Stocks, bonds, mutual funds, and real estate. All common forms of investments. But did you know that domain names can also be an investment? That’s right. Domain investing is another form of investing that can be just as lucrative as investing in the stock market if you play your cards right.
But just what is domain investing? And how do you get started if you want to try it out for yourself?
That’s what this article covers. We’ll also be discussing why you should invest in domains.
What is domain investing?
Domain investing, also referred to as domaining, in simplest terms, is when someone purchases one or more domain names with the intention to later sell those domain names for a profit.
The profit generated from domain investing occurs when the domain name is sold for a higher price than it was originally purchased for.
Do this a few times over, or sell an expensive domain or two for a healthy return and you can begin to see how investing in domains can really add up. In fact, some investors (called “domainers”) even do this as their full time job given the earnings potential.
Now, you’re probably wondering what you need to know to start investing in domain names, and which domains you should buy in order to turn a profit. So, let’s talk about that.
How do I start investing in domain names?
The first thing to do is to really think things through. Meaning, you want to treat this endeavor just like a business. Because in a sense, it is.
For example, things you should think about include:
- Is there a specific industry or industries you are wanting to focus in?
- What is your budget to invest in domains?
- Are you looking for short-term opportunities or long-term opportunities?
Doing some homework in the beginning can help you not only save money, but can also help you make the most from your investment return in the long run. Without it, you’ll likely take the route of a gamble, which rarely makes for a great investment decision.
Two methods of domain investing
There are essentially two different methods of domain investing depending on your goals, budget, and time frame. Those two methods are:
- Short-term investing or “domain flipping,” and;
- Long-term domain investing
Let’s briefly cover each method.
Short-term investing / domain flipping
When domainers talk about domain flipping, they are interchangeably talking about a short-term investment. If you think about investing in terms of real estate, an investor may purchase a fixer-upper property or lower cost home with the intent of reselling the property for a much higher price in order to generate a profit.
In real estate, this practice is known as “flipping homes.” It’s no surprise then that when doing this with domain names, the practice is simply called “domain flipping.”
In these instances, domain investors try to purchase domain names that are lower in cost and then quickly sell them for hundreds or even thousands of dollars more than what they originally paid for the domain.
When it comes to long-term investment opportunities, domain investors often try to buy names that are more valuable and then hold onto them for a longer period of time. These types of domain names are referred to as premium domain names. Essentially, these are names that are short, catchy, and much more brandable.
The idea here is that as an investor, you are buying a domain that is already considered valuable in attempt to sell that name down the line to another person, entity, or organization who is willing to spend much more than even the high price you initially spent.
A hypothetical example of this would be if you bought the domain name “homes.com” for $1 million. Your goal might be to sell this domain down the road to a company like Zillow for several times that amount because that is a domain that is much more valuable to them. Likely much more valuable than your original purchase price of $1 million in their eyes.
Considerations for investing in domains
Whether you opt for a short-term or long-term investment strategy, it’s important to know what’s involved when pursuing domain investing as a hobby or a true source of income.
Both domain investing strategies require buying domain names and building a domain portfolio. The management of your domain portfolio will depend on the investment method you choose. And while traditional domain investing doesn’t require as much hands-on attention as flipping, it also usually takes a bit longer to turn a profit.
With that being said, here are key considerations when it comes to investing in domains.
Like most things worthwhile, some time and dedication is going to be necessary in order to succeed with domain investing. Rarely is domaining an overnight “get rich quick” method of investing (though, that’s not to say it can’t be).
Regardless, it’s important to understand that doing well with domaining does require a level of time commitment to research and discover what works well and what doesn’t when building your domain portfolio. But for those willing to invest the time in learning, the payout is often well worth the effort.
Money / investment willingness
The next consideration comes down to your investment budget. That is to say, how much money you are willing to invest.
When starting out, you may want to start with a smaller investment to test the waters a bit first to find the type of domains that work well for you before jumping into a larger investment right away.
At the end of the day, the amount you invest will also come down to the approach you plan to take. That being opting for a short-term or long-term investment strategy.
This is actually one of the more important considerations to think about. And often a consideration new domain investors don’t think too much about at all. But every domain you buy will eventually have to be renewed at some point.
If you are able to sell your domains quickly in a short sale, then this may not bother you too much. But say for instance you purchase 50 domains with a 1-year registration length. Well, in one year, any domains that you were not able to sell will need to be renewed if you still plan on hanging on to them to sell. If your yearly renewal fee per domain is $10 and you have to renew 50 domains, you can see how this can quickly add up and leave you in the negative.
So, the best advice here is start small. Purchase 5-10 domain names and see if you can sell those first. Because even if you cannot, you won’t be stuck with an astronomical renewal bill when it comes time to renew.
The last consideration is your competition. The truth is, there are domain investors who have been doing this for years and have become quite good at it. Remember, some domainers even do this for a living.
So, before diving head first, just remember that research is your friend. Try and get a strong understanding of what the market looks like for a particular industry you want to focus on. Then, see what domains you can purchase that are undervalued that may have a good value in the future. This is the best way to get a leg up on the competition and break through a saturated market.
Advice for new domain investors
Domain investing can be exciting to try, particularly if you are new to domaining and want to give it a try. But before going off and spending your life savings, take some time to plan out your approach.
To help, here are a few practical tips for new domain investors:
- Start slow: Rather than buying a thousand domain names to start, buy just a few and sell those first. Once you feel comfortable turning a profit from your initial investment, then increase your investment by buying more domain names to sell.
- Focus on an area of expertise that you’re already familiar with: Purchasing domain names related to a field you’re already familiar with can help you sell your domains faster and at a higher return. Since you likely have an understanding of who might want to buy your domain, it’s easier to sell value to that person.
- Set a budget dependent on your method of investment: Regardless of whether you want to flip domains (short-term investment) or invest for the long-term, set a realistic budget you are comfortable with. Also account for recurring renewal costs in your budget.
By keeping these simple tips in mind, you will be equipped to have much more success in the long-run with domain investing.
Ready to start investing in domains?
Hopefully you now have a basic understanding of what investing in domains entails with this introduction. If you are ready to start investing, great! Just remember the tips you learned in this article and you will be on your way. Start slow, plan your budget, and do your research.
Well, that’s all for now. Go ahead and give it a try.
Domain investing FAQ
Domains can be a good investment with proper planning and attention. Like all investments, there is always some risk involved, but domain investing can lead to high rates of return for investors who are able to sell their purchased domains for a profit.
There are 3 main ways people can make money from domain investing. 1) By simply purchasing a domain name that is memorable or brandable and then selling it for a profit to someone who wants it. 2) By CashParking. This just means you purchase a domain with the purpose of advertisers placing ads on your domain, thereby allowing you to earn a percentage of revenue from the sales generated from that advertising. 3) By leasing domains. This is where you own a particular domain, but allow others to use it for a cost.
When you create a listing for your domain, you will also set a payment method to receive funds generated from the sale of your domain. Once your domain sells, the funds are then distributed to you via the payment method set up when listing your domain. Most sales are paid out within a 21-day time period.