Buying Virtual Real Estate Is Neither Easy Or Cheap
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In our ongoing series of articles
about Second Life, the enormously popular make-believe on-line universe, we
come back to the question of whether one can or WHY on earth
they would own virtual real estate.
Anshe Chung would probably give you a loud and clear "yes." Chung
is the avatar of a Chinese-born teacher living in Germany who claims to own
about a million dollars in virtual land in Second Life; land
that she buys, sells, leases, and employs several people to help her manage.
Second Life doesn't provide information on how many of its 6.5 million residents
own real estate but it does say that residents have sold close
to 41 million square meters of land thus far in May and 5,808 residents currently
have over 23 million square meters for sale in 33,000 parcels. This is land,
as distinct from islands; 7,122 islands are owned by individuals, companies,
and groups at present and 565 new islands have been created so far this month.
Not every resident can buy land. The basic free membership allows a member
to explore second life but it takes a Premier Membership at $6 to $10 per month
(depending on the length of the subscription) to be able to buy and build on
land. Not everyone can buy land for another reason - they are technologically
challenged. After over a week of being teleported from one place to another,
reading every tutorial we could find, and trying to talk with a live person
at Second Life (ten minutes on queue twice only to leave messages that garnered
no response) we still had a lot of questions about the process, but, if we weren't
wandering around on a free membership with empty pockets, we probably know enough
to make a purchase.
Land can be purchased directly from another resident or it can be bought at
auction. Over 15 million square meters have sold at auction
in May; a figure we assume is separate from the land sales by residents figure
given above. The land auction operates in a mode similar to eBay where bidding
is automatically generated at $1 over the previous bid up to the price the bidder
has set as his maximum.
And the process is not easy and the land and the islands are not cheap. Auctions
are conducted in either Linden dollars or USD. We found only two current auctions,
both in L$; and tracked one; 2,688 meters at auction in the region of Bishop.
Bidding opened Monday morning at 11,500 Linden dollars - approximately $42 U.S.
dollars (USD) and, with 13 bids was up to $112 USD by the same time Tuesday
- not exactly Monopoly money but, with another 24 hours to go, relatively cheap.
Auctions completed in the last week included dozens of large parcels
that had sold between $2,000 and $3,000 USD.
Then you could buy an island. That will cost you a flat $1,675 USD for 65,536
square meters. If you have found the perfect spot for your island but aren't
quite ready to buy you can reserve a spot for $30 USD. You can create the perfect
island from a stock portfolio of five or maybe it is six prototypes. As a work
in progress we frequently received conflicting information from one page to
another. Once you own the island you can tailor the terrain, expand it, or use
it as a base to build a complete continent.
But it isn't the initial investment, it's the upkeep. Owners are
assessed a monthly fee by Second Life that is based on a tier system -
the more land you own, the more you will pay. Sort of like a condo fee we suppose.
The fee for owning 512 square meters (considered to be 1/128 of a region) is
$5. However, if you own the equivalent of a whole region, 65,536 square meters
the same size as an island, the monthly use fee is $195. An island will cost
$295 per month.
So why would anyone spend that kind of money to buy something that really doesn't
exist?
Many people simply want a place to plant their avatar. Once one owns land then
one can build a fanciful house, ornate office building, or a peaceful spa, outfit
and decorate it from the hundreds of stores lining the virtual streets, and
invite friends in for music or chatting. Residents are establishing places to
meet others with similar interests or proclivities and for sure there are many
locations that have been purchased for very adult activities and quite a few
that are dedicated to religious observances.
Residents may be motivated to acquiring land to establish a business, and as
we mentioned earlier, hundreds of residents are making real money every month
providing goods and services from their virtual offices and stores.
Still another reason is investment for rental income. We found
one parcel of land where a smart avatar had erected a series of billboards and
was renting them successfully to other entrepreneurs to display advertisements
for their businesses. Others build malls and rent out space to retailers who
are not willing or able to take the plunge into ownership.
The answer that scares us is speculation. We would love to know how much Anshe
Chung started out with when she bought her first parcel in Second Life. Regardless
of the amount, she was far-sighted enough to see the possibilities and is now
a virtual real estate mogul.
But as more and more people are drawn into Second Life through media reports
such as this - and there have been recent articles in many, many newspapers
including some major news outlets and quite a bit of exposure on CNN, the idea
of pyramiding rears its head. Not a pyramid scheme which would suggest that
the founders of Second Life set out to defraud, but rather the kind of pyramiding
that is now plaguing the real-life housing market. Who will be the last person
to make a profit before the virtual market crashes or at least stalls out? Face
it, a company like Sony has the resources to plunk down $1,675 to buy an island
and might be willing to go to $4,800 or $9,000 a year from now. But will the
average person playing what is really an on-line game be willing to spend hundreds
or thousands of dollars to hang out or gamble on establishing a web-based business?
Well, one major American real estate player is betting that
Second Life is a good place to plant a branch office. Coldwell Banker
Real Estate doesn't expect to make money from buying and selling virtual
real estate, but they are taking the whole phenomenon very seriously with their
new
venture (press release).
CB's West Coast hours make their virtual office a bit inaccessible to those
of us on the East Coast, but we have visited their offices, made the acquaintance
of their official greeter, a Golden Retriever with some unique talents, and
have an appointment to meet with the managing avatar for a helicopter tour of
the subdivisions the company is building and get a little insight
what the company hopes to accomplish.
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