land prices.....

Hi everyone

I apologize for my ignorance, but I need to ask.

From what I have read, buying a piece of property on another person's sim is more like a lease than an ownership. (please correct me if I am wrong)

However can someone explain the difference between owning a piece of property on an already existing sim (neighbourhood) and owning an island that is bare?

Are there limitations on both?

Thank you

Yep. If she'd put a small margin on, I would have bought it from her.

Velvety, you are confusing the discussion between mainland vs. estate.

when you buy on a mainland sim, you "own" the property. what this really means is you have control over everything, including sounds and landscaping, mature or PG, etc. you can build anything you damm well please on your mainland property. you can resell it and keep the profit, or take the loss depending on your luck.

"buying" on an estate is actually paying someone a lump sum to "rent" from them. you must follow their rules. you can try to 'resell' your spot to someone for a lump sum, but you are in essence only selling the chance to rent. you own nothing and can be evicted at any moment, even on the day you paud your large lump sum (why anyone would rent like this is beyond me). you cannot typically make a profit, and a loss is almost insured.

I agree with the comment that this is a paradigm shift, and also with the overall improvement we can expect if people can afford larger pieces of land. I would never have learned to build if I had stayed on my original 512. I paid L$13K for it last summer. I am now on an 8K, for which I paid the same amount earlier this year.

Not only will the grid look better if we all have a bit more breathing room, but builders will be able to be more creative. And sell more and better homes, furnishings, etc.. Design and building will be rewarded in this new dynamic, over land control.

The SL economy is radically different than the RL economy. The most limited resources in RL, including land, are of limitless supply in SL. I certainly appreciate the pain many landowners felt when prices dropped, but I also understand the excitement for many others. The limited resource here, human creativity, will emerge as the driving influence in this paradigm.

Hey...i own both Estate and Mainland sims with both business models (renting and buying) thankfully my lands are now full again and I don't have to get involve in the daily grind of looking for customers. I'm just saying that i have come across potential customers that prefer the Buying option even after you explain the differences.

I realise thats it predominantly a rental market on Estates, and i think all those past "land scams" have a lot to do with it changing the culture.

I don't think you can change the PG/mature setting on a mainland region - only the estate manager (LL) can. You can make parcels on a mature mainland region contain only PG stuff but you couldn't buy a PG mainland region and put mature content on it.

I always kinda think of the grid being a country with LL as the federal government and estates (both the mainland estate and private estates) as being states. When you live on the mainland or _own_ a private island, you're your own state and answer only the Fed Linden. When you live on an island but don't own the island, you answer to both the state you live on and to Fed Linden.

Land Market...........................................

I've been watching all of this carefully, with some interest.

I see a few things happening at once, and this is mainly based upon talking to people, plus a few *very* insightful former AOL employees who shall remain nameless by request.

Northern hemisphere winter is high season for online activities, period. People are shut in, it's dark and cold. By the time spring comes around they are dying to get outside and get some fresh air. AOL employees on the front lines saw similar trends going all the way back to the 80's.

Add mainland expansion to that, and you've got sudden oversupply. Plus, all those openspaces came on the market - and generally people don't go from 'no land' to openspace. They sell off and move, and the regions they came from now have even more land on the market.

One interesting factor: openspaces are only available through people with a full region already. That's arguably a *very* economy-stabilising move.

Think about it. Few will go from 295/mo to 370/mo - some will, but basically unless you are a baby land baron and renting, that's some serious change. Think of the new car you could get for 370/mo! So this heavily favours the land barons in terms of stability, if not profit.

* * * * *



Openspaces...........................................

Consider an openspace at 100 USD/mo from a land baron. Expensive, right? That's 25 bucks more than tier.

The land baron is gonna make 300 bucks for his trouble over the first year - but wait! He just bought the region for 250, so he only makes 50 bucks in the first 12 months if it's purely rented, no up-front fees.

Oh, and the tenant changed their mind at month six and the region sat empty for two months... the openspace is now a net loss of 100 USD at the one year mark.

Plus all the hours of dealing with people - you get to lose money *and* humbly serve people at the same time

I'm in no rush to roll out openspace regions for people, just for this reason. It's ***dangerously*** destabilising to do a lot of whole openspaces for people all at once. I'll charge a nonrefundable 150 USD fee up front, knowing that flips the 'typical scenario' net loss ever-so-slightly positive (50 bucks in the first year, say).

If anyone banks tier aside like I do, three months ahead - even with the up front fee and perfect tenant stability, charging 100/mo will still lose you 25 bucks at the end of the first year, because of the 75 * 3 months 'tied up'. Watch a lot of people with too many openspaces get in financial trouble, once the shiny wears off.

Would people be crazy enough to spend 150 USD for the privilege of a Caledon void? You betcha. I've got a long list that are willing to spend far more than that, going back two years now - the oldest on the list have been waiting since about last summer. Which basically ensures that Caledon stays financially stable: conservative growth for the win.

* * * * *



Financial stability...........................................

