Lower Estate Prices than monthly costs of land.

[Bold Burner]

I might have been calculated wrongly so please correct me if I'm wrong. 

 

I was comparing prices of homesteads and I noticed something that I found odd at first sight so I started calculating. 

When I as EU resident want to buy a homestead from Linden Labs I pay a monthly fee of 109 Euros. This excludes tax, which in my country is 21%.

For this calculation I left out the tax as I presume taxes are different by state in USA and recently they have to pay that too if I read correctly.  

I noticed homesteads are being rented out for L$6500 weekly 

I multiply that by 52.12 then divide it by 12 then I get monthly cost for rent = L$28242.50
When I want to buy this amount from Linden Lab then I have to pay: $116.23 (excluded transaction fee) which is $7.23 more than the monthly tier for the homestead. 
So in essence they are losing money per month.

How is it possible for them to make profit? 
How is it possible for competition to compete them?
Do larger estates get quantum discount? And if so isn't that unfair to starters in the estate business? 

Could someone elaborate on this and tell me what I'm missing, in my calculation and/or observation? 

kind regards. 
 

[TT120]

The large landowners get big discounts.  There really is no way for a smaller landowner to compete.

[Alwin Alcott]

44 minutes ago, Bold Burner said:

 

How is it possible for them to make profit? 
How is it possible for competition to compete them?
Do larger estates get quantum discount? And if so isn't that unfair to starters in the estate business? 

 

many landlords own grandfathered regions with lower prices, it was even a sort of marketing trick not that long ( not long is still quite some years) ago.. the renters could buy down the rental costs ... the landlord needed to add a little more to that amount and buy the grandfathered status : renter gone... region stays grandfathered ---> next renter pays full price again.

Europeans who can't use exeption or deducting of VAT from their expenses can't compete

There always been rumours, not to be disclosed by the ones joining in, programs for large landbarons on private regions. I vageley remember to have seen documents about it in a very long gone past when it wasn't top secret yet . 
Fair.. or not... well... thats a question you'll always find in business, it's a common fact that big clients get better prices in nearly all sectors in RL too, i think it's to simple to say it's unfair.
( and everybody is welcome to bid /buy a grandfathered region when they are offered for sale .. you'll have a higher purchase price, but with normal rental prices you'll get even faster.)

[Rowan Amore]

It's always been cheaper (since I've been around) to rent a full region or homestead as opposed to purchasing one.  The difference being, you pay directly to LL if you buy and you pay another resident if you rent.   Many people don't want another resident involved as they may disappear at any time leaving you with no home.   Maybe you pay more for peace of mind?

[Bold Burner]

2 minutes ago, Alwin Alcott said:

many landlords own grandfathered regions with lower prices..

Just for my understanding does this refer to homesteads too? Grandfathered homesteads?
 

[Alwin Alcott]

3 minutes ago, TT120 said:

The large landowners get big discounts.  There really is no way for a smaller landowner to compete.

the big boys were small once too ... also without discounts. 
It asks 1000% work and dedication to your business to grow. Ánd a huge investment. 
I know a few small landlords with  max 5 or 6 region estates, but still making little profits ; they work their ass off and offer excellent customer care. Niche market, but it's possible.

[Bold Burner]

1 minute ago, Rowan Amore said:

It's always been cheaper (since I've been around) to rent a full region or homestead as opposed to purchasing one. 

Maybe I was not clear or I not understood your answer but I was comparing/referring to purchase prices directly from LL

[Alwin Alcott]

1 minute ago, Bold Burner said:

Just for my understanding does this refer to homesteads too? Grandfathered homesteads?
 

yes

[Alwin Alcott]

3 minutes ago, Rowan Amore said:

It's always been cheaper (since I've been around) to rent a full region or homestead as opposed to purchasing one.  The difference being, you pay directly to LL if you buy and you pay another resident if you rent.   Many people don't want another resident involved as they may disappear at any time leaving you with no home.   Maybe you pay more for peace of mind?

this is true for the people that consider buying a region .. for EU or other VAT or related taxes  without business model so no excemption from paying it.. not worth to buy , rent is cheaper. the saving, in my case is nearly 240 dollars a year in VAT ... and if i would own a homestead as premium + member.. also ad a saving of 249 dollars for being premium .. totally uninteresting.

