Flipping between Aution Houses and Transaction Fees expalined

I've been playing around in beta trying to get a routine going with regards to flipping items.

The strategy is simple, buy something for 100g, sell it for 110g, profit...or is it? Those of you that know the system will immediately see the flaw in the above statement. To quote Rolf Harris"Gee...can you tell what it is yet?"....

So what I want to post today is some simple, yet very necessary information for would be flippers of mats/items on the Gold and Real Money AH.

At the time of writing the transaction fees on Beta are as follows:

Commodities/Gold on both AH's is a 15% fee paid by the Seller.
Items on RMAH $1:25 per item
Items on Gold AH 15%

What does this mean for those planning to play the flipping/salvaging game?

For every 100g you spend on an item you need to be selling for MINIMUM 115g just to break even. So bidding on items to Salvage to Subtle Essence at 150g requires you sell the resulting Essences for 173g. So if the going rate is any less than 180g it's probably just not worth the investment.

Now we also need to bear in mind that since we are likely to be bidding on these items the sales won;t complete for up to 24hours. We tie up our 150g bid in the system until we are out bid, or win at the end of the auction time period. So the price of essences now is irrelevant. We are banking on the price of Subtle Essences being greater than 180g in 24 hours or mores time.

True Flipping is can happen somewhat quicker of course, buying 100 subtle essences for 100g, to sell at a minimum of 100 x 1.15 to break even can be done in a matter of seconds, assuming the market is rising, but as Marko has shown the market is anything but stable, so the real game is going to be guessing when the best time to sell will be. Is it the second after the stack gets into your stash or at sometime down the road (eg. 6pm on a Friday evening when server populations are logging on to play and craft, rather than 2am on Saturday morning when the player base has dumped 200,000 Essences on the AH after a full evening of playing and farming.)

Flipping between the RMAH and Gold AH is going to be even riskier. The margins a lot tighter and transaction fees potentially crippling. When I buy an item or commodity from the RMAH I need to sell it for 1.15 times what I paid for it, and for 1.15times the amount of gold that I can sell for the amount I paid, plus 1.0329 times the amount paid to cover Paypal to cash out. Some may not be following me at this point so I'll explain this again: I will be paying transaction fee of 15% on selling the item on the Gold AH, another transaction fee of 15% selling the gold on the RMAH, and a further transaction fee for cashing out to Paypal of 2.9% plus 0.3%. So that $1.50 item needs to generate $2.05 (1.5x1.15x1.15x1.032) worth of gold. So if gold is worth $1 per 1000 I need to sell for at least 2050 gold, and to sell the gold for at least $1 per thousand to break even. If gold is like Beta and worth closer to $10 per Thousand the item needs to sell for 205 gold to break even. Subtle Essences are a good example of where this is currently workable in Beta. It is possible to buy Subtle Essences on Beta AH for under $1 each, making your threshold value to sell on gold AH 137gold, assuming a 10 to 1000 ratio, however as this drops on release to closer to $1 per thousand or lower we would need to be either buying our Essences for 10c each, or selling for 1370g each to profit from this revenue stream.