Long term, my strategy is to simply use a scarcity model - Caledon will be 'done' in just three more full regions (about 8% bigger than we are now).

That may:

- put the market over to the 'demand' side, making land fairly valuable

- valued land in turn bolstering confidence of residents (I pray it doesn't skyrocket in value; that would be problematic too for a community-minded area)

- not dilute our appeal over too much land

- spur some competition, which if I maintain market leadership, will also turn any Caledon-clones into ablative heatshields, burning up before I do if the market goes sour. So copy me! I'm just a wee bit evil like that...


I don't quite have the land list to fill the last three regions this instant - I possibly may just 'go for it' and get them, as there is always more demand for 'shiny new region' than there is for old. It's tempting.

* * * * *



A fix for Openspace financial stability...........................................

....and finally a gift for all the land barons out there: a possible financial model that may fix the openspace region financial instability problem.

Illustration of the problem: Openspace region at 100 USD/mo, first year:

Cost: 250
First year tier: 75 * 12 = 900
3 months tier reserves sequestered for emergency: 75 * 3 = 225
-------------------------------------
1375 in charges and sequestered reserves

First year revenue (flawless occupancy, no payments missed):
-------------------------------------
1200 USD

First year net loss:
-------------------------------------
175 USD

This could be mitigated by a 175 USD 'up front fee' but this also presumes that the hours you spend dealing with it all are worthless.

Second year (of flawless occupancy and payments) is better: a net gain of 300 USD.

Conclusion: After 24 months, 12.5 USD/mo profit if everything went PERFECT. Face it, that sucks!

So why would you rent out voids, when they are the financial risk-equivalent of giving the keys of your new car to a 16 year old boy on a Saturday night? It could go perfectly, but more likely you'll be paying dearly for busted fenders and insurance.


But there are other ways. Consider this: eight 2048m parcels on a void for $L 1000 a week each. Not unreasonable at all, for a small patch on secluded, wild waterfront and a buffer between neighbours!

Watch.

$L 8000 / wk * 4.333 weeks/mo = $L 34664 / mo.

$L 34664 / 265 * .965 (3.5% exchange rate on LindeX) = 126.23 USD/mo

126.23 USD - 75 USD monthly tier = 51.23 USD/mo income

51.23 USD/mo => 614.75 USD annual income.

If there is an up front fee of $L 8582 for each parcel ($L 4.19/m) the region has paid for itself. Sequester 3 months tier and the region still makes 389.75 annually the first year.

Sure, more small tenants is more work - but this is where economy of scale comes in. 10 such fully occupied openspace regions make 3897.50 annually the first year, then 6147.50 the second year, or a total of 10,045 USD at the 24 month mark. Not a bad hobby, and you get to have a 10 region mini-continent to play with. Well, kinda - there's no prims left over for you! Shave 5 prims off each of the eight parcels (468 prims -> 463 prims) and you'll have 40 prims for some low prim trees, a megaprim road, and so forth.

If you don't stay fully booked, survival breakeven (not valuing your time) is just below the 5 parcel mark.

Worth it? Quite possibly - script performance is lower on openspaces, but there are less avatars hanging around, and tons more land. Make a wild area, or perhaps cluster little towns in a beautiful, wide-open country - that's what I may be doing myself in 2009.

i think i'll just stick with my 6144 for business (laffs since practically everyone rents for free) and my 2048 on the side for fun. too many regions sounds like a major headache, Desmond! and there's all that math to calculate. i teach it, not try to decode it. keep on keepin' on.

Raymond,

I've never known you to be so bitter or negative...but I'm afraid that you paint an accurate picture.

A lot of the air has been let out of the SL economy in the last eight months. What we need is some new economic sectors to replace casinos and banks and land flipping.

I don't have any brilliant ideas, so I've started a new thread to brainstorm the problem.

Desmond - nice post.

I've seen many Open Space sim owners already charge 125 USD (and more) for tier or rent. Some have no upfront costs and some practically charge the LL purchase price as one large upfront fee. So if by coincidence they're already charging the amounts specified in your 2nd model but with a single prospective tenant not the 8 x 2048's you mentioned.

Like i stated in one of my earlier posts..., some well managed & marketed Estates (yourself included) will be able to fill their SIMs with tenants regardless of the current climate (from your waiting lists).....but for many SIM owners, they're just spitting into the wind!

If you took a snapshot today, we have 20000 sims on the grid, 45000 plots of land set for sale and we don't have the number of regular online users to support it.....there's absolutely no argument about it! Unless LL has a serious PR & marketing drive worldwide and increase the new player count ......and regular ones at that (via platform stability)....we've hit a major problem.!!

Update on that auction I screwed up. I offered her the new max that I was poised to bid, and I bought the piece from her, so she got a profit, and I got it at what I was willing to go to.

Phil- are you in turn selling on these auctioned lands?...or are you keeping for yourself (i.e business or home)

On Desmond's post...

