Death Shot - RMAH is where the real money is at

You might notice that these bows have been getting stronger and stronger, while selling for less money. (You can all thank Blizzard for increasing your drop rates!) 

See how much it sold for after the jump.

I know what you're thinking:

No more articles about flipping! They are boring and flipping items contributes nothing to the economy. You are just taking advantage of people!

Fine. 

Time for a totally new topic!

Chipotle burritos

Here's my favorite Chipotle burrito combination. It's the one I go for if I want something tasty. 

1. White rice, black beans. I eat pintos at home, so I go for the difference. 
2. Steak. Grilled. Medium-rare. Yum!
3. Fresh tomato salsa, with a little bit of hot salsa. Don't want to overpower the other flavors.
4. Sour cream. Keeps the burrito from falling apart.
5. Cheese. This along with the sour cream turns the burrito from a conglomeration of ingredients into a work of edible art.

From the first bite to the last, this burrito oozes creamy goodness. It's spiked with the perfect amount of spiciness, and you'll never forget the juicy succulence of the medium-grilled steak. (Part 1 of the burrito series is here!)

Oh right, this is still a Diablo 3 blog. Today's topic is about flipping on the RMAH.

Buy Battle.net Bucks

I don't mean to buy them with Paypal cash or your credit card. "Buy" them with your items.

When you make a sale on the RMAH, it's a very good idea to get them in Battle.net Dollars (BDollars) instead of sending it straight to Paypal. I discussed this a bit in the money article. 

The reason you do this is so you can use BDollars to reinvest and play the RMAH. Why limit yourself to only flipping the gold AH market? Without BDollars, you can't use the RMAH at all. And here's a preview for the rest of the article: The RMAH is where the real money is at.

For the majority of my flips, I do both sides of the flipping in the RMAH. I buy items on the RMAH, and then resell them on the RMAH.

Why?

Because flipping on the RMAH is the most profitable venture in the game. I guarantee it. Try it yourself. If you don't make money, simply leave your credit card number in the comments along with personal information, and I'll personally fill it up with money.

Let's go through the reasons for using the RMAH instead of the gold AH.

Your money is safe

Reason 0: Your money holds value as long as it's in BDollars.

Gold depreciates. Money does not. Simple as that.

There are various ways of gauging the effective $:gold ratio. Because the gold commodity sale is fixed by Blizzard, it is not a good way to indicate the correct ratio. Instead, look at the other commodities. Namely, gems. Radiant Star gems go for 27-30$ on the RMAH, and from 15-20m gold on the gold AH. Because the 15% fee applies to both markets, you only need to divide between the two to get the current ratio, which is around 1.5$ per million gold. 

Of course, this does not explain why flipping on the RMAH is profitable. But it should add some assurance that you aren't chasing some shooting star like you would in the gold AH: You aren't earning gold while the value of gold itself drops.

Spare me a dollar?

Reason 1: For sales in the RMAH, there is only a 1$ fee per transaction.

Think about it: Would you rather take a 15% hit or a 1$ hit? When flipping items that are 100$ each, that 1$ fee is nothing. It's a flipper's paradise. No longer do you need to make back the 15% sale fee on the gold AH on top of whatever meager profits you can squeeze out. 

If you buy something for 100$ and flip it for 108$, then you've got yourself a Chipotle burrito. 

If you buy something for 100m and flip it for 108m, then you're an idiot. You've lost (100m - 108m * (1 - .85)) =  8.2m gold.

Even if you sell something for as low as 7$, the 1$ RMAH fee is more profitable than a 15% cut: (7$ * 0.15) = 1.05$ fee. In that regards, you should be selling anything that's 7$ (~3m gold) or more on the RMAH.

The takeaway? Stop selling in the gold market. Move all your big-item transactions to the RMAH.

What is it gold for?

absorutery nothing!

Let's brainstorm the uses of gold:

1. Crafting & materials
2. Upgrading gems
3. Repairs
4. Using the Gold AH
5. In-game trades

As you can see, the 2 use-cases for gold are crafting and buying from the gold AH. Assume you are taking my advice to move into the RMAH. How much gold do you need to keep around exactly?

