Property Speculation

Although I have in theory bought my little patch of heaven outright (for the princely sum of L$3725 or about US$16), what I have in fact purchased is an indefinite leasehold. The landholding system in Second Life is effectively feudal – possession of land is dependent on keeping up payment of tribute to the feudal superior, in my case Linden Labs themselves. It’s true that my monthly membership fee covers the first 512 square metres, but the costs escalate as the amount of land held grows – a 65,536 square meter estate incurs a monthly charge of US$195. I have no idea how close this is to the cost of the hardware and electricity that is required to host that amount of virtual real estate, but I suspect L-Labs are making a healthy profit.

Instead of buying land myself I could have rented a plot from one of the so-called “Land Barons”. This can be rather more expensive than dealing directly with L-Labs, but has one big advantage; regulation. L-Labs impose practically no restrictions on what can be done with land; my neighbours are free to build big ugly buildings right next to my property, or, even more annoyingly, start up a popular business that would suck up all the server resources for the sector. Big landlords can enforce planning regulations, so tenants can feel secure that they won’t wake up one morning to find their quiet beach house overshadowed by a six-storey strip club.

Renting out premium land does seem to be a reliable way of making money, reliable by Second Life standards at least. A big attraction is the fact that it’s not very capital-intensive – US$1675 will buy you a whole island – which makes it easier to get into than real-life property investment. However it also means that you would need to look after an area the size of Antarctica to make any worthwhile return in absolute terms. The associated administration would be a full-time job, and a dull one at that. Not quite the escape from the rat race that Second Life promises.

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