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Risks of L$1 Land

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Written by Giancarlo Takacs Monday, 16 November 2009 22:23

 
The barriers to entry and the resources needed to create a virtual real estate business in Second Life®  are low compared to real life. This means that virtual real estate businesses that do not have stable revenue streams can thrive for a period of time before basic economic principles lead to their failure. For the land buyer, it is important to understand this distinction, since an estate, like any other business that is not profitable, will disappear eventually, resulting in a lost investment for the buyer. 
 
Costa Rica Sims Estate is a viable and profitable business with land and tier prices that are competitive with other estates offering a similar product. In addition, we offer amenities and environments that are unique to Second Life®, further reinforcing the added value of our estate in comparison to others.
 
Here are some things you should know before buying land:
 
1- If you were to buy a full prim region (15,000 prims) from Linden Lab®  that region will cost you $1,000 USD, which includes the first month’s tier. If you were to buy a homestead region (3,750 prims) from Linden Lab® that region will cost you $375 USD, which also includes the first month’s tier. This applies to every single person wanting to buy a full or homestead region from Linden Lab®.
 
2- Here at Costa Rica Sims, we do not profit from the land sales, we only recover the initial investment in order to buy more regions and keep expanding our estate. Our revenues come from the land maintenance fees (Tiers). 
 
Here is how the math works using a full region (15,000 prims) as an example: 
 
$1,000 USD = approximately L$270,000
 
A full region (15,000 prims) is typically divided into 8 parcels of 8,192 sqm with 1,875 prims each. This means 1,875 prims multiplied by 8 equals 15,000 prims.
 
The price for each of these 8,192 sqm parcels is typically L$32,500 or approximately $125 USD and includes the first month’s tier fee of L$15,400. Note this approximation is due to the currency fluctuations in the market for Linden dollars.
 
If you multiply $125 USD by the 8 parcels, you get the total cost of $1,000. This means selling all 8 parcels of 8,192 sqm with 1,875 prims recoups the initial investment made by the estate. This also means that we do not charge for the hours we spend subdividing, terraforming and landscaping a region before we put it up for sale.
 
3 – Important questions to ask yourself as a land buyer:
 
Do you know of any successful business that would buy a product only to resell it at a cheaper price?
 
Would you invest in a real estate project when the owners of the project are losing money every month?
 
How long do you think that real estate project will last until the owners call it quits and take everything you have invested with them? In Second Life®, this means once an estate owner does not pay the tiers to Linden Lab®, the region will be shut down and all objects belonging to the residents of that specific region will be lost forever.
 
4- When you see land being sold for L$1 and similarly low tier prices, that piece of land is not generating any profit. This means the estate is being supported by the estate owner’s own money, not by the sales of land or the tiers. What this means for the land buyer is that the existence of the estate is more at the will and finances of the estate owner, not the residents who own the land. This poses a greater risk for the residents since the estate will not be able to withstand changes in the market without stable revenue streams and profits. This is why so many estates in Second Life® disappear overnight. Just as in real life, the virtual real estate market is also influenced by supply and demand. A successful business owner does not lose money and knows how to effectively manage the changes in market supply and demand.
 
5 - Owning land in Second Life® is an investment. After all, you spend valuable resources such as time and money here which could be spent elsewhere. Most Second Life® residents are here for the same reason, to socialize with one another. If you are going to invest in a property and pay monthly tiers, do it in an estate that offers you more than just a piece of virtual land. The same criteria you take into consideration in real life when looking for a neighborhood you can call your own and where you will belong should be taken into consideration as well in the virtual world when buying land: a nice community, many amenities, security and guarantees for you and your loved ones.
 
If you are looking to own a piece of virtual land in Second Life® that you will only use for rezzing prims, changing clothes or logging for the day, then all those 3 things can be done for free at a sand box.
 
Land priced at L$1 means that you are not getting something for free. Instead you have gotten something with a lot of hidden costs, with the potential for lost land, lost prims, lost time, lost work, and lost trust. This is why you will never see L$1 land at Costa Rica Sims.
 
Love & Light,
 
Giancarlo Takacs
CEO
Costa Rica Sims
Tags: Estate: costa rica sims estate Estate: land for sale Estate: costa rica sims tier Estate: security

Giancarlo Takacs has contributed articles to CostaRicaSims.com since Wednesday, 09 April 2008.

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