Real Estate Crash

Sounds like fun

Well we now see the first ever Sim to auction off for $5,000 US, that's $L 21 per square meter wholesale.

Just think, at old prices Desmond Chang could have purchased 4 of the current Caledon Sims for that, the same applies for Anshe Chung. I ponder on the merits of a fair rental income yield that is not exploitation, vis-à-vis selling that land on the $5,000 Sim for the (guess) $L 25 per square meter the purchaser will need to sell on to end users to even break even on that purchase including one month at tier $195.

Never mind, the market can remain irrational for far longer than I can remain solvent, a lesson learned after the 1999/2000-dot.com boom and crash.

At least on the markets I can always exit and recover any losses by shorting the damn thing, here however in this new virtual life paradise where its all different and normal rules don't apply (Where did I hear that before) I cannot see how I can short Second Life land, unless of course Desmond (or Anshe if she reads this) is prepared to give me $5K now if I promise to deliver a mainland sim in three months time.......standard covered warrant deal either way entirely normal, trust me on that one

Post repeated on Second Citizens BB Land and Economy for ID reasons

LL is on the record that they want to see land averaging at $7 m2. The reasons for this are that their income depends on end users holding smaller parcels of land and also that a significant portion of the SL economy is driven by land-owning end users. Prefab housing, furniture, landscaping, accessories, intimate animations - all of these SL content sectors depend on land-owning/renting end users. Resellers flipping the same parcels back and forth to other resellers for months on end does not benefit either LL or the SL economy. Average land pricing has to be attractive enough that end users are happy and willing to spend that $15 a month on tier that they would spend on a WoW account anyway. A 2048 parcel is far more attractive at $54 US than at $115 US. The end user is king here and the pricing will come back down to where they want to buy at because LL controls the land supply.

With all due respect, very bad advice. Land is NOT an investment in SL, because it is an (effectively) infinite and renewable resource, it is made. RL investment is different: I got the "Motley Fool" value newsletter and invest in value stocks (I do a lot of research); my average yield is about 25%/year with very modest risk (and the risk is spread out).

Buy land to use for fun or to make a business. "Investing" in SL, land or otherwise, is the riskiest thing you can do with your money. Don't do it. Buy stock (well researched, and I recommend the Motley Fool Value newsletter), buy Treasury Bills.

John, I made the utterly stupid mistake of investing in Cisco stock in March of 2000, ostensibly after reading too much hype about dot.com millionaires. I didn't do my homework, didn't know enough about the stock market and had never heard the term "bubble." Somehow in all that hype I missed the warnings that the market was weakening, all I heard was "buy now!! prices are just going up, up, up." We all know how that story played out and I lost a lot of money. But that loss bought me an important lesson about doing my homework before throwing large amounts of money at things, especially if I expect some kind of return on the investment. Buying at the top of a weakening market is a mistake made by amateurs and fools; it is a painful and expensive lesson.....

I think it's gonna tke a lot more land, a lot faster to get the an average of $7 m2. In order to maintain the current level of land pricing, land has to be created fast enough to maintain the land/resident ratio. That is, if the # of residents doubles, the amount of land also needs to double. To cause a drop in the price requires excess capacity to come online. Clearly it's in LL's business interest to have lots of people owning land and paying tier etc, but given the current state of affairs, I don't have a lot of confidence that LL can deliver the goods.

OTOH, land demand seems strong enough right now, that the number of tier-payments is really only limited by the amount of land tier is being paid on. The current land price isn't going to affect the tier payments being made by longtime landowners, and new land seems to be selling fast enough that vacancies aren't a big effect either. LL is just missing out on tier payments for land they haven't managed to produce.

If you are espousing T-Bills then you're clearly too risk averse for this land game. Just because your tolerance for risk is low and/or you don't have any experience trading land in SL, doesn't mean you should declare it a bad investment.

No offense taken. I didn't mean to imply that someone should invest all or even a substantial portion of their money here. But as I said earlier, with all of the online interaction nowadays, I think it's worth looking at. Heck, this thing's getting national attention. Forbes, BusinessWeek, CNN, AOL. That's why I'm here. People a heckuva lot smarter than me are checking this out.

I must admit that over the last week, the thing I've achieved more than anything is fun!!! Just last night a girl took me jetskiing. She approached me!!! I love this place!!!

Others will too.

Quite the contrary, I've tried trading land (and profitably), in fact know exactly what I'm talking about. Fact is I don't have T-Bills (too low a return, but good for most people who shouldn't engage in risk, hence the advice), but do have stock, and am a "value investor" with a medium tolerance for risk. In RL I can get solid returns on my money, pay 15% flat tax on those returns, and can do so with acceptable risk. So: I have experience trading land, I have a reasonable tolerance for risk, and do declare that land in SL is a poor investment compare to return/risk available in the real-world, and through much more solid institutions. Last year I bought Tiawanese Semiconductor (TSM) at $7.77/share; I sold it a few weeks ago at $11.25/share. All the stocks I own are up substantially. My only time invested was in research. Much, much better than speculating on the price of server space.

