« Jaw Drop | Main | I Just Have One Question About All This... »

10/23/2008

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Ann Otoole

"Why do so many people go into rentals, given the harshness of Mystery Math? That is the mystery..."

Probably because they read some idiot's guide to becoming a zillionaire in SL.

The real way to get rich off SL is by writing bullshit books about how to get rich in SL.

Ciaran Laval

Throw VAT into that equation and you have another chunk of issues and with the pound crumbling against the dollar there are going to be some tears ahead.

I think Openspaces are going to crash at some point, not because they're not popular but because the $75 tier fee becomes a big chunk if people aren't renting it out. People will bail.

I'm not sure about the need to pay so much in advertising mind you, certainly not in land rentals, property rentals seems a lot more competitive.

The rental market is important to Linden Lab, I'm sure they realise this in terms of cost savings on billing, building, support yadda yadda yadda.

However there's no point in landlords crying in public about the harsh realities, it's a competitive sector and you shouldn't be operating on a 100% occupancy model, which some people do. The whole deck of cards will come crashing down way too quickly if you work that way.

Diag

Thanks Prok for posting a definitive, first hand account of how difficult it can be to make money sub-leasing land in SL. The next time someone who's been in SL for 3 months informs me they've decided to buy a sim, chop it up, rent it out, and make a fortune, I'll refer them to this post.

Also, Ciaran, in regards to VAT and the crumbling UK pound :

Luckily us Australians are not required to pay our equivalent of VAT when we purchase stuff from the US of A (so far), however, with our dollar tanking as compared to the greenback, the cost of my $US40 tier has increased from $AU42 to over $AU60 just in the last month.

This can't be good for the SL land market.

Margaret Leber

I think my favorite hustle in the whole thing is the folks like Sirux Mahoney who offer "FULL 65,536sqm Commercial/ Residential Class5 Islands" to noobs that don't realize they're "buying" a low-calorie OpenSpaces region.

With four or eight...or 32 of these puppies stacked on a blade (remeber, LL promises "four per CPU", meaning I could host 16 of them on my desktop) someplace, they seem fine until they're all occupied and chock-full of badly-scripted freebies and a sex bed or twelve. Just like the cable companies overselling their internet access and then silently capping traffic when things get dicey.

So things get horribly laggy for Mike and Mary Nieube, they leave, the Estate Owner resells the sim, and we wonder why there's lousy retention and poor occupancy rates.

Desmond Shang

I'm not the only one that's profitable by far, there are plenty of others on the grid doing pretty well to this very day.

Much of this had to do with not overextending in 2007/2008, and having the regions we do for quite a long time now; such that they were paid off long ago.

That said, I won't crow too loudly because anything could happen, still. Everyone's a genius... until they suddenly aren't.

I keep about 90 days of tier reserves just in case of the metapocalypse, regardless if I see it coming or not. 90 days should be enough time to adapt to almost any new world order as best as can be done; if that's not long enough, there's likely no saving any of us.

Sioban McMahon

It CAN be done, however. Maybe through luck, maybe through a business plan and creation of a quality environment. Maybe both.

I manage a registered charity, raising donation in SL that we convert to dollars and transfer to the RL charity each month. We have a group of 15 sims, 12 of which are rental land (10 whole island rentals and 2 parcelled islands). We maintain 100% occupancy. An open island or parcel fills within hours of announcing availability. The rentals pay the LL bills on all 15 sims and generate additional lindens that we combine with donated lindens to send to the RL charity. Our monthly amounts to the charity vary, depending on how busy/popular the events in our public sims have been. The monthly donation to the RL charity ranges between $500-1800us. We raise the amounts owed to LL before they are due (no floating things on our credit cards).

I think our success comes from our two part approach. We have a great community that loves the atmosphere we've created in the sims. Most of our tenants are people who attended events (music, storytelling, theme dances, workshops, etc). The events support the rentals by providing the pool of potential tenants. The rentals support the events by paying the bills. Both rentals and events support the charity.

It took us a long time to reach this point. Building a strong community is HARD and takes not only up front work in creating the atmosphere, but long term and continuous work in providing great events and an interesting place.

If you want to get into this sort of thing, you need to do a realistic business plan in advance AND know that you'll likely lose money for the first few months.

Sit down and write out your worst case scenario costs for a month. No kidding yourself at all. Figure out what you'll need to charge for land to cover those costs and generate profit (or in our case lindens to be donated). Do your homework in world. Are there any sims charging the price you came up with? What do those sims have that makes people pay that level of rent (or are the sims sitting empty?)? Quality DOES pay in SL.

How are you going to attract tenants? There's a lot of competition out there. A community like ours is a great pool of potential tenants, but you need to invest a lot of time and energy in creating it. Is that something you are willing to do?

Prok is right, you can't just build a sim, put up a For Rent sign and expect to make money. Put the work in, create something special, and continue to put the work in, and you CAN be successful.

