Warning about purchasing private land

People should be cautious when buying land from private sources rather than from Linden Labs.
For example; a private openspace SIM (low lag & reduced PRIM islands), the price seems to start at about $30,000 Lindens and up and the tier fees are about $25,000 Lindens and up per month.
There are realtors in Second Life, such as BFR (owned by a resident calling himself B H), that are charging an inflated rate for the purchases and the tier fees. A profit margin of 163% above BF's cost has been noticed by a few residents.
Also, an employee of BF said that a SIM had been repossessed by BF and is for sale at "half price" ($30,000 Lindens) and that the tier fees are $28,600 Linden. This means that they normally charge $60.000 Linden to buy an openspace SIM (double the going rate), and are charging $3.600Linden per month over the going rate for tier fees.

BEFORE BUYING, do some shopping and calculating. It pays.

This is a free market with many different business models and many different companies. Customers have to decide what they want. Low purchase price with higher monthly tier? Or the other way around? Go for a low price with a relatively new, small and unknown company, taking the risk that it will be gone again in a few months and you lose everything (or still be happy with that company in years, who knows) - or pay more with a well established company (that still could be gone from one day to the next, who knows). Go for a price that barely covers the costs for the company, giving that company no safety margin in case of a month without income - or pay a bit more for the knowledge that the company will still be able to pay LL in case of missing payments from some of the companies customers one month?

I think your thread title is kinda sensational, and you just state what every informed customer should do anyways.

An Openspace purchased from Linden Lab initially costs $USD250, which is more than L$60,000 in the first place. They cost some residents (such as me) more than $USD250 because we get taxed on the purchase.

Most landlords decide that an upfront fee of $USD250 would put residents off so they look to recoup costs via tier fees.

When land is left unrented then it is running at a loss to a landlord, it is a risky business not to build some sort of profit margin into your operating costs for such circumstances and associated advertising costs.

Yep the whole $1L or free land thing is very missleading really. If you truley are buying land from someone, then it shouldn't matter if they leave SL tommorrow. You should still have the land and full control over it, including stopping the previous owner from entering.

Oh and I should add that L$25000 tier fees gives the landlord a profit of about USD$16 a month if their tier fee is $USD75 a month, hardly a whopping profit. With an upfront cost of L$30000 it would take them 10 months of having the Openspace rented out just to break even on the deal.

Yes, and that with the risk that in the middle of that the renter/"owner" runs away, leaving behind a landlord with a half payed SIM that will be hard to "sell" again, when others sell new ones where the buyer can chose name and position and sometimes include the first months tier. That's why I myself sell at a price that covers my own purchase cost. That's safer for me and therefore also safer for my customers.

It all depends on whether you charge the first month's rent right away or only after a month.

If you ask purchase price and rent at the same time you "break even" (not true since you end with an openspace for free which puts you ahead rather than even) after 3 months.

And when your client can't pay his tier, you need to find a new buyer for the sim.
If you can't find that buyer or it takes you more then a month you still have to pay the tier to the lindens. Lost of 75us$ per month; So, your new client has to stay for 5 extra months to break even.

By all means, shop around - it's critical.

My last openspaces went for $L 42k and 6500 a week (rental, not 'buy' - that $L 42k is utterly nonrefundable) and I've had people on a waiting list since 2006 for these things - back when they had 2/3 the performance and 1/2 the prims.

What's worse, I'm not even offering any now; I've told people 'maybe January' and I might go up to anywhere between $L 54k to $L 66k down - 200 to 250 USD.

I've gotta be really evil!

* * * * *

For full disclosure:

a) $L 42k down is only about 150 USD. Takes me months at $L 6500 a week to recover the region purchase of 250 USD. I sequester 3 months tier for each region (225 USD) as USD credit, so by the time I start making $L income beyond that it's about month 13. Actuarially factor in the risk of abandonment, cashflow issues, nonpayment... and it's even worse.

b) Then consider my time helping people, maintaining the overall estate and whatnot - if my time is worth anything at all I really break even on these things in about two years. At month 25 you might be able to accuse me of making money for having the region 'just sitting there' - and I'd make a whopping 25 dollars or so that month.

Two years of helping people diagnose why their client software quit on them, teaching estate management, occasionally floating small loans or dealing with resident's icky 'relationship aftermath issues' (or three, or five) in strictest confidences... Logging in and it's your agenda not mine, get over here quick... ah, and Des, never ever quit! Hell yes, after two years of that, I think I'd break down and accept lunch and a glass of the cheap house wine. grin Of course not everyone is like that, but on average I think the truth of the situation resonates.

c) I'm not really in it for the money. So taking on a bigger estate isn't a goal of mine. My estate is plenty big enough as it is.

d) There are lots of people plenty rich enough to get half a dozen regions on the grid if they felt like it. Not everyone is a starving college student. But by the same token, well off people are generally quite good at picking value (this is why they are still well off) so there had better be something more than just 3750 prims to motivate them to get a region.