1. Assuming that you use the RMAH to buy the majority of your items, you should only be using the gold AH only when you see a cheap deal or need the occasional small item that isn't expensive enough to be on the RMAH. In this use-case, you don't need to keep around too much gold: 10m should be enough.
2. If you craft properly, you should be able to bankroll yourself indefinitely by selling your goods back on the gold AH that recoup your costs, and the rest on the RMAH. The amount of gold to sustain really depends on how lucky you are. For crafting, I would guess and say 20m is safe.

It take's some toying, but the idea is to pretend like you're playing 2 completely different games.  

Gold: Use the gold market to fund your crafting, find the occasional good item on the ah, and price comparisons. If your gold becomes too light, then flip some of your items in gold. If your gold becomes too heavy, then buy items and flip them on the RMAH side.

RMAH: Use the RMAH to do the majority of flipping and trades in. If your RMAH becomes too heavy, then you should cash out via Paypal (or other techniques described later). If your RMAH becomes too light, then you are somehow doing it wrong. BDollars should be the most important resource to keep a large quantity of at all times.

It's been there all along

I actually alluded to this in my first post.

The RMAH is kind of a wild beast compared to the gold auction house. There are people who try to maximize value on their so-called godly items, and then there's people putting stuff up for 10$ to see if the system even works. What you will see are items priced at the absurd 250$; and similar, if not better items at 10$. Kind of a hard environment to actually sell anything.

 Yeah, the key to flipping has been here since the first post.

 What I was trying to say, backhandedly, is that flipping is amazing on the RMAH. Buying items for 10$ and flipping them back for 250$ happens.

Reason 2: The RMAH is filled with misinformed and skewed prices.

I can posit a couple of reasons for this:

1. Players trying to get whatever money they can. These people don't follow or understand the $-gold ratio because any money is good money to them. Most likely, they believe in a flawed version of common sense where virtual items aren't worth real money. Remember when you sold your first item for 20$ and thought, Wow, I can't believe there's someone stupid enough to buy this... only to later realize that the item was worth 50m? I haven't, shut up, quit making fun of me.
2. Other players simply don't understand the ratio. A newbie could see 1$/m gold on the forums and base his RMAH sales around it.
3. Some players think 250$ is the best of the best. I've bought things listed for the RMAH cap of 250$ and sold them back for 200m on the gold AH.
4. The RMAH has much less traffic. Less traffic = fewer items ending up selling = people tend to lower their prices more drastically to sell items. It also means that there are less bidding wars. Because people buy less on the RMAH, prices get stale quickly and the market will try to shift prices lower to account for the lack of demand. Because you are flipping items, the profit margin insulates you from this shift.
5. The RMAH isn't infested with bots that will shark cheap items as soon as they are listed. Think about it from a botter's perspective: They have billions of gold to play with. Why would they ever leave the Gold AH?
6. The RMAH has less auctions. Have you ever tried to sell your item and you couldn't find a similar item to set your price against? Prices are naturally going to bounce around because there are less items on the RMAH: Items are only worth as much as the context provides. If there's 2 similar items that are worth 15$, then I could say that my item is also worth 15$. Now, if they both dissapeared, then my item suddenly loses an accurate sense of value. This doesn't happen on the gold AH because there are usually 1000 things that look like yours. But on the RMAH, it's a different story. 

Let me talk more about the implications of point #6, an AH with less auctions. This is the key point here: Items are only worth as much as the context provides. What this means is that you could be chugging along, playing as optimally as it gets, and your world will be flipped upside-down because the market reshapes itself under you. Let me give an example.

Got miracle?

Last night, I was trying to win a Natalya's chest plate with a 137 dex roll on the RMAH. The bid was at 20$ at the time and it seemed like a great deal: I did a search earlier and the closest item was 40$. But there was a problem; I needed to go buy some milk. It does a body good.

I couldn't make a snipe bid to win the auction when it ended because I would be out purchasing some moo-juice. So I compromised and put up a max bid of 25$, with an hour to go on the auction. Hopefully, nobody would fight me and I could get away with the armor for around 20-25$.

But fate wouldn't have that, because the original player who bid the 20$ was sitting next to his computer, drinking a cool glass of ice-cold refreshing milk this whole time. He instantly counter-attacked with a 27$ bid.

Luckily, I hadn't left my computer yet, so I threw back a ~28$ bid.