Darien Caldwell

When I had my estate, it wasn't wildly profitable, but I did make a decent sum, even though all my sims were $295 a month tier. However, the amount of time I had to put into it in order to keep it comfortably on the black side of the line wasn't justified by the profit.

Once LL dropped sim prices and started pushing Openspaces, I realized the writing was on the wall for your average Land Rental business, so I took the necessary actions to wind down my estate.

I fully agree you need to either have a passion for it that doesn't require profits, or something really compelling to make said profits. As LL continues to step into their new-found Estate Owner Role, it will become even more clear this is so.

economic.mip

Why I gave up on the rental idea and ate 20 bucks of tier once. It is not a good paying gig, and anyone who has tried it should know that. Add to it that I have a strong aversion to the "mature" things of SL, and it just wasn't my thing.

Desmond Shang

A very long time ago, one of Anshe's estate manager 'angels' mentioned that you needed dozens of regions to really make a go of it, to make your time worthwhile.

I thought: "Nah, it's my hobby, a few hundred bucks positive a month sure beats paying for a 15 dollar subscription any day..."

...and it does, but also, it doesn't. Being in the business means you can never really take a break. Ever. Sure, you can skip logging in a few days now and then, and if you do that strategically you can prevent burning out on the whole thing. But there is *definitely* a work and worry aspect to it. At 15 dollars a month or whatever, skipping a month or two and coming back is no big deal. But don't even dream of ever doing that if you manage land on the grid. Suddenly, it's joblike and businesslike in a way few are ready to take on.

Second, Anshe's angel was quite right, in the long term. I can justify my time because of the income, but it takes a lot of regions to do that. Most people have an online interests horizon of maybe just short of a year on anything focused; one look at the rotation of most people on the grid and in forums tells you that. So unless you are downright fixated on maintaining land as all the fun you will *ever* need to have, other motivations will eventually make or break you.

Nobody ever knows what the future holds. I remember when things looked pretty bleak in 2004 - nobody predicted the success to come. In other common-wisdom areas, I've seen people utterly shocked that the housing market collapsed, or, the stock market when everything was seemingly fine just a moment before.

I think the trick is to be prepared for absolutely anything. Utter failure - or utter success. The only surefire way to truly lose in the grand scheme of things is to never leave the illusory safety of a work cubicle.

Prokofy Neva

I really can't say what is keeping me involved in this business. I guess I keep plugging away at it, and think I will "make it better". I have little projects I do to "make it better" and when they work, and it *is* better, I feel vindicated.

Ciaran Laval

Pretty much agree Desmond. I have im's galore and my land holdings aren't a piddle in the ocean compared to Prok and you and I do have assistance but people want to talk to me.

The thing that keeps me going is that I love meeting new people, it's certainly not for profits and even though I recently expanded and have been working effing hard with that it does have a downside in terms of my social time in SL.

Hourly rate wise I'm working my cobs of for eff all. I wouldn't get out of bed for a job that paid this rate RL.

However the factor thay sways is for me is that it's my business, I'm the boss. I live or die by my decisions and despite swerveballs like VAT being thrown at me I'm still here (I know that disappoints some of you :p). Life experience is worth more than money in some circumstances.

However I am realistic about the whole business and I think that's where others fail miserably. being a landlord is not an easy task, despite what some say about us being leeches and untalented.

Sioban

I agree with Desmond, as well. It IS work. You (or some people you trust) have to be on every day and be ready to talk with your tenants. If you don't do that, there are always other sims to which you tenant can switch.

I also agree with the idea that you have to be ready for anything. People, the RL economy, and SL in various ways will always throw you a curve ball. Providing consistency to tenants is critical.

Since I posted that first comment, I tried to count how many sims and venues that I've seen open and close since I started with our sims (Feb 07). I can't do it. They're all starting to blur together. A few main things seem to be linked to each closure, though, either alone or in combination.

1. After the fun building stage, the folks weren't prepared for the work that rentals or ACTIVE club management takes.

2. Money, money, money. Didn't plan for a few lean months or hand unrealistic expectations for their occupancy rate or the amount of rent tenants will pay. In club, folks think that tip jars will pay their tier, too. Not likely.

3. Fights. Partners or friends go into a venture together and end up tearing each other apart. Different views of where the place should be going, perceived or real differences in the amount of work being done by each person, or combining romance and business.

rightasrain

There is no land--you are all in a shared fantasy that only makes the Lindens rich. It is over-priced data storage = digital swampland. And if you think the land market is tough--the Lindens are adding more and using the logon splash screens to promote it. Wake up! There is no land, no water only tier payments to LL and bad neighbors.

Ciaran Laval

Rightasrain, you're technically correct but you're missing an important aspect.

Check out the auctions for the new sims, look at the prices and then tell me there's not value in location, location, location.

Another factor is that waterfront land has always gone for more than inland parcels and still does.

This wouldn't happen if it were purely considered by the market as a data hosting solution, all land would be pretty much equal. That is not the case here.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)

Blog powered by Typepad

Advertisements