The cost of tier for an island is definitely the thing that always puts me off buying. I'm still on the half sim level, but I would go to a full mainland sim with its tier, except that there would be no benefit to me. An island would have a benefit, but not one that merits the tier.

I'm not selling them. They are in the sim where my store is, so they add prims, and 2 of them are adjacent to my store, which is useful. I've sold land in other sims recently, and I want to sell more as my skybox tenants dwindle (if you didn't know, I was in the skybox rentals business but I've been allowing it to fade away as people leave). I'm not in the land business

Yep, i would only ever pay over the odds prices for land if it helps business expansion. You'll make up those extra costs through possible increased sales via increased product lines.

I've had around 3000 spare prims and plenty of adjoining space for a while now, but the space sort of meandres through the sim - long walk. The piece I just got and one that I got a few days ago, will allow me to extend the store in the right places to keep things near the landing point. In fact, I've already done it with the other one, and I'll do it with the new piece today - it's earmarked for the rugs, so I can spread the seating out a bit

I got the piece for 8000 - 4000/512, which is the lowest yet in the sim. Even when it was new and cut up it cost more than that. So I'm happy with it.

I'm happy with my little 1024 sq m flat corner waterfront parcel in a new mainland sim which I bought privately from a seller for L$8200. Whether that was a wise move, I will no doubt discover in the future

But virtually all the land around me is owned by one avatar and there are plots for sale in all directions - a large swathe of land chopped up into small parcels - ranging from 256 sq m at nearly L$4000 to 1024 parcels at nearly L$20,000

The bigger parcels are really nice square flat waterfront properties but they've been unsold for at least two weeks and have had their prices hiked from L$15,000 initially to L$20,000. One parcel was set for sale to an avatar who owns a lot of property to the west but I noticed this morning that it's now been changed to for sale by anyone so that sale has obviously fallen through.

Since I paid L$8 per sq m for my parcel, I've offered L$4100 for the 512 sq m parcel to the north but it's been totally ignored ... and there are now square white pad-style advertising markers all over the land giving details of the selling price.

I'm not going anywhere but I'll settle for keeping my little parcel for the time being.

Elfrida

All land is leased, mainland, estate, wherever, it's leased land. Linden Lab are the most trustworthy landlords here, if we end up in a situation where Linden Lab can't be trusted the whole platform collapses.



If you're talking about estate land the difference is whom you pay and the added variable of whether they're trustworthy. If you yourself have an island you pay Linden Lab directly for tier, if you don't pay tier you'll lose your island, but Linden Lab aren't generally complained about for having an argument with a tenant and reclaiming their land, something which some people who had a plot on an existing sim have complained about.

It looks like those sellers haven't done their homework. They probably bought the SIM via an auction and thought by chopping it up small plots and selling for double the market rates, they would make a nice tidy profit. Wrong!
The current market has changed with oversupply of land....i guess they'll learn the hard way as those lands remain idle.....and the tier clock remains ticking! Expect those prices of plots to drop as they approach Tier payment dates.

This is a great time for the few buyers that are out there....you'll find bargains almost anywhere.

Yes, that's rather what I'm hoping will happen

Elfrida

There are plots going for as low as L$4.1 a meter which is about as low as it's going to go, give or take L$.5.

If anyone was wondering why their mainland or Estate land is not selling, this might be part of the reason:

1169 new sims this week bringing the total number of main grid regions to over 20,000 - the total being 20477, 15861 of which are private estate regions.

See this fascinating thread for more info:

http://www.sluniverse.com/php/vb/business-land-economy/8523-new-second-life-sims-past-week.html

Cool we have more sims online than real people
We have to invite more people, maybe some flyers to drop in schools or something seeing anyone with hotmail can get in.

If it costs close to $4 to buy a gallon of gas, people can't afford to buy something that they will have to pay tier for. They may even be selling their land and downgrading to basic membership. Maybe they aren't even in SL anymore because they can't afford high speed internet.

On the plus side, I just bought a couple of lots overlooking the ocean, flat, green, level, and in a neighborhood that has lots of big, old builds (fewer ads that way) for less than I had to pay for my original land. My original land was sold by listing it as newbie friendly and including a very low prim house, plants, a small pond, and a few pieces of 1-prim furniture. I gained about 150L over what I paid for it. It was listed as 2000L cheaper than the surrounding lots (which still haven't been sold). (Unfortunately, I have to pay an extra US$5 for having an extra lot for 3 days.)

I can't imagine being able to afford tier for a whole sim (or several), whether mainland or not.

Yes, I was thinking about getting 2 open spaces (one for my home) and one for the lounge stores. Found out you have to own an entire sim to buy them (my 35,000 sqm in the sim wasn't good enough). Most sim owners charge you $25-$35 extra USD on tier, so instead of buying a sim to live on and paying that $295, I'm selling my 35,000 sqm and just settle on a smaller plot and cash out. Use the money to pay RL bills. If LL had it set up that any Concierge member could buy open sims, I would of definately bought 2-4 open space sims. But since that's not the case, I don't see a point in paying $125/month or more just to get live chat help in SL.