Buy v. Rent: An Estate Owner's Perspective

There have been a number of threads on the merits and demerits of buying v. renting in SL.

So as an Estate owner I would like to give my perspective on the debate.

First of all, it is incorrect to say "An estate is a portion of a private island that someone has put up for rent", as quoted in another thread. An Estate, as defined by LL, is a group of one or more sims. I own the Fair-Isles Estate, and we have a number of sims under that estate (=regions, = private islands, =65536sqm).

A part of a (private) sim is simply a parcel, and it can be put up for sale, or rented. I am in total agreement that the concept of 'selling' is seriously flawed in SL, but that applies whether you 'buy' on the mainland or on a private island sim. In neither case do you 'own' the land. If you stop paying tier to either the Lindens or to the owner of an island, they can, and do, reclaim the land back.

That does not mean to say that there is no difference between 'owning' and renting. When you 'buy' land in sl, you get certain rights, such as the right to terraform, set a Home landmark, maintain a ban list, return other people's objects, etc. But you pay an ongoing cost for those rights.

It is much more honest, in my opinion, to rent, and that, I believe, should be the correct term for ALL land transactions in SL, (imagine in RL paying cash for a house, then still being asked to pay mortgage each month as well!!). I spend US$1,675 for each of my sims, and US$295 / month in tier to LL. I have to landscape, plant, put in homes, furnish them (taking an entire day to do each one), employ architects, interior designers, estate managers, and sales/support staff. So I need to recover not only my monthly tier from my tenants, but also my capital outlay, and ongoing costs ( I need to pay my staff, and pay for advertising, setting up tenant groups, etc, and contrary to what people think in a virtual world, there ARE maintenance costs involved!).

There are private sims that are mature, and others that are PG, there are some that are commercial, some residential, and some that are mixed. There are some that allow anything that does not contravene the basic TOS, and those that are quite restricted to maintain a certain theme, or ambiance. In short, there is something for everyone, and the rights obtained by 'buying' can just as easily be had by careful selection of where to rent, and you can rent somewhere different every week if you wish.

Of course, as in rl, there are some very good landlords, and some unscrupulous ones, I hope that I am counted amongst the former.

It is also true, that even if you rent on a private island sim, the owner can evict you with no refund, and there is little that can be done. But in my experience, I have never seen this happen. It should also be pointed out (and this HAS happened, just read these forums) that people are barred from SL, with no reason given by LL, and they lose EVERYTHING!

For a private island sim owner to behave badly towards his tenants is commercial suicide, just as in rl (I am talking about the high end of the market here, not the low end).

But the maximum loss a tenant can sustain is usually a week's rent. On my Estate the minimum rental period is 1 week, and the maximum that can be paid in advance is 4 weeks (because of L$/US$ exchange uncertainty), but almost all tenants choose to pay by the week. Compare that potential loss with the loss of a huge purchase price!

The tenant is free to leave at any time, for any better offer that comes along, or just for a change of scenery. Often, a tenant will leave because they find a partner, and they move in together, so one rental property is then relinquished.

I have also had tenants who have left because they wanted to 'own' their own piece of land, and landscape it themseves, and design their own home, etc. Almost all have ended in tears. There is only one success that I am aware of.

So that is my take on the buy v. rent debate.

BTW. If anyone is interested in how an Estate owner plans and executes a sim project, just let me know, and I will post a project plan. We have just finished Hoini, the 1001 Arabian Nights themed sim (which has been described as the most beautiful sim in SL), and the problems and solutions to the problems could make for quite interesting reading, although I am not sure if this is the right forum.

Yes!! Please post that project plan, I'm very interrested in that.
If possible, with numbers, so I can judge if I want to get involved in the land renting business.

