Investing In Domain Names

Investing in domain names has a number of similarities to investing in physical real estate. I was the high bidder in a domain name auction today for a real estate-related domain name. The domain was a city name followed by “realestate.com.”

On the domain auction platform I use, each participant has the opportunity to open with a minimum bid, usually around $69, for domain names that are expiring or being sold by a private individual or company. Once you agree to the minimum bid and a certain time passes, a private auction is held.

I was one of 45 people bidding on the domain name. I did my homework and this city is located in California and has a population over 100,000. With less than three hours left until the end of the private auction, I had an idea. Why not contact real estate offices in that city and speak with the office managers and see if they’d like me to bid on their behalf. I would simply ask for a $500 fee to bid and handle the transaction. I found it difficult to actually find an office manager that was in the office this morning. I finally had a receptionist willing to transfer me to the office manager’s cell phone.

I explained my proposal to the gentleman, that I’d take the risk of actually buying the domain based on the price they were willing to pay, would show them proof of how much I paid, and wanted $500 to manage the process. I explained further that I’d be the one taking the risk because I’d be trusting that they’d buy the domain name from me once I controlled it. The gentleman I spoke with wouldn’t hear any of it and said there are too many scammers, etc. I explained that I’d be skeptical too, I’d go ahead and bid on the domain myself, but it was going to be more costly long-term for whomever licensed or purchased it from me later.

So after visiting with the office manager, I felt my competitive nature take over and decided that I was going to be the high bidder. A couple of other bidders had been duking it out for the domain and I stepped in during the last five minutes of the auction. I went back and forth against one of the two previous bidders and ended up “winning” the domain. Whether or not it’s a win hasn’t quite been determined yet. I’m confident from my past experience with real estate related domain names that I can turn this into a winner, both for me and for whomever is saavy enough to license or buy the domain from me.

Since the auction ended, I’ve continued working the phones calling real estate offices in that city. I’ve since gotten through to a few office managers that have agreed to let their agents know the domain name will be available. I’ve sent e-mails and left messages at a few other firms. My goal is to try and get at least a 20%-30% return on these types of investments given the risk and time needed to make them happen. Investing in domain names can be done with a little training in a particular domain niche, even a 15 or 16 year old kid that can speak well can start making a great return on their money.

Update as of June 19, 2013:  This particular investment hasn’t gone so well. I’ve not found anyone willing to license the domain name from me, nor have I had anyone make me an offer to purchase it. I’ve learned several lessons from this experience. First, I let me emotions take hold and got too competitive during the auction. I believe I paid about $2,000 more for the domain name than I should have. I didn’t leave myself much, if any, upside potential. I was also overly confident that I could make the investment work.

Now, I’m left with a couple of options. I either need to develop the domain into a lead-generating website with which I can make referral fees and/or will make it easier to license or resell, or I need to cut my losses and sell the domain through a domain auction platform.

Update as of July 28, 2013:  About two weeks ago, I received an unsolicited e-mail offering to pay $15,000 for one of my domain names, not the one mentioned above. We negotiated quite a bit and I ended up selling him the real estate-related domain along with several other domains in a package deal. I don’t think I made any money on the real estate domain, but I made around $5,000 on one four-letter domain and just over $3,000 on another four-letter domain included in the package deal. Overall, I was fortunate to come out okay on this deal and coming up with the idea of selling a group of domains (included this less desirable domain in with more desirable ones) proved to be a good idea.

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