Any way you want to slice it, a domain is a piece of Real Estate on the web, or more actually put, “Virtual Estate.” 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 must pay lawyers’ fees to get all the paperwork completed correctly, screen your tenants, fix leaky toilets, and pay real estate tax.
With domains you can just buy one with existing traffic and let it make money for you and forgo the rest of the hassle. No real estate lawyers, no tenants to screen, no slips and falls, and above all, NO leaky toilets. You will have to pay a renewal fee every single year on the domain 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 a traffic domain from someone else. When you buy a domain from someone else, that is referred to as a purchase on 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 years 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. And domains offer many different or easier ways to invest.
Further, if you just focus on the five years’ worth of revenue then you’re missing the bus. This is because after you pay the cash up front for your revenue-generating names (otherwise referred to as “revenue domains” or “traffic names”), 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 the new acquisition. You then use the money that those generate to buy another revenue/traffic name, and then another, and another. So, your purchasing power increases every month because you are building your business and creating a snowball effect.
When I began domaining I started with $100. Through a lot of time and patience I was able to multiply that $100 to $1,000 cash and had a portfolio of 135 domain names as well. It took me about 1 and ½ years to do that. At this point I had a respectable portfolio, but realized I was doing all the work and not letting the domains do the work for me. 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 so I bought another domain that made five or six dollars a month. The next month I had $91 dollars. Then I bought a domain that made $7 a month. I continued to repeat this cycle. 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 need to do is collect a check every month and then go buy more names. Remember, the only way the above model works is if you are buying domains that are true 100% traffic domains. Link pop domains or similar cases where traffic gradually falls off will not work how I described above. This is for purely type-in and typos. (Read Chapters 5 and 6 for more about typo, type-in, and link pop domains.)
The “What If”
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. You probably already know that in any business you will most likely will lose money before you ever make it. I was cautious enough to not make a lot of bad deals and was able to minimize the ones that did go badly. Be cautious, but not so much that you miss the big deals that are true gems.
It is good to look over your potential investments 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 or 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. In many ways, domains are so much easier to deal with that it is crazy not to look at domains as an investment vehicle. No repair requests, no lawyers, no paperwork. Just payouts. And when it is time to make a sale, it can take as little as five minutes, as opposed to five weeks, to complete everything. Just sell the domain and push it to the new owner. Let’s talk about buying a domain.