Is there real money in virtual real estate?

By Christopher Solomon, MSN

If you’ve never heard of the land baroness Anshe Chung, maybe that’s because Chung only exists in the virtual reality game Second Life. Chung, or rather, her real-life counterpart, Ailin Graef, has gained attention – and a BusinessWeek cover – as the first person to reportedly become a real-world millionaire from her virtual-world business.

How’d she do it? By buying, developing and selling virtual real estate. While much of her wealth is still tied up in Second Life’s currency, Linden dollars, those can be sold for genuine US dollars. Graef reportedly makes upward of $150,000 annually.

Second Life is one of several massively multiplayer online role-playing games that are, literally, their own worlds. Julian Dibbell, author of “Play Money: Or How I Quit My Day Job and Made Millions Trading Virtual Loot,” estimates the market for virtual items across games such as Second Life and Ultima Online has hit the $1 billion mark. “I think it’s safe to say that it’s at least $1 billion now,” he says.

Such numbers – along with success stories like Graef’s – show there’s real scratch to be made from online dirt. But just how much depends on a number of factors, of which only a handful are under your control. Here’s how the virtual real estate game is played:
In Second Life, users customise digital alter-egos called “avatars” that can walk down streets, gamble in casinos, do distance learning for university degrees, cavort in strip clubs, fly over Second Life’s varied landscapes, you name it. And when users want a place to roost, people often buy or rent virtual property. Everyone dabbles in it, and many Second Life people make it a permanent side occupation that delivers a steady stream of profits,” writes Catherine Winters in her new book, “Second Life: The Official Guide.”

Bane Darrow, who, like several people in Second Life, asked that his real name not be used, falls into this last group of buyers. Darrow co-owns and operates Darrow Estates, which offers residentially zoned properties in Second Life with community covenants. “I started it about three or four months ago” as a part-time hobby, says Darrow, who is a Seattle-area computer programmer.

Darrow and his partner buy sims from Linden Lab, choose some basic topography and then customise the new land before dividing it into 16 parcels for resale. “We spend a week or two just getting the sim ready – adjusting the land heights where we want them, putting in trees; we have a lake in both of our sims, streams, waterfalls, rocks, particle effects that kind of looks like splashing.” The parcels are advertised on Darrow’s website, where people can buy a parcel and pay for it with PayPal. Darrow Estates even advertises on Google.

If you want to buy a 4,096-square-metre parcel in Darrow Estates’ first development, “Blueberry,” a lush region with a lake and waterfall, it costs $20 to set up, and $26 per month ever after. “We are sitting at 90% to 95% capacity,” Darrow says, not unproudly. At that occupancy rate, he’s bringing in about $390 per month from the monthly fees on each sim; the initial $20 fee per parcel adds a one-time bump of about $300 per sim, which Darrow says helps pay for his Google ads. He sees the $1,675 as a capital investment since he can resell the entire sim. But it’s clear this is not a huge moneymaker for Darrow. The monthly fees from his buyers leave him just about $95 per month, meaning it takes at least 17 months to recoup the initial $1,675 investment. Even ignoring advertising costs and including the initial $20 fees, it would still take a good 14 months before he would be in the black.

The number of users making smallish amounts – just $10 to $50 monthly – with a Second Life virtual business was about 9,500 in April, or nearly triple that of November. “There’s a lot of people with a self-sustaining hobby that generates drinks money on the side,” says Adam Frisby, a 22-year-old computer science student and entrepreneur from Perth, Australia, who’s co-founder of Second Life’s Azure Islands. Meanwhile, the number of “in-world” business owners who are making more than $5,000 per month was only 139 as of April, estimates Linden Lab. Though that’s up from an estimated 58 in November, it’s still a tiny fraction of the more than 7 million users. No one can say for sure how many of those are in virtual real estate. But several Second Life pros agree that big-time real-estate players number maybe a half dozen.

Those who are doing well in Second Life real estate aren’t just selling land; they’ve figured out how to provide some value or a service that users want to buy into, says author Winters. “It’s all about coming up with a reason to be in this community versus that community,” Winters says.

Alliez Mysterio (again, her Second Life name), seems to have excelled at this. Mysterio, a woman in the Lake George area of New York, runs dAlliez Private Estates with a partner. With 53 estates, each a sim in size, and well over 200 renters, dAlliez is one of the largest real-estate developers in Second Life. “We have a few themed estates and also just plain land for the people to use,” Mysterio says. One of the themed estates is “the Rue d’Alliez,” a French marketplace-type milieu complete with a cabaret.

With people often renting one-quarter sim from dAlliez and paying $75 to $100 each, Mysterio and her partner likely bring in somewhere north of $17,000 a month. “We have reinvested our money in setting up more estates from Linden Lab. So [we] actually don’t take out much money yet,” she says, though she acknowledges she makes enough in Second Life that she doesn’t have to leave her home to work elsewhere. “There is money to be made if people are not greedy,” Mysterio adds. “I have seen too many people come in, buy estates and not have one up and paying for itself before they buy another. This is a way of life, and as such, I put my customers first and they know that.”

Whether you have your sights set on Second Life as a source of fun or profit – or both – there are some basic things to keep in mind about how the virtual real-estate world differs from real real estate. Realtors undercutting FSBOs. There’s not such an obvious role for real-estate agents in Second Life, users say, in large part because the users have free access to all the search tools. Yet that hasn’t stopped real world real-estate behemoth Coldwell Banker from getting into the act – part of a larger influx of real companies into the virtual world. In March, the company put up for sale more than 500 homes in Second Life, at about $20 each including the land – and they’ll toss in home furnishings as a closing gift. “My understanding – and it’s just my understanding – is the average land baron would sell the average plot of land for US$60,” says Charlie Young, senior vice-president for marketing.

Coldwell Banker also opened a virtual real-estate office that’s staffed with a few agents. This isn’t a way for Coldwell Banker to cash in on virtual real estate, says Young, but to find new ways to reach some of the estimated 80 million Echo Boomers and make them familiar with the Coldwell Banker brand. If more real-world brokers begin using Second Life to extend their brand, this could bring added pressure on Second Life land prices.

In contrast to real-world real estate, prices in Second Life have been relatively stable for the past nine months or so, a long time in Second Life’s short life span, says a Linden Lab spokesman. But when price jumps come, they are more abrupt and, at least with sims, are generally at the whim of Linden Lab. Linden increased the price for a sim several months ago from $1,600 to $1,675 – almost 5% – and the monthly tier for new purchasers rose a much steeper 51%, from $195 per month to $295 per month. Land is virtually in endless supply: as Second Life’s popularity increases (today, it has 7.2 million registered users), Linden Lab simply grows the land size of its virtual world. Were it laid out in real life, Second Life would cover nearly 600 square kilometres – a tripling in the past six months.

You can’t escape real-world taxes. Real-world money made in the virtual world is taxable. And now the US government is even mulling whether online money made, and kept, in online currency like Linden dollars is also taxable. A US congressional committee is starting to look at the issue.

Finally, you need to ask yourself: Is it wise for you to sink a lot of time and money into a relatively untested virtual world, where the odds of making a mint aren’t with you? And then there’s the other big question: What if Second Life’s popularity wanes? Many with dreams of becoming that next Anshe Chung could come away empty-handed.

Is there real money in virtual real estate?

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advantageous@archaic.michelson” rel=”nofollow”>.…

good info….



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