Thanks!
- Stukas

I agree with what you said, I have a little estate and an upcoming sim in which i will set land for rent. I have thought a lot about selling/renting, and I think both are valid options. I decided for the rent, that will free tenants on "fear" to lose a bunch of money they put for buying (yes there are some unscrupolous landlords who just care about money and nothing else, I never heard of any bad ones, but reading the posts I can understand that trust is not an easy thing to gain on SL, where land is paid by real bucks and there is no signed contract like in RL). Besides renting land frees tenants on initial costs for buying, even when there is total trust with the land owner. Land is expencive, it is for everybody, we can't do much about it. If after buying we would have no more fees to pay, then buying would surely be a better choice.
But everybody who owns land must pay monthly fees in order to maintain their land.
So a rent, in front of a higher monthly cost (of course saving the initial buying cost, land owners will need to make a rental plan in order to cover monthly fees for the sim and have some income for the land they bought and nobody will buy if it's for rent), makes things much easyer for both tenants and land owners. They both will feel less responsibility, money involved will be what everybody needs to pay to LL for "owning" land (and of course the land owner will have to plan some more incomes to cover the extra costs to landscape, hiring people to manage the whole thing, cover the potential plots that might remain unrented for some time, giving support and customer care to tenants, and a lot of other little things).
A scrupolous land owner, would rather pay out of his pocket for land bought by tenants if things should go bad (and not for their fault, we all are in the hands of LL). That is for me, and that's one of the reasons that made me go towards giving land for rent. I would feel too much responsibility and maybe a sense of "guilt" too.. for selling land that still would be "mine" at the eyes of LL. It shouldn't be like that, as I paid the whole sim so would be honest to sell it, until I can guarantee that land sold there will be there for the tenants who bought it until they want (or until SL will be on).
Yes renting would be much better for everybody, with refunds even better. The worse that could happen to a tenant if things should go really bad )who knows... sim should be shut down forever, landlors should delete their account and so on..) would be having to look for another place, and no money loss.

For all who criticize landlords, remember that they made an investment, a high risk one, of a lot of real US$. And after taking off all costs (as mentioned here and on the first post) don't think a landlord "makes" a lot of money when renting land, it takes years (RL years) before they get back what they invested in that. And and investment for years, on SL, can be considered a very high risk

I would like to add something about "ownership". Speaking of ownership of land in SL is not of course the same as in RL.
In the renting case, a lot of landlords will give ownership of land for the lease time. That's my case too, specially cause it's a commercial sim. So tenants, even when renting land, will be onwers there, having access to their parcel with ownership rights. That means that terraform, ban list, setting land to group, return objects, and so on, will be tings they can do. They "own" their parcel for their lease time. Of course there are some limitations, first of all, they won't be able to sell their parcel (of course *giggles*, they didnt buy it)
But they have their plot just as they bought it (they will actually buy it, even if price is usually the initial lease time, that might be a couple of weeks or a month for example), so they are granted ownership rights on parcel.
And usually same rules, as usually stated in covenants, apply for both buy or rent, and they are not restrictions to make tenants life worse Just the contrary, having some simple rules will make SL experience in that sim much better for both tenants and visitors

I'm in 100% accord with Rock's thoughts. I, too, do not 'sell' parcels on my SIMS, but in exchange for setting up houses, custom teraforming land, etc., I encourage tenants to stay awhile.

I'd extend Rock's comments to add:
*In exchange for rent (specifically, in exchange for a 4 week minimal rental commitment), I 'sell' land to my tenants. Basically, my tenants 'PREPAY' the first 4 weeks rent, and I 'sell' them the land for $1L. In exchange for this 'long term' relationship, I allow all the benefits of land ownership. (ban lists, teraform, audio stream, auto-return of prims, etc.) After the first 4 weeks, additional weeks are paid one at a time.
* I do NOT allow 'transfer' of the 'sold' land to a third party. The reason for this is very simple...there's no way to prevent the third party from being defrauded by the 2nd party (or from selling it to a 4th party, etc.). The sublet tenant must pay the original tenant, who must pay me. Any break in the payment chain means the last 'purchaser' is vulnerable to all those between him and me. This creates all sorts of potential avenues for mischief. Some of these have been documented in these forums. (recently, entire SIMS fell prey to this.) I personally know someone who lost over $1000US as a result of this sort of fraud. Consequently, I simply do not allow the deeding or resell of the parcels.
I have found only one exception to the land transfer constraint: often, an original tenant would like his GROUP to have access to the property. When a tenant wants to DEED the land to a GROUP (which is common), I (or one of my excellent estate managers) stand by and personally help transfer the DEED of the land to the group. Once successful, the transfer process is turned back off.

