That's it, I am off!!!

The nerve of someone competeing with you for business.....how dare anyone rent lower than you do

Considering the shisters out there I think if people are happy with a landlord they know will not rip them off then mostly they will stay. Sure some will go but they taking a risk going to an unknown. Reputable landlords are preferred by renters.

My own rental business is bound to suffer. I like to pick up clean, green and flat 1536-1680's on the mainland. Renting them easily at 600 a week. I am already seeing some better deals for renters out there.

Just checked land sales, and there are lots of nice parcels in my size range at 7.5 to 7.7 per sm. Some decent 4096's as well.

Not to be an alarmist, but prices seem to be tumblingg atm.

Yep I am sure what they said makes sense if I could understand a word of it. I have had real life rentals for many years and I have never considered the purchase price in the rental price. I do comparative shopping to see what the market will hold at the time for the type of neighborhood that it is in. Some where in the back of my brain I also take in to consideration the economy.

What I do make sure of though is that my rental income covers my monthly expenses for that property. That would include monthly payment, property tax, insurance and up keep. I guess that would be considered "tier".

Is that sort of what you said Trout? I am a blonde remember.

Gabriele,

Don't mind at all. The reason for the higher purchase price and higher tier rates is because I am European, and Europeans must pay Value Added Tax (VAT), in my case (Germany), of an additional 19%. This goes to the German government (or should do), but the history of this is not so straightforward. Originally LL absorbed the cost of the 19% to ensure a level inworld playing field between all residents, but some time ago, can't remember exactly when, they decided to no longer do this, and passed the 19% cost onto their European customers (thereby eliminating the level playing field). The possibility that they might do this was never pointed out before any European purchased an island sim from the Land Store (in the UK this would be called mis-selling, an offence, for not pointing out potential monetary risks).

But enough off the VAT rant, it covered acres of forum space when it first emerged (but still infuriates me no end).

I think it is no longer a secret that LL are going down the route of an initial public offering (or the equivalent US terminology). I think this slash in new island prices, the cut in starting auction prices, the introduction of a new continent into the land market, are all to do with driving up resident numbers prior to that offering, and to hell with the business people within SL. LL have only one target when it comes to enrichment, and that is themselves, no-one else. That is fine, they have every right to do that, just as I have the right to say 'enough is enough', I am out of here.

OpenSim here I come...(maybe)

Rock

Thanks Rock, appreciate you answering my questions. Having to pay VAT on virtual land purchases definitely does not help - I do feel as though the european union should make exceptions for this kind of thing, especially when the purchase in question will never be brought into the EU. I am not even sure how they manage to justify it - mystifying

Maybe not as much as you think - lots of people out there will not go premium, they do not see the point as it is money that they could use to rent without the USD commitment. I felt like this for a long time before I went premium. There are also people who don't want land per se but a house or a shop - these people will still want to rent too. I agree maybe a few changes will happen but I just don't see the market collasping - especially as most premiums will not be able to afford $195/month for a whole mainland sim which they will have to buy to get the price benefits. People who buy and split mainland sims for resale are not going to let the price of mainland go any lower than they can prevent it going.

EDIT: The current price drops are more likely due to panic than a long term reflection of prices - and even these do not seem that drastic yet!

I was seeing red when I saw the blog announcement, but in the diversity of responses here my blood pressure has reduced. This is SL's own version of the bursting housing bubble in the US with housing prices/value dropping 20% in some areas. There are no ARMs here unless tier jerks upwards, but my guess is they will prefer to hold tier and just bring in more people.
My recouping of purchase price will go slower, but I can also expand for less upfront money. My people rent from me cause I treat them well. Sane Administration is worth Lindens.
It would still be lovely for SL to give us $1675 island owners a 2 month tier holiday to take away even a transitory taste of bile.

There are enough VAT threads in search to keep you busy for a week .

In short: it's a protectionist measure. Any European company would have to charge Europeans VAT as a normal part of doing business. International companies could swoop in, unencumbered by the 20%ish levy and every European business would find itself at a competitive disadvantage. By "requiring" international companies to charge VAT it levels the playing field.

In SL's case the measure ends up hurting competition, but then it was never designed for a (closed) virtual world in the first place. If the grid were open up, with third party hosts springing up all over the globe the measure would accomplish what it's supposed to do.

Thanks for the info Kitty That was very insightful.

I don't get it - why would lowering island pricing bring in more people? I can't imagine some people going to www.secondlife.com for the first time, see that an island is only $1000USD, and log in to get a premium account. I can see more existing people buying islands, but bringing in new blood?

I may just be stupid and missing some logic here

-lucincia

good luck to you wherever you go.

This is the second bubble in SL in 9 months. Prices fell by half last August and September when LL did another massive land dump.


It isn't a bubble, it is a massive inflation of land by LL leading to it losing value. Just like how it has worked in the real world the past 100 years with the FED printing money and that money becoming more and more worthless.

Yes. What makes it worse is that we're predisposed to think of "land" as an appreciating investment...because in the real world, it's a limited commodity. "They ain't making any more of it."

In SL, the Gods can make the world bigger any time they want to.

I can't say I'm unhappy with it, though...I need more primz, and this makes it more affordable.

Yeah and LL did play up the supposed similarities for years

I guess it is simillar in lots of ways - just not in others.

I would even argue that being established and renting for a time you are in better standing than new comers still especially if you have "Payed Off" more than the difference between island costs already.