Folks, this is the key to investment: figure out the intrinsic value of something, and purchase below that value. When it goes above that value, sell. Land in SL has the intrinsic value of the server it is on, no more. SL is for fun, or for making content and selling that content, but speculating on server space is the path to tears. Intrinsic value.

And post-script: look at Warren Buffett Jr., he is in the same financial league as Bill Gates and through investing -- he only considers the intrinsic value of a company, and his careful strategy has earned him the wealth of a RL small nation. Meanwhile, like clockwork, speculators get wiped out when their get-rich-quick scheme dies.

I know I'll get plenty of people arguing this point, but I really am trying to caution people who roll a substantial portion of their money, or worse use a credit card, to "invest" in SL when that is the least sensible thing to do with your money. If your rich and want to play real-estate in SL as a game because you can afford to lose a few hundred or a few thousand dollars, by all means -- but this is NOT a path to long-term wealth.

Painful, but.....not a total blown out loss. Trading today at $28.74 although I figure you may have paid much more for them Also if you still own them its results day today and its a profitable company.

However Second Life land is not a traditional investment as things stand and I endorse the comments made about value and/or dividend stocks and funds within a balenced portfolio.

But don't worry we have all been there( market tops and hype) which includes me. First lesson I learned was stop loss and the need to have one and stick to it. Back to SL now sorry about off topic post

Not to take away from your main point (that LL would prefer more new residents own land), it is not true that "resellers flipping the same parcels back and forth to other resellers for months on end does no benefit LL."

Consider your 2048 parcel, bought by a new resident for his admirable and economy-building purposes, and held for 3 months. LL gets $18 per month in tier for three months, or $54.

Now consider that same parcel, flipped from reseller to reseller at an average rate of once per week, or 3 months. LL gets $18 in tier from the first owner, $18 from the next, $18 from the next, $18 from the next, and $18 from the last reseller to purchase it in the first month--$90 for the first month! Add to that $72 for each of the next months, and LL has realized $234 in tier vs. the $54 from a single owner.

Of course, many resellers don't increase their tier on each transaction, and the more tier they hold the less likely any one transaction is to bump them up to the next level. My example, then, is extreme--in RL LL would earn something more than $54 but less than $234 (unless the flipping was happening at a much higher rate than once a week). But I hope you take my point--that LL does benefit from land-flipping. (Still not sure on whether it is possible that the economy was also benefitted, given that land speculation is part of the economy. How much of the demand for new sims is stimulated by people merely wishing to resell for profit?)

First, I want to agree with your main point that SL is not a good long-term investment vehicle. There are too many variables under the control of LL, at the very least. And like you, I'm investing for retirement on a Value basis.

Having said that, it is also legitimate to invest on a Price:Earnings basis, particularly when investing in renewable commodities. Wheat, for example, is not in fixed supply, and anybody can plant it and grow it. Nevertheless, it can make business sense to invest in wheat, or to speculate on wheat futures. Fiber-optic lines are being produced and expanded all the time; it can still be a good strategy to invest in telecommunications.

So with SL land. Anshe Chung has over a million US$ in cash and assets, RL offices and employees, all from investing, developing, and managing land in SL. As a SL noob, I bought my First Land at the end of November, threw in some more money as I saw opportunities, and as of now--after riding a boom and a bust--I've realized a simple return of 132% even factoring in tier and premium membership expenses, and even assuming I'll never get a single L$ for any of the SL land I still hold. 132% in 2 1/2 months, buying 25,280m2 and selling 23,248m2. And that's without buying and selling every day, without even getting online to check prices every day. Without a bot. Simply estimating what specific parcels of land should be worth and comparing that with their actual price.

Depends on the furniture, I guess. You won't get rich on it, but I regularly do pretty well with just the small amount I sell, considering I didn't spend an enormous time in developing it. The cost also reflects that. My furniture is significantly cheaper than my skin/genitals product for men, which took months to develop.



People regularly steal and try to undersell you with your own products in this game. Similar to RL shoplifting in a weird way, I guess. However, people are very keen to reputation in this game as well... and that's a sure way to a bad reputation. So it works out a little bit, but one still has to stay on top of it. The permissions system, with all its flaws, does make it possible to keep an economy in this world.

as for the people who lost money in the land biz... well, its their stupid fault for panic selling. I've been through a few panics in this world already, and I rode it out and played it conservatively, and was able to regain my costs when I went to resell the mainland property I bought. I didn't sell at a profit however - as I sold to friends. I remained fair and I have a clear conscience about that. At the end of the day, reputation is what matters and being a fair person to deal with will gain a person more money over the long haul.



if you are paying your tier costs with your profits, you could well lose your shop location to "repossession" if you can't pay the tier. Same diff. And there are many who are dependent on sales to make the tier payments.