Rocky, I am also very interested in how you executed your project plan. I am working hard at actually having a plan in place instead of flying by the seat of my pants with this Estate business.

Thanks!

I bought my parcel from an Estate owner and would never rent..I like owning my little peace of heaven. I guess renting just reminds me too much of RL renting.

And tier to me is to cover the costs of the server running the land, not the land itself. That's just my way of seeing it. And since my Estate Manager is much more responsive then LL, it is a much better use of my tier money IMHO>

You weren't around before LL introduced the option to "buy" private sim land. One type of landlords would have the land group-deeded and you were invited into the group, the other type would deed the land to your own group where you have the exact same control as "owning". Neither of the two ever asked you to pay for land you never owned, and neither held up the pretense that anyone but the sim owner owned the rental.

I'm sorry, but you're blind if you haven't seen it before. Every single day there's a new story of someone being evicted, some to the point where the sim owner will ban the resident off their sim and demand a ransom sum to be paid before they're allowed to come pick up their belongings. Others will pester their renters off their island by randomly returning furniture or parts of their house, or simply plain grief them until they give up and leave.

Compared to all the private island rentals those are definitely a small minority, but it happens every single day.

http://www.secondlifeherald.com/slh/2007/03/residents_of_8_.html
http://www.secondlifeherald.com/slh/2007/02/island_land_sca.html

The first one caused a lot anguish for a lot of people, and while it had a happy ending with someone else willing to incur all the costs, it could have been far worse.

No Kitty, I am not blind, I simply stated, truthfully, that I have never experienced it, and I do get out - quite a bit!

Another problem with the Mainland which no-one mentioned, but has popped up in the forum today, is that someone who owns a mainland sim found that everything in the sim was gone, everything! He had a rental business, tenants, and now all his business, his tenants's possessions, his buildings, all gone, and nothing has shown up in anyone's Lost and Found folder. LL have told him that it is not possible to do a rollback on a a mainland sim under any circumstances. Rollbacks on private islands sims are done, and I have seen them. Another advantage to renting on a private island.

With all the "advantages" mentioned I would not like to trade my land on the main land for rented land.

The stories Kitty mentioned are there. We see them to often here on the forums.

Concerning the Sim that was destroyed, recently also a Sim on the mainland has been rolled back. So it is also on the mainland possible.

Morwen.

Here's another estate owner's perspective...

'Buy', 'sell', 'rent' or 'lease' - it doesn't matter what you call it really; it all adds up to 'no recourse' if something goes wrong.

You are giving money to the estate owner and hoping that he's not a loser. Could be ethics, could be the ability to balance a checkbook - there's a million things that can go wrong.

So you balance that against the risks of the mainland, where a million things can go wrong in other ways.


* * * * *


Allow me to share a little story.

Once upon a time there was one tiny little sim called Caledon, all alone in the sea.

I had saved and saved and saved to get it, and there was no charge for land - just rent a spot, there you go! It took me four months to raise the money for the sim all by myself.

Well, guess what happened. Caledon filled up, and was veeeery popular. Still is! People began selling the rental rights to others.

Some who got free parcels sold the 'right to rent' for over $L 60,000 to the next tenant. Wow!

It was sort of like raising all that money to buy a sim, only to have people come in, rent it, and reclaim the cash I used to buy it. Just rent for a week, and sell the transfer rights, so easy!

There was a loooong waiting list to get into Caledon, but I wasn't keen about charging an up-front fee. "Just wait another four months!" I told everyone.

Well, nobody liked that. Eventually the waiting list revolted in the most curious manner. People started dropping money on me $L 20k at a time. "Open the next sim!!!" they said, "here is market value for the land, just open the next sim!" Okay, okay. So I did.


Moral of the story:

If you have a popular sim and don't charge market value for the land, people will snap up your parcels and profit off your land for you.

* * * * *

Incidentally, I've had friends with refund-upon-eviction policies for anyone they found to be totally obnoxious in their sims.

Well, guess what happens if a tenant suddenly decides they just want a refund?

Offer refunds upon eviction, and find out...