Saturday, October 25, 2008

(not) making money

While thinking about buying the Promissa parcel I blogged about, I stumbled upon this blog item by Prokofy Neva, about the profitability of rentals in Second Life. It seems it's hard to take a decent return on investment in the rentals business, mostly due to tier fees and other, associated costs.

I know I am not making a profit off my rentals, currently. For one, I wasn't using the available space in my land tier, meaning I paid Linden Labs a monthly fee for the right to own land which I didn't have. Unused space in a land tier an investment with zero return! Right now, after buying the Promissa parcel, my tier is used for all but 363 meters, meaning I'm finally (mostly) getting what I pay for.

Occupancy is the defining factor in profitability for rentals. If I have 100% occupancy in a given month, I am a few US Dollars short of breaking even. The chances of this happening, however, are very small; usually occupancy for my parcels is somewhere between 35 and 100%, hovering around 80% on average, meaning this whole business costs me a couple of US dollars each month.

In truth, if I could keep all the proceeds of my parcels myself, I could break even at 80% occupancy. But, part of the rental fee goes to Tropical Beach Rentals, Zena Silverstar's team, who take care of my parcels. They do an excellent job, I couldn't handle this land without them; they deserve their part of the cake.

That doesn't mean I'm not going to try to break even. I'll have to take a look at the rental prices, for instance. Some of the parcels are on an excellent spot. For instance the parcels in the snapshot at the top of this post: the parcel at the bottom is the new one I bought in Promissa and my parcels in Timandra are to the left. All of these are bordering at Linden owned waterways and have a really nice view of Shipwreck Island in the middle, realised there by Tropical Beach Rentals just for this purpose. And in Fortimus, I created Fortimus Harbour specifically to guarantee tenants a good spot and access to water. Perhaps those parcels could yield more rent in the future.

Also, maybe I need to do something about publicity: get occupancy up by advertising here or there. That's something I haven't paid any attention to, so far.

So why am I effectively paying money to be in the SL land business? Well.. Second Life is a game, isn't it? Part of the fun in SL for me, is the role playing element, which I do in the land business. I am enjoying myself, tenants get a nice place to stay, while paying the biggest part of the bill. I'm fine with that.


Anonymous said...

so I guess people respect you as a land baron because you lose money to meet them? Wake up, there is no land and you are only sending money to Linden Labs so they can subsidize Bay City, Magellan digital swampland to further cost you money.

vint falken said...

Thank you for sharing, Sered. Curious how this proceeds... if you will get to the point of 'break even'. But besides the 'rl money' you insert into the SL land, I also assume you also invest a reasonable amount of time?


Sered said...

@Anonymous: no, I am not looking for respect. As I said, I'm enjoying myself in SL by doing this land thing, and it's ok if it costs me a few dollars a month. And by 'a few' I mean a single digit amount.

@Vint: Zena Silverstar and TBR handle most of the daily mainentance, I really don't have to invest much time. As a matter of fact, this week, for the first time. a tenant approached me with a problem. Never had that before!
Keep you posted on any progress there might be regarding the 'break even' point!