That's it, I am off!!!

That depends on your business being large enough to be VAT Registered - in which case you must charge VAT to your customers and return it to the tax authority, and then you can reclaim the VAT you pay on asset purchases and on-going costs.

I don't think that there can be very many SL Businesses that are large enough to be VAT Registered.

The only businesses in SL that _can_ be VAT registered are MDCs doing business in the real world in US$. L$ transactions can't be legally counted for VAT, so you'd have to register the income made by selling L$ for US$; but then LL would have to collect VAT from Europeans on LindeX purchases, which they're unwilling to do, and no competitor can do (because it means charging higher prices).

Much wisdom, Marcel.

There is a certain floor to the market price for rentals, except when dealing with a landlord who isn't looking to profit at all, but split costs. With the new pricing, you will find more of these. ("I just bought an island, I'm thinking of renting some of it out, I just want to share the cost of the sim" - seen that thread here a couple of times lately?)

Some people would bolt for a 23 Linden cent advantage, others wouldn't. Especially if the sim is beautifully themed and not just some flat green parcel.

VAT is a bit of a red herring. Sure, in Europe, we have to pay 17.5% more (in the UK, it varies from EU country to EU country), but on the plus side the US dollar has crashed.

A few years ago, a US dollar would have bought you 1.2 Euros. Now it will buy you just 0.63 Euros - the crash of the dollar has been spectacular, and means that Europeans have an advantage over Americans in purchasing things priced in US dollars since everything is half the price that it was 6 years ago. Even a high VAT rate doesn't wipe that out.

Even so, that doesn't alter the OP's point that newcomers will recoup their investment more quickly than before, and so can charge lower rents.

That doesn't make any difference to competition inside SL though. It may mean that Europeans are discouraged from starting SL businesses, but that's about all..

VAT is definitely a red herring in this particular instance. The issue of LL lowering the price of land does not effect VAT. You pay VAT on a $1675 purchase or you pay it on a $1000 purchase. VAT definitely puts the OP at a disadvantage as against those who don't pay VAT, because his tier is higher, not because the cost of purchasing the land is higher. If the OP had said that he was leaving because he just couldn't compete with those who had a smaller tax burden, then I would have sympathized with his position. But the lowering of land prices does not effect his ongoing costs or his ability to compete. All it means is that newcomers to the market will be able to recoup their initial investment more quickly. But they won't be able to lower their rents beyond what their ongoing costs are, and, excepting the VAT issue and grandfathered tier sims, those costs are identical to everyone else's. They have no legitimate advantage.

It really sounds to me as if the OP got smashed with VAT, not the price reductions.

Now.. I don't mean to sound like a dick...

But what is the 'famous sim Hoini' famous for? I can't recall ever hearing of it for any reason...

(If this's been asked, sowwy...eyes stopped reading after about half a page)

Yep..



We almost never hear about that, though. It's usually just about how horrible VAT is.

It's a red herring in the sense that if I wanted to buy a sim a few years ago (not sure when SL started), the tier would have been US$300/month. That would have been about 200 UK pounds when the exchange rate was 0.66 pounds to the USD.

Recently, they started charging VAT. It's still $300/month, but now I have to pay 17.5% on top of that, making it $352/month. The exchange rate is now 0.49 pounds to the USD, so that $352 now costs me 172 UK pounds.

So the drop of the dollar has more than offset the VAT - I'm 28 pounds a month better off.

Not sure about your country but in the Netherlands there is no lower limit to be VAT registered, aditionaly you don't even have to charge VAT on the sell of L$ to US$ because LL buys the L$ from you and sells it on to the next person and as LL is not EU based you don't have to charge VAT.

There is a lower limit in dutch VAT laws below wich you can reclaim the VAT you normaly would have to pass on to the goverment but you still have a VAT number and do VAT accounting.

ps. how I figure LL buys the L$? simple, the Lindex transactions appear on the LL monthly statement and they can't book transactions that are not to or from them.

