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Domains as Virtual Real Estate
Any way you want to slice it, a domain is a piece of real estate on the web. When you have a domain, it may be a mansion or it may be a slum. Either way you have a piece of online real estate. What a lot of savvy real estate investors will do is buy a property and then lease it out. The person he leases it to will be the person making the actual payment on the note…not the owner themselves.
Sounds pretty easy, huh? Buy a house, rent it out, and pay the note with the money you make. However, with a real house you have to pay lawyers fees to get all the paper work completed correctly, screen your tenants, fix leaky toilets, and pay real estate tax.
With domains you just buy one with existing traffic and let it make money for you and forgo the rest of the hassle. No real estate tax, no tenants to screen, no slips and falls, and above all NO leaky toilets. You will have to pay a registration fee every single year on the name, but other than that, that’s about the majority of your concerns.
There are two ways to get names that have traffic. (1) Get lucky and register one that already receives traffic, or (2), buy one from someone else. When you buy from someone else, this is referred to as the “secondary market” or the “aftermarket.”
Now, this is the time when domains and real estate start sounding exactly alike. If you are going to buy one with existing traffic and revenue that’s fine, but you will need to be prepared to pay a multiple of the revenue. You may be expected to pay two, three, four or sometimes five year’s or more worth of revenue depending on the name. I know what you must be thinking right now… “Pay five years revenue!!!?? I have to wait five years before I make a profit??!”
Yes, that is exactly what I am saying. Why? Because if you keep a tenant it will take you 20 or 30 years before a house will pay itself off, plus you have to fix toilets, pay for lawyers, do paperwork, and pay real estate tax. Five years does not sound so bad anymore, huh? I don’t mean to berate real estate. Quite the contrary. Real estate often has great appreciation, tax, and leveraging benefits. However, it is not for everyone. Domains offer many different or easier ways to investing – in virtual real estate.
Further, if you just focus on five year’s revenue then you’re missing the bus. This is because after you buy a number of names and place the cash up front for your revenue-generating name (“revenue domains”), then you can turn around every month and buy more traffic/revenue names with the money you have made from the revenue you are receiving from them. You can use the money that those generate to buy another traffic/revenue name, and then another, and another. So, your purchasing power increases every month because you are building your business and growing it.
Starting Out
I will give you a real life example…Mine!
I started with $100 and through a lot of time and patience I was able to multiply that $100 to $1,000 cash and 135 domain names. It took me about 1 and ½ years to do that. Now, I had a pretty big portfolio, but realized I was doing all the work and not letting the domains do the work for me. So I took my $1,000 and I bought seven revenue domains. By my estimates those names made me about $80 a month or so in parking.
So, I took that $80 and I bought a domain that made $5 or $6 per month in parking. The following month I had $86, and bought another domain that made five or six dollars a month. Then I had $91 dollars and bought a domain that made $7 a month. The cycle goes on and on. This is the SMART way of making domains work for you because now you don’t have to do hardly any of the work. You don’t have to go to the forums or Sedo.com, or anywhere else and advertise that you have a name for sale and hope that someone likes it enough to buy it. All you have to do is collect a check every month and then go buy some more names. Remember, the only way that this above model will work is if you are buying domains that are true 100% type-in/typo domains. (Read Chapters 5 and 6 for more about typo, type-in, and link pop domains.) Link pop domains or similar cases where traffic gradually falls off will not work out like how I described above. This is for purely type-in’s and typos. All of these things are explained in later chapters.
The “What If’s”
What if I get scammed?! What if someone takes my money and does not give me exactly what I paid for? What if I don’t make the right investment decisions?
Well, it’s entirely possible but you can't let that stop you. Do not be a victim of “analysis paralysis” as they say. You have to learn, and in any business you will probably lose money before you ever make it. I was cautious enough to not make a lot of bad deals and minimize the ones that did go badly. You need to be cautious, but not so much that you miss the big deals that are true gems.
It is good to look over things to make sure they are legit but there is always going to be risk. If you wanted a clean and safe investment then you would be putting your money into CDs and savings bonds and not into domains in the first place. Real estate used to be one of the best returns that you could expect in the investment world. However, domains are giving real estate a run for its money. Domains are so much easier in many ways to deal with and handle that it is crazy not to look at domains as an investment vehicle. No leaky toilets, no lawyers, no paperwork…just payouts. And when it is time to make a sale, it takes five minutes instead of five weeks to complete everything. Just sell the domain and push it to the new owner. Let’s talk about buying a domain.
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