Well, that's fine what you think. It's your opinion and you're quite welcome to it. It's been my experience that people need to be reminded once in a while to do some research and shop around.
Concerning the example I supplied, the owner told me that they have 400 residents. I would think that 400 residents paying them well in excess of 160% profit would give the company a VERY comfortable margin for safety, wouldn't you? Either that or they are simply gouging people which is more in my line of thought. I am only going by whqat the owner told me.I would imagine you all have different circumstances so you can add your own individual twists n turns to the storyline.
I went looking around yesterday and found a couple more places looking for half BFRealty's asking price and $25K tier fee ($3600L cheaper than BFR's). So, that makes about a half day of research for me and I found 5 places more reasonable than BFR's prices. So if these places have been able to get by without gouging clients then others should be able to do the same without gouging people, right? That is, if they are decent people, I think.

Well then, don't rent from them.

But don't trash them here on the forums. By naming names, Your OP is in violation of the forum guidelines and the Terms of Service.

So shoot me for being a consumer advocate.

Some people operate loss leaders. An Openspace costs USD$250 to setup. There's no real second hand market in them like there is for full sims, but you need to own a full sim to get an Openspace on the grid anyway.

I really don't see the gouging here.

Oh, I think there's definitely merit in not paying too much upfront - clearly the benefits are instantaneous. Low prices!

On the other hand, us expensive guys didn't fold over the summer like a lot of estates did. There's the benefit of having a solvent landlord. You'll see plenty of tragic posts where regions vanished out from under people, or regions were sold and the new owner just booted everybody. Just keep reading this forum, you'll see new ones like that soon enough. Anyone can be a land baron here - including the 19 year old who was all into it until he got a new PS3 game.

I don't know who makes 160% profit in this business - I sure don't. At 150 USD down and 6500 a week, it's literally a *year* before I dare start cashing out against it. Takes months to recover the purchase price of 250 USD, then many more months to 'profit' enough to recover a decent tier buffer for the region.

I can see openspaces offered for nothing if it's already paid off, there's sufficient tier buffer already set aside and the plan is just to get tier going again on it. Once in a while I'll take care of someone that way too, with a land parcel.

But if it's a new region - watch out and pray that none of your neighbours default. There are landlords out there who are biting their nails, praying rent comes in fast enough that their regions don't go dark.

Renting private land on the grid is sort of like getting a car from a used car salesman - except here, if the salesman ever goes broke your land vanishes.

Best of luck to you though - I'm sure there are lots of people who are both inexpensive and reliable enough to back up their regions in a pinch. Just size 'em up real good before paying any money.

Apparently, I was missing part of the picture. But you must certainly be able to understand that when we see people such as BFR charging others $60K to buy and $28.6K in tier fees per month when there are others that charge $25K to buy and $25K in tier fees, it sure LOOKS like gouging. Especially when he arrogantly claims he is doing very well and has 400 suckers paying him those prices.

Thank you all for your input.
Have a great weekend and take care

Of course anyone who does not want to pay what someone is asking can always choose to shop elsewhere.

To buy an openspace sim from LL one only has to shell out $1250 USD upfront. That is $250 for the openspace and $1000 for the full sim that they must also own.

then $295 tier per month for the full sim and $75/mo. per openspace.

I have never understood the rationale that it is wrong or somehow "gouging" to make a profit, in a free market society.

if you don`t do your homework with paying that much, nuff said...

you don`t go out buying software befor checking the competition and what`s available, right? and this is buy+monthly payment

.

The Problem here Ciaran and everyone else on this thread, is that Annalise Ember decided to do all her research without actually pulling out the calculator and understanding the facts of openspace pricing policy before she had put our business under the bus with a comment of 165% profit margin. For all you estate owners, who has experience the same ordeal this is just merely another case of a resident who hides from the estate owners when it comes to paying their tier and has to be kicked off the land.

In the light of the OpenSpace price increase the title of this thread should be changed to:

Warning about purchasing anything from a greedy, unethical company like Linden Lab

It's the whole idea behind a free market, silly. How ever, when producer A charges 20 apples for the same thing producer B charges 50 apples for, it's a pretty good bet that producer B is either badly managing their company or else they are simply straight out gouging. It really isn't that tough of a concept to grasp, you know.

Whatever, foul Breeze. I didn't even know I was kicked off because I left before the end of the month of September. BTW, if you kicked me off then why did you charge me tier fee for the month of October? Wanna see my Paypal detrails, bigmouth?
Also, I found a sim that cost 25KLinden to buy and is 25K Linden tier fee. Sure makes your 60K sim + 28600 seem like gouging.

There is a business term: "Prestige Pricing" or "Premium Pricing".

It's why people pay more to have a certain name brand stamped on their products, when the product was likely made in the same factory as the generic or lower-priced item. It serves more than one purpose. There are branding considerations, as well as the fact that certain consumers equate a higher price with a better product. If those consumers are your target market, you've got their money.

Alas that might not seem like a good deal for long. Not with the tier increase, a lot of people are going to be asked to find extra money, USD$50 is around L$15,000.

People need to educate themselves about the cost of land from LL before deciding on any purchase in SL.