[Bold Burner]

4 minutes ago, Alwin Alcott said:

240 dollars a year in VAT ...

600 Euros here per year.. 21% per month on a full region 30K prims is $249 dollars per month makes 50 dollars (euros +-) a month just tax. 

hence I gave up lol. 

Edited December 27, 2022 by Bold Burner

[Bold Burner]

16 minutes ago, Alwin Alcott said:

Europeans who can't use exeption or deducting of VAT from their expenses can't compete

I thought I read somewhere that recently also people in USA have to pay tax now. I misread? 

[MoiraKathleen]

1 minute ago, Bold Burner said:

I thought I read somewhere that recently also people in USA have to pay tax now. I misread? 

It depends on what types of services are considered taxable in the State the person lives in.  The amount of the sales tax rate, if applicable, is not the same across all States either, or even across all tax jurisdictions - it can vary by city or county depending on local additions to the sales tax rate. 

[Rowan Amore]

The only thing you pay to buy Ls to pay rent is the transaction fee.  The place I rented my homestead, rents homesteads for 6099/wk.  With transaction fee, that's $116.92 per month.  

Adding VAT on would increase the price of buying a homestead directly.  Renting one, no.

That's what I meant by being cheaper to rent than buy,

[Teresa Firelight]

I am going to "play" with numbers to show that for some of us (particularly those living in places where their currency is in US Dollars (USD)), that owning (paying tier directly to LL) can be cheaper than renting.

Dont forget, it costs money to buy/sell lindens as well - this is how money changers make their profits (e.g, in RL as well as SL). If you buy lindens you get less Lindens per dollar than what you sell them for, plus there are fees going both directions.

Lets say that one wants to buy 2500L on the Linden exchange ... which is the "hypothetical" $10 USD. By the time you add in fees, the cost is not $10 USD anymore, it is $11.74. That works out to getting only 213 Linden per US Dollar (instead of 250).

Now when you go to sell 2500L on the linden exchange... estimated value is $9.89 but after fees estimated proceeds are $9.54. Basically you pay 11.75 for 2500L and then when you sell them back, you get $9.54 for them, or a loss of $2.20 USD -- and that is for only 2500L.

The numbers change around a bit as the number of lindens change, but in all cases there are fees on all linden purchases. In the example of 6500L rent per week, which works out to 28167 L per month (6500*52/12), it would cost you $124.20 USD for 1 month's "rent." But if you own it, you pay directly to LL in USD and avoid those exchange rate and transaction fees.

Now, if your account is not in US dollars, you have RL exchange rate fees as well. But if you are paying in USD, then 109 is much cheaper than 124.20.

But if you live in the USA, then you have to add in state sales tax. So if you are paying $109 from a state with 10% sale tax, that comes to 119.90, which is still less than $124.20 .. proving that for some of us, it is a little cheaper to own than to rent.

[BronwenBlessed]

I don't know if this is connected to lower rent issues but a friend and I just bought a sim and are going to be paying lower than average fees for the rental of the land thereafter.  Regrettably, I only googled the real estate agency after the payment of the original fee and one month's rent.  I would like to know if a real estate agency can rent a property for a low price the first month or so and then suddenly raise the prices.  If this happens, is there any recourse for the renter?

Thanks for your attention.

[MoiraKathleen]

13 minutes ago, BronwenBlessed said:

I don't know if this is connected to lower rent issues but a friend and I just bought a sim and are going to be paying lower than average fees for the rental of the land thereafter.  Regrettably, I only googled the real estate agency after the payment of the original fee and one month's rent.  I would like to know if a real estate agency can rent a property for a low price the first month or so and then suddenly raise the prices.  If this happens, is there any recourse for the renter?

Thanks for your attention.

You should carefully check any N/C's you were given by the real estate agency to see if there was any mention of the initial price being a time-limited discount price.  If you don't find anything in the info provided, check with the real estate agent and ask if the initial price will be the on-going price as well and if there should be increases in the future, how much advance notice do they provide, etc.