Break Even Numbers for New Land Pricing

If one were going to buy land in auction and sell in world. Assumptions in green.

Say you buy one sim at auction for US$ 1,000. (You could get bid up.)
You will also need to pay tier fees for at least one month, an additional US$ 195. (Assuming you sell in one month.)
Plus you will need to spend time parcelling out the land - say 2 hours @ US$ 50/hr - an additional US $100. (i personally value my time much higher than that.)

So initial cost for one sim ready to sell is US$ 1,295. or L$ 323,750 at L$ 1000 / US$ 4 exchange rate.

Say you wanted to make a 10% profit. You would need to sell at L$ 356,125 / sim.

One sim is 65,536 square meters (sq.m). (Assuming no Linden Protected Land in the sim.)

That makes the selling price: L$ 5.43 / sq.m.


Looks to me land is going to be going for about L$ 6 / sq.m.


variations:
Exchange rate fluctuations changes the price. E.g. 10% lower exchange rate (i.e. L$ 1000 / USS 3.60) changes the price from L$ 5.43 / sq.m to $6.04 / sq.m.

Selling the sim's worth of land in two (or more) months changes the price. E.g. Selling all of the land in 2 months changes the price from L$ 5.43 / sq.m to L$ 5.96 / sq.m.

Changing profit margin from 10% to 20% changes the price from L$ 5.43 / sq.m to L$ 5.93 / sq.m.

Wow, good job on the math.
That is how much the original purchasers will sell it for but what happens when the next buyer wants to sell it? Because if there is all this land for $6L/m they won't be able to make any profit. Not that I ever make profit on my land sales since I usually just want to get rid of it lol.

I predict it will become more common to rent land from someone who owns the entire sim. It does become more cost effective and the land owner retains the land and can restrict zoning and things. It has become way more popular then when I started a little over a year ago renting land in Indigo (thanks Flip!).

[/COLOR]Turns out this is a bad assumption. Philip just said the new mainland sims will have protected land.* * *

Also, it turns out that US$1000/sim is the price that auctions were closing at before the change. The new starting prices is US$1000/sim.

There is a double whammy here. US$ 1000/sim (even with protected land). So US$ 1000 buyes less land than before; this requires a high L$/sq.m price to recoup the cost of the lindent land. And the new minimum price is was the old maximum price; any bidding will only increase the price of land further.

reverse price controls then

Forcing them to stay high.

Leads to Deflation =controlled Money Sink. I suppose

L$ don't leave the economy... so there's no sink.

increasing pricing without feature improvments is questionable... imnsho.

where's the marketing guy? why hasn't he said anything?

Oh wow right, the auctions are in US dollars now?

Wont that mean INFLATION?

since land was a money sink?

So if I'm reading that right... base start price $1000, with Linden land (a variable amount), on the mainland with all that entails (lesser land control tools - neighbouring sims - etc)

Seems that it's not in the 'normal users' interest to buy a sim this way.. if you were buying it to use the land you'd get more bang for your buck by forking out the extra 200 bucks for an island.

Or am I missing something?
Or is this the 'plan?' - to ween folks off the LL created mainland and into multi island communities?

Siggy.

well land prices will be minimum $5-6 it looks... so there's inflation there already.

as for no auction sink... i dunno.

but, perhaps this rise in prices is to go in sync with the 1.7 update with better sim performance... so i would presume LL might be planning to up the prim limits per sim and therfore they are making sure we pay for it

Personally i think LL are starting to take land owners for a ride... Perhaps they are trying to get the majority of the residents to rent from the land barons.

whoever said this price rise will not affect L$'s exchange rate is possibly wrong... if land is a higher price, merchants will charge more for their products to substitute the higher prices, rent will also be higher...

IT'S ALL A BIG CYCLE AND WE'RE ALL GONNA EVENTUALLY DIE... AHHHHHH... flee for the hills, FLEE FOR THE HILLS!!!!

uh... then wouldn't they wait for 1.7 to come out first?i don't know if that's the case. but it's feeling that way.run away! run away!

what i mean , arent auctiosn right now in Linden dollars? they go to Linden labs.

So they money gets destroyed , right?

so what happens when no mooney gets destroyed becuase of land auctions?

some auctions are in l$. i don't know if they made much of a sink compared the weekly stipends.a little bit. but that will end with the new system.dunno. i don't think much given that the land actions weren't a very big sink.