They don't - LL acts as a broker but it doesn't buy the L$ itself. Also, I don't know if the netherlands are different regarding this, but in the UK you can't VAT register if you have no VAT-able sales.



They just don't tell you the name of the payee, but it's not LL.

Which all depends on the question of why you are buying your sim in the first place.

If it is personal playground, you are quite right. For that matter buying or renting land is quite cheap compared to what it used to be

But if you want to rent out the parcels to break even or make a profit, you are wrong. Because the entire SL economy is based on dollars. So instead of 300, you pay 352. Giving your US based competition 52 dollars advantage over you when they have to set rental prices.
Since many estate owners are in the estate business to rent out parcels, they did get hit hard when VAT was introduced.

Marcel

I had heard that some heritage sim owners were getting a refund on the price of their sim. I don't know how much or who qualifies, just some thing I heard through the grape vine.

True, but also, the OP was blaming the drop in the price of sims for his perceived inability to compete. That is totally unrelated to VAT. There is no reason why the drop in sim price should affect his numbers, because eveyone pays the same tier (except for VAT). If his numbers were acceptable before, they should be acceptable now, regardless of the fact that new island buyers are getting a better deal. If VAT is his problem, he should have said, "I'm leaving because now that LL is charging VAT, my profit margin is not acceptable anymore."

I still would like him to stay. If Hoini is not profitable, let him just stay and enjoy his friends and all of the other things SL has to offer. It's not all about money - or at least, it doesn't have to be.

It's too late, Trout. Hoini already sold. The buyer got the better of the deal, if you ask me, because he has a unique property that will retain value. Oh well.

I don't know economics, but I do know people.

And I do know that if the average rent across the grid for, say, 1024m is $L1100/week (for example), somebody who buys an island for 40% less than you is not going to undercut you and rent his 1024m lots for $L800/week so he can take as long as you to break even on his original investment. He's going to rent his lots at near the average price, and simply break even sooner. In fact, breaking even sooner is really the only difference.

The OP is going to take just as long NOW to recuperate his capital as it was going to take him a week ago. If "6 months left" was perfectly acceptable then, "5 3/4 months left" should be just as acceptable now. Who cares how long other people are going to take?

Until more and more of the $1000 island holders get into the biz,

At which point they will cut their rates to steal the customers of those "average" priced rents.

Once enough of them do that the higher rentals feel the pinch the overall price will drop.

But rent often is not based on purchase price, it's based on tier and is a certain percentage over tier. There is a certain price floor at which people can charge but beyond that, the 675 doesn't make much of a difference. What it should do is force people to add more value to the land to make it worth paying more for.

There is always a segment of the market, however, that will look for the cheapest thing out there. Unless this is your specific market, you shouldn't worry about it. Others value good service, security, beauty, tranquility, community features or maybe the events that you host.

well true.

But isn't the average rent loosely based on getting back the purchase price PLUS paying tier?

This lowering of purchase price will lead to some drop.

However much was influenced by getting back the purchase price.

/me pokes his head in to see if Rock is REALLY gone and wonders how long this thread will linger on in his memory.

Rock?

ROCK?



beuhler........beuhler



.....beuhler


/me waits for the credits to start rolling and to see if Rock will emerge from the bathroom in a towel
"Are you still here?...go home...the show is over.....go on!"

This presumes all or at least a majority of the folks who bought the $1k islands joining together in some kind of conspiracy against those who paid more. I don't see that happening (although I suppose on some dark level it could be possible); everyone is in buisness for himself. The way I see it, there are so many people looking to rent, that somebody who cuts his rental prices down that far is going to fill up his land with new currently-homeless-and-actively-searching tenants too quickly to pose a real attrition problem to established landlords like the OP. Generally speaking, if your tenants are satisfied, they won't be shopping for new places to begin with, unless YOU gave them a reason (like raising rent to compensate for losses you haven't incurred yet, just because you think you -might- incur them in the future).