It wasn't even enough to break his bid. He must have put down 30$, because the bid shot up to 29$ with him still in the lead.

At this point, I could have just gotten angry at the 15 year old timekeeper kept bidding until it went up to the price that I was willing to pay (35$). At 35$, I would still come out with a profit. However, I remembered the rule: Items are only worth as much as the context provides. 

Perhaps the item has changed value from a day ago. 

I started typing in a query on the RMAH to see what a 137 dex roll was going for. I simply wanted to verify that a 35$ bid is still a good price to pay. But what I saw on the search results shocked me.

There was an even better Nat's armor roll. For only 20$.

A miracle! I snapped it up right away.

Of course, anyone can attribute that to lucky and stupidity. After all, it only takes one idiot to list a 138 dex roll for 20$. But I strongly believe that part of this failure was due to the small size of the RMAH. I verified this by doing a search for dex rolls around 130: There were none listed at the time. There were only 120's going for 15$, and 140s going for much more. I suppose the seller made his best guess and went with 20$. This would never happen in the gold AH where there is a Nat's armor for every dex range.

The other takeaway is that prices change swiftly on the RMAH. If enough people posted a 138 roll at 20-25$, my bid of 30$ on the 137 roll would have been foolish. It only takes a few sellers to drastically skew the RMAH market in one direction or another. Because of these swings, it just takes a little bit of experience and good timing to snap up good deals. What fun is an investment vehicle where the prices never change?

Too much money

Let's say you follow my advice... 


...and it works for you! You now have a very respectable 250 BDollars. Good job! Every time you make a sale, it will now get dumped into Paypal by default. While this is a convenience for some people, it's actually an enormous hassle for those who really want to flip the RMAH.

Why?

Because 250$ is not that much money on the RMAH. For me, that might be 10-15 items. I would run out of BDollars very quickly if I only had 250 BDollars to work with.

One of the key problems with Blizzard's RMAH is the 250$ cap. Any incoming money when you are at the maximum will spill into your Paypal. In the money article, I've suggested that the reason for the 250$ cap is for legal purposes. I imagine there is some compliance policy that must be met for Blizzard to support a larger cap. This means that there are additional audits they have to run and pay for in order to support this.

Because all the extra money gets spilled into Paypal, it's effectively "cashed out". That money is not available to you to invest in flips anymore. Bummer. 

Note: If you add money from Paypal into your Bdollars, you technically aren't paying a fee. But think about it for a moment: when you turn BDollars -> Paypal, you will pay a 15% fee. In other words, if you do Paypal -> BDollars, you are committing yourself to pay that 15% fee in the future, because the intention is that you will eventually cash out your BDollars. Not worth it.

Luckily, there are a couple good solutions for maintaining an effective Battle.net Balance of more than 250 BDollars:

1. You are prevented from sending sales to your BDollars if it puts you over 250. So spend your BDollars on something. Spend some time and find items to flip in the RMAH. As long as you keep doing this, your assets will be tied into items and your Battle.net Balance will remain healthy.
2. If you don't have time to find items to flip and need to move money fast, then you can make a fail-bid. Find an item that has a low bid price that doesn't expire soon. Put a bid on it (but not too high, unless you want to win it). Hopefully nobody will outbid you until it almost ends. You've effectively hid your money for a day!
3. Buy gold. Reinvest into gold for crafting and gold AH purchases. Remember that you incur an implicit fee when buying gold (because turning it back into BDollars is hard). But that's not what I want you to do. What I mean is that you should buy items with your BDollars, and then flip the item for gold. By doing a flip, you are effectively shielding yourself from the fees by nature of the of the profit margin.
4. Give me your money. I'll pay you back when you want it. I'm good for it, I swear!
5. Transfer your balance to a friend or a second account.

Now you have the tools for racking up absurd amounts of BDollars. Of course, you probably don't have to deal with this until you are actually flipping heavily in the RMAH. Just keep this in your mind for when that time comes.

Let's talk a little bit more about the bow itself. I won't go into full detail about how I flipped it; see the previous article if you want an in-depth look on what goes through my head.

In short, I bought it for 8$ (heavily mispriced), and sold it for a respectable amount. This was not difficult for me because I've got a reasonably good grasp of the bow markets every other similar bow was 20$. Scroll down to see how much my bow flipped for on the RMAH.