If LL stops adding $L to the economy, there will be no need for a sink. *insert Twighlight Zone music* Because money will just keep cycling the system....

Sings...

This is the end
Beautiful friend, this is the end
My only friend, the end of our elaborate plans


Personally, I think everything will be fine. But I tend to be an optimist

Stone - actually - aren't your original calculations correct?

From the Town Hall:



Please correct my logic here:

Assuming: Phillip was accurate about more sims available for auction than demand, all released at once - creating a defacto 'infinite supply' situation.

So....

I bid on Sim A - starting at $1000 - triggering the auction
Joe Avatar outbids me on Sim A with $1010

Fine.

I move onto Sim B - starting again at $1000 - triggering the auction
Alice Ching outbids me on Sim B with $1010

Fine.

I move onto Sim C - starting once again at $1000 - triggering the auction

Wash, rinse, repeat - until I am the lone bidder on the auction. I'm not responsible for the previous auctions, because I've already been outbid.

Essentially, what we have here is a fixed price for a mainland sim - $1000 - with the auction's only purpose as being a dispute-resolution mechanism when there's a higher-than average demand for a particular sim.


Of course, Telehub Sims and other highly-desireable sims could skyrocket in price, because while Phillip discussed "lots of sims", that applies to the bulk of land; "Special" land will always be in shorter supply.

Am I off base?

Are more allowed prims on the horizon? If more prims are allowed, this might be a reasonable trade-off in that respect.

coco

the original calculations assumed the whole sim would be resold.

that is not the case. the new mainland sims will have some protected land (land owned by the lindens.

so that reduces the amount of land in the sim that can be resold... which increases the L$/sq.m price.

Gotcha. Yep - makes sense now. And a sim with minimal Linden Land may fall into the 'highly desireable' category as well.

It'll definately be interesting to see how this all turns out.

You know, with this being the way it is, perhaps the L$ amount that land contributes to the leaderboard should be upped? Currently, it's $1L/m... but I think if it was $5L/m we'd have a whole new leaderboard.

a group gets together to buy a sim:

assumptions:
- exchange rate of US $3.82 / L$ 1,000
- 3% protected land in sim (63570 sq.m player owned)
- cost of hours used to parcel land not calculated (done for fun)
- tier costs no included in cost because final owners are initial owners
- not bid up at auction
- no profit motive

costs:
- sim purchase: US$ 1000 = L$261,780
total costs: US$ 1000 = L$261,780

total owned land: 63570 sq.m

price per sq.m: L$ 4.12 / sq.m

a land reseller with low profit motive w/ optimistic conditions:

assumptions:
- exchange rate of US $3.81 / L$ 1,000
- 3% protected land in sim (63570 sq.m player owned)
- cost of workhours put in to set up sim US$ 100 (reseller does work)
- tier costs included in cost because resellers need to recoup fees
- also, less than 3/4 sim sells in one month incurring tier fee
- remainder sold in second moth
- not bid up at auction
- no profit motive beyond hours worked

costs:
- sim purchase: US$ 1000
- first month tier: US$ 195
- second month tier: US$ 125
- work hours: US$ 100
total costs: US$ 1420 = L$ 372703

total owned land: 63570 sq.m

price per sq.m: L$ 5.86 / sq.m

a land reseller with high profit motive w/ optimistic conditions

assumptions:
- exchange rate of US $3.81 / L$ 1,000
- 3% protected land in sim (63570 sq.m player owned)
- cost of workhours put in to set up sim US$ 100 (reseller or employee does work)
- tier costs included in cost because resellers need to recoup fees
- also, less than 3/4 sim sells in one month incurring tier fee
- remainder sold in second moth
- not bid up at auction
- 20% profit motive beyond hours worked

costs:
- sim purchase: US$ 1000
- first month tier: US$ 195
- second month tier: US$ 125
- work hours: US$ 100
total costs: US$ 1420 = L$ 372703

20% profit sought: L$ 447,244

total owned land: 63570 sq.m

price per sq.m: L$ 7.04 / sq.m

* * *

single change variation:
- 5% protected land: L$ 4.20 / L$ 5.99 / L$ 7.18