I know it's just an anecdote, but I rent a house on a mainland sim for what I know for a fact is a decent percentage more than what I could pay for the same size house on a private island. But I wouldn't leave this place; I like the amenities and the service way too much.

I just think it will be a progression. One person decides they can rent for less, then another comes to that same conclusion ..

Eventually it starts to be the price.

Partly you are right Collette.
But there is a bottom price on which you just make tier, and no one will be satisfied with that. Especially not since you would have to get 100% occupancy day in day out. Even on the Island I rent, at 2 linden per sqm per month, there are occasional empty lots. And the price difference isnt that much anyway: In another topic I calculated it on yearly basis (purchase plus 12 months tier), I believe it was about 0,29 linden per sqm per month.

So the situation is not going to be so much different: some people get their rents as low as possible, some people give so much added value they can charge higher. The latter will be occopied though: compare a place like Caledon with the low rent waffle sims.

But there will be slightly more people buying Islands then before, though not as many as people think. After all, most people who fork over a grand, will think about the monthly costs.
Of those new entrepeneurs, most will be gone within a year, as setting up a good rental environment is not buying sims, cut them in 16 pieces, and put up rental boxes. Especially the low rent fighters will drop as leaves soon.

Basically rents will drop a bit, and get back to normal within months.
That is how I see it happen. The fact that sim sellers will loose 675 dollars stays though, but that is risk of the business.

My biggest question in this all would be: how much land do we need? Looking at estate as well as mainland, it seems to me there is vacancy enough. If I had a successful rental business, I would not worry, but I would not easily start one. Not without a great vision.

Marcel

If you're paying the money completely out of your own pocket then yes. In terms of consumer spending power Europeans, and especially those in the Euro zone have more spending power, that's good for SL.

However if you're a business, it makes no difference whatsoever. Indeed if you're a profitable business taking money out of the world you're taking less out now, especially those in the euro zone.

To step back from recent events and look at the big picture, I think what we are looking at is discomfort brought on by change.

Raise prices - people scream, the weak, thinly capitalised businesses suffer terribly over the short term

Lower prices - people scream, the weak, thinly capitalised businesses suffer terribly over the long term


Note that I say businesses not consumers. For consumers, pricing going down is only a good thing. Obviously.

The only time it would not be a good thing for consumers is if their service provider or landlord financially capsized, thus ruining everything.


Oddly enough, for the estates capable of riding out such changes it may actually *benefit* them overall. Having competitors crushed or stillborn by substantial price increases (Nov 06), or left wallowing profitless or in debt by devaluation (March 0 just helps marketshare for the survivors.

Plus, don't forget the fact that we just had our prims doubled on openspace regions - which you can get *only* if you have a region in the first place. A rather nice kiss on the cheek for the landed aristocracy of the grid, no? And the wise move to make, otherwise it would have kicked many, many many business models to the curb overnight.

I've got twelve of those openspace regions - Thus I'd effectively been handed 1.5 regions worth of prims for free in March. Not being stupid, and knowing my residents aren't stupid either and can do math as well - I passed this benefit straight on to the residents, banking it in the form of resident loyalty. Which is a damn good investment to make.

* * * * *

As an estate owner I never expected the regions to hold their resale value very well... some value... but not much.

Rental residents who paid up front fees were affected in two opposing ways.

First off, the newly lowered region cost will trickle down in the form of land devaluation. Which is a direct hit to residents, if they ever expected to recover much value from their land.

However, the fact that they absorbed some of the hit and their landlords didn't get smacked with the full force of it means they still have land to talk about. I wonder how many thinly capitalised, low margin estates out there are slowly coming to the realisation today that their return on investment is gone. Or ridiculously negative, if they value their time more than 50 cents an hour.

* * * * *

One of the ways to retain value is just plain limit supply of a good thing.

Caledon for instance is pretty much finishing out its land mass in a few months. If demand remains much like it has over the past two years, land valuation may go way up if Caledon land supply goes down.