As a DM, you have the authority to give your players loot in the form of magic items, blessings, and other features. We know loot is fun, and we do not want to police you with strict regulations that suck the joy out of the process. However, this authority still comes with its own set of responsibilities. If unchecked, loot can lead to a variety of problems for the server - power creep, complexity creep, and a faulty economy.
We have devised a set of guidelines for determining loot payouts on a quest. These are not hard rules, but rather things that we ask you please keep in mind when devising your payouts. If you are going to bend a guideline, think hard about why.
Note: Unless otherwise stated, these guidelines aren't meant to apply towards gag items, quest MacGuffins, and other relatively inconsequential items (such as giving a normal Potion of Healing to Fliers).
Costco items are a standard metric, and we encourage you to use them to balance your own loot. Numerically, you should not exceed what is available in the store. For example, +2d4 damage is the strongest weapon enchantment available at Rare, so you should not feel the need to create a +2d6 damage version. This goes similarly for things such as AC and DC calculations.
Generally, any item of significance should require attunement. Keep in mind that a non-attune, slot-less item is essentially a free class feature; if your item doesn't require attunement, you should have a good answer as to why. Does it compete for an important slot (e.g. Mountebank cape)? Are its effects niche, passive, or inconsequential (e.g. granting a swim speed)?
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Why? Power creep is pretty self explanatory. The stronger players get, the harder it is to balance quests, and the more DMs are forced to alter RAW stats to compensate. At its worst, power creep can throw all semblance of balance out the window.
Secondly, power creep exacerbates differentials between players. Someone who was lucky enough to happen to get on quests that gave out top tier loot is now going to take the spotlight on all future quests they go on with other people. At best, this creates a feels-bad for the other players; at worst, this can lead to unfair combat situations and even unfair deaths due to wild differences in character capabilities or survivability.
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On an average quest, you should not be giving out more items than 1.5x the number of players in the party (and in fact, we encourage giving less). For long or significant quests, you can consider increasing this metric to 2x.
Additionally, you should try to make no more than 20% of your loot Homebrew unless the narrative context of the quest demands it. This should math out to roughly one or two HB items per quest.
Of course, make sure you don't overcorrect! As a general rule, one item should not make up more than half of the budget. If you funnel all of your budget into one item, even if that item fits into boopsum this generally results in an item that is way too overtuned for that level of play.
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Why? A constant flood of loot contributes massively to complexity creep. While it may feel bad for players to not receive an item in the moment, consider just how many quests a player goes on over the course of their character's career. Not only does this become incredibly difficult to track for DMs, but players also tend to either forget what their character can do, or their turns take much longer to resolve due to how many options they have at their disposal.
Secondly, a flood of loot makes individual items less special! It's hard to devise something that really captures the players' attention when chances are they've already received something similar a few quests back.
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Try not to give your item too many different features. An average item shouldn't have more than 2 "extra" features (not counting AC or base damage on armor and weapons).
You also should be very wary of making alterations to core features such as class and subclass abilities. While spellcasting is more of a grey area, we still discourage sweeping changes to casters as this directly treads on the one thing Sorcerer brings to the table.
Finally, try to avoid designing items that very massively shore up character weaknesses. A melee character can have a bow, but they shouldn't be doing more DPR than a dedicated archer. A spellcaster can have a flavorful sword, but it shouldn't be optimal for them to wade into the fray next to the fighters.
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Why? This is the broadest category. Of course, complexity creep is one thing. But additionally, these types of designs start to veer into the territory of breaking 5e's already questionable system balance. We do not have the benefit of iterative playtesting; we don't learn if your item is a problem until it's already disrupted other DMs quests.
Secondly, complex items like these put an enormous burden on DMs preparing and running quests. It is not uncommon at all for a DM to be ambushed by something they weren't aware of existing, throwing their balance into disarray or derailing the plotline.
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Be mindful of items designed for specific players and their builds, rather than for the quest. This doesn't mean you should be completely player-agnostic; however, you should be designing for your quest first and foremost. In general, we believe it is good practice for you to design your items such that more than 1 player can express interest in them.
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Why? This is more of a combination of all of the above categories, but it has become common practice enough that we believe it warranted its own section. Targeted items oftentimes end up way more powerful than intended for all of those reasons, as they give too many features or overcorrect on a "fix" that spirals out of control.
Secondly, targeted items can ironically start feeling less special as players stop picking their loot so much as they are "assigned" it by the DM.
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