About Us 
Estate Blog Basic Business Principles
Estate Blog Basic Business Principles
Written by Ryker Infinity Tuesday, 27 January 2009 13:54
In my travels around the Estate, I frequently get asked a few reoccurring questions and decided it would be beneficial to share the conversation with the community.
How do land sales actually work in the Costa Rica Sims?
To get started, let us go through how land comes into existence in the first place in SL. First, raw land is acquired from Linden Lab by the Estate owner for an upfront fee, or purchase price. Next, the land is subdivided with the appropriate square footage and prim allotments, which vary given then type of sim (homestead, openspace, full) and environment. Then, the land is terraformed, landscaped, and themed via sounds, waves, animals, etc… Finally, the land is put up for sale with a purchase price and an associated monthly tier payment dependent on the number of prims and square footage.
How are the purchase prices and profit margins determined?
The purchase price is set to recoup the initial investment made by the Estate owner. The tier price is based on market rates that are competitive across the grid. This price includes the fees (tiers) the Estate owner is required to pay monthly to Linden Lab and a profit margin. This profit margin is again determined by what the market will bear, meaning it is competitive with others in the marketplace for a similar product offering.
How are the revenues and profits from tiers utilized?
The Costa Rica Sims have neither the least nor the most expensive tiers SL and the profit margin is mainly used for reinvestments in the Estate, such as developing a strong community, hosting elaborate events, building new structures, updating old structures, refreshing landscaping, updating environmental attributes, and adding new amenities. In addition, profits are retained as a buffer to protect the project from any sudden changes in the marketplace that may threaten its stability, such as the recent increase in tier pricing for openspace/homestead sims. Next, profits are used to pay for the Executive Team and the work they do for all the community such as building our shopping center, managing our elaborate events, and creating and maintaining our website, etc... Lastly, profits go to our referral program where residents are compensated from bringing new residents to the Estate.
Why are tiers not used to buy new regions?
In order to have tiers used to buy new regions for the Estate, it would require for the Estate to use the profits made by 8 full regions, which the Estate already owns, to make such a purchase. This significantly impacts the ability of the Estate to grow since growth would be dependent on a larger number of occupied parcels for a relatively stable period of time. This would mean that the Estate would have to divert resources from other programs that are used to reinvest in the community for its growth.
Why is land in Costa Rica not 1L$ or free like in other estates?
Land is a valuable resource just like in real life. There are a few reasons why land is not 1L$ or free in Costa Rica. First, land is priced to recover the initial investment and establish stability for residents. The owner of the estate who sells land at the 1L$ price or for free is not recovering his or her initial investment. Instead, he or she is relying on tier payments to aid in that recovery. You may notice that land sold for 1$L or for free usually has a higher tier payment. This dependence on tiers for recovery of the initial investment makes the Estate less stable. If there is a month with a high number of parcels for sale in the Estate and the owner is relying on tier payments to pay for the tiers due to the Linden Lab, it will be difficult for the owner to cover these expenses. This typically happens when the owner runs the project as a pleasurable pastime rather than a business. It is also common for Estates like these to disappear suddenly without a trace, taking with them residents’ prims, lindens, and time.
Secondly, land is priced to add value to those residents who invest in living here. Unlike in real life, investing in land is relatively easy and affordable by comparison. As such, anyone with $1,000 can purchase a sim and technically become an Estate owner. However, it takes a significant amount of work and resources to create a viable business. A successful business, such as the Costa Rica Sims, is able to maintain the value of the land for those residents who invest by creating a strong brand, providing numerous resources and amenities, and developing a vibrant community. These activities are carried out through the work of the Executive Team and via partnerships the Costa Rica Sims develops with other prominent businesses in Second Life.
Lastly, there still is a purchase price for Estate owners to buy land from Linden Lab. Unless Linden Lab decides to sell sims for 1L$ to Estate owners, the Estate will not sell land for 1$L or for free. Doing so would prevent us from achieving further growth and continuing to develop what has been said by many as the best Estate in Second Life.
Ciao,
Ryker Infinity
CFO, Costa Rica Sims
| < Prev | Next > |
|---|