Neither do I, for the most part. However, some trades garner better reputation than others. I remain "iffy" about the general ethics of many casino operators, both RL and SL. But as people are dumb enough to pay them, I see it as " get what you deserve" sort of situation... however, I would rather if the casino is not located next door to me. Laggy scripts and shouting machines do not a nice neighbor for a high class retail biz make.



that's what brought me into this game... but I will do my best to refrain from the obvious advertising I could do in this space



I have nothing against land barons who provide added value above what you can get on the mainland, by having tailored covenants and lovely landscaped sims to suit various needs of residents. Indeed this world needs these people, and I am glad to pay them a bit more than I would on the mainland to have a better location for my business. May they continue to prosper.

Agreed. The only "SL business" I'd ever consider 'funding' on a credit card would be an island business granted an island is 1695usd costing roughly 13usd in interest payments and it would be relatively easy to sell that island for 50-100usd over tier... That being said, it certainly is no way to get rich unless you plan on buying a heck of alot of islands. As for getting rich, I'd definitely max my credit card out with stocks over SL anyday -- something like Apple will pretty much guarantee you a no risk healthy return for likely several years to come. But... SL is so much more fun than plunking all my money in Apple, so I leave a bit in here for fun

"The land barons are a creation of LL. It is a function of selling new land in whole sim sizes. I only need a 4096 plot so I am not going to go buy a whole sim. On the other hand, someone has to buy those sims from LL and if they don't cut them up and sell them, well...... there aren't any 4096 plots for people like me."

Just to clear up a point here, land barons existed before LL started selling sims this way. That is one of the reasons they could sell sims this way. Before they sold only whole sims they would be chopped up in some random way and the plots would go to auction that way. But with the increase in abandoned land being sold, it was determined that having a Linden take each sim and chop it up was not a good use of resources. If you want to get a plot of land that is less then a sim, they will come up in auction. They may not be the best piece of land, but they are there.

The resident pays $15/month in tier, the flipper pays $5.5/month to hold the same amount of land ($195/sim + 10% mainland bonus). I'd love to see the price on a parcel that was flipped 12 times as well, I doubt the last owner would be able to sell it at anything but a significant loss.

Meanwhile the new resident is infusing real money into the system, because (s)he bought their L$, and they'll need more for furniture, or at the least for textures, and their tier is being paid with PayPal or their credit card.

The land flipper on the other hand is using money "earned" in world to pay for tier, so isn't actually spending any *real* money at all, (s)he is dependant on people like that new resident to be exchanging US$ for L$, and as evidenced in another thread, a land flipper's priority is to cash out whatever is earned so on the whole it's merely parasitic behaviour.

Parasitic behaviour? God forbid anybody makes a profit.

I accompanied a friend this morning who was looking at some mainland. By the time she tp'ed me a land flipper had shown up, bought the land and then proceeded to offer her a "good deal" on the land. I'm sure you see that as neighbourly and friendly .

Buying up a sim and carving it up and reselling at a profit is useful, buying land at below market price because a resident need to be rid of it that very second is useful to the seller, anything else is merely preying upon the rest of the community without offering anything in return which I do believe is the dictionary definition of parasitic behaviour.

Welcome to real life. Just because it's a virtual world doesn't mean it's a fantasy world.

Are you talking about buying sims in auctions and carving them up, or swooping on cheap plots and reselling them? The two are different activities, and some people only participate in one or the other. Of course, many do both, but that does not mean the two are the same.

When you first said about "parasitic behaviour", you also mentioned the US$195 tier - now you claim you're talking about people buying and reselling cheap plots, and that people carving up sims provide a useful service?

Does your dictionary also have a defintion for free market?

The problem here is that nothing has changed. You have one reseller buying the lot at auction, carving it up. Another comes along and buys it and then marks it up again. That might happen a third time. Because search was broken yesterday (still is?), I saw land being sold for one price on the map, then when i teleported to the plot, it was already bought and often for sale at a different (higher) price.

I don't begrudge anyone the actual profit, but I dislike the fact that these extra markups make it more difficult to obtain land. There are thousands of plots for sale out there, and very few that I or many others would be remotely interested in. I just look at them and say, "you can kiss my ...."

Search still is broken, and as expected... already resold and marked up.

Good. A free market in action, you had the choice whether or not to buy it yesterday and chose not to. Somebody else decided differently.

FYI, the map can be many, many hours out of date, so relying on that as proof of the speed at which parcels are flipped would be a mistake.