I'm not going to get into a whole big accounting debate, but to be honest the OP does have a point.

When I look at ROI I don't really care about what the balance sheet looks like or where the numbers go (no disrespect but that's what bean counters are for). I base my decision to enter a market based on a forecast %ROI (on ALL investment), within a specific time span, taking into account the opportunity cost and risk levels.

The nature of SL as basically a startup (more or less), means that risks are high for the medium term and the time factor becomes critical.

I don't know how long it takes to recoup nearly $700 via rental income, but I'm guessing that while also covering overheads like tier, it's not inconsiderable.

Alright, I know that the land could be considered an asset and could be sold, so you have to take into account the resale value when calculating ROI. I'm guessing though that unless a new buyer really loves what the OP has done with the land, it'll still sell for less than he bought.

Either way, it sounds like the rug was pulled from under his feet a bit and this has put him at a financial disadvantage when compared to his competitors. Mind you the "rug" was always moveable and it's a risk that he probably should have taken into account from the word go.

Finally, on the whole land/property bubble thing. I guess the current "credit crunch" and its effect on RL property prices just goes to show that investing in anything - even RL land - carries risks.

Funnily enough if you look at property in the US over the past 100 years the last 8 have been a blip. When your great-grndparents bought a house back in 1908 they didn't actually make a profit on the deal until the early '40's......

The playing field is still level, there is no advantage. Anyone can buy a Sim at these new prices. LL is not asking for more money for a purchase/agreement that has already been made, they are lowering the initial investment for a new purchase/agreement.

When has technology, especially new technology, NOT dropped in price over time?

Hi Vlad,

I might have misread the OP, but I got the impression that he's paid $1695 and the new price is $1000.

If that's the case and he hasn't recovered the difference by now then he still has to find some way to get a return on that.

It's all personal I guess, but unless the OP is in it for fun, I'm assuming that he was looking to make more of a return on his money than he would have if he'd stuck it in the bank.

I agree though, risk is all part of the game, and investing cash in a technology/software service from a startup business would certainly make me factor in price reductions for new entrants in the short/med term.

No longer "Your world, Your imagination" but rather "Our world, Your frustration".

Hmm perhaps everyone would have been happier if they increased Island prices by $700 instead.

Well that depends on whether you expect to recoup your money in a month or 2 years doesn't it?
All in all it sounds like a 50% price increase would have made everyone happier.
At least you'll be gone before the cometition takes off and it drops to $100 an island and tier drops to $100 per month.
And don't you get VAT back when it's a business deduction like our GST where businesses get the GST back. That's of course assuming you are running it as a bonafide business rather than a "cash in hand" tax dodge, which is why governments introduced GST & VAT in the first place.

Yes, and I'm all for people making money is SL. I hope that people who purchased Sims at the higher price can still make money on their (risky) investments. They have the advantage of entering the market earlier, they've had time to build relationships with their customers, and time to promote their services.

I think my point about a level playing field was poorly stated, though. The opportunity to purchase a Sim for $1000 is available to anyone. People who already own a Sim are free to take advantage of this new price. There is no unfair advantage if everyone gets the same deal.

If buying a Sim for $1675 seemed like a good risk, then buying one at $1,000 should be even more enticing.

Where I can understand the initial frustration for Sim owners, if they think a bit further the effects are marginal when you want to stay in business. Only people planning to seel an island are screwed.

The OP does van a disadvantage called VAT which makes his rental prices 19% higher then others, when he would want the same profit per month, since he pays that VAT on tier as well. That has nothing to do with falling island pricing though.

The fact that more people can afford an island, will bring more people in the game that will try to beat existing landlords on pricing. That does happen all the time, and will happen more. Those are the people who sell their estate parcels, ask low rents, and leave SL within a year without refunding the purchasers.

Any settled Estate owner who doesn't overcharge their tenants, will not notice much of this price drop I guess though. Not that many people will leave their parcel for a bit cheaper one from a brand new landowner. A well landscaped Island will always have extra value and be rented out. Ask Desmond

As for economics, I think Trout, backed up by Ann, proved their point better then I can. No need for the agressive answers from the OP, they only are trying to help here. Your frustration is understandable of course, but should not be acted out on others I suppose.

One more try:
Any Island costs 295 doller per month (leaving VAT and grandfathered Sims alone for now). Lets say your goal is to make 200 dollars per month on the Sim. That means your revenue should be 495, no matter what you payed for the thing in the first place.
Now from your profit, you will have to recoup your initial purchase. Recouping 1675 takes longer then recouping 1000. But, for the rent you are asking that doesnt matter. It just takes longer before you can put the whole 200 aside as profit, instead of recouping initial costs.
Now if I were to compete with you, I would have to make my rents lower then yours. But just like you, I want to make a profit. So in the long run, I will not be able to get much lower then you, as the tier part is the same for you and me both. The only difference is the recouping of the purchase. Lets put that on a year
Your have to take 1675/12=139,58 dollar per month from your profit, and after a year your sim has been payed for.
I have to take 1000/12=83,33 doller per month to recoup my purchase. A difference of 56,24. Which equals about 15k Linden dollars. Equals 23 linden cents per square meter per month. And I seriously doubt that for a price difference of 0,23 linden per square meter, people will run from your Sims, towards a newbie that bought his first sim and cut it in 16 squares divided by small canals.

Marcel