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.