The Three Types of Domain Profits
Last Update: Nov 16, 2021
The Three Types of Domain Profits
A lot of you will have read my last post regarding selling a two-year-old domain, with which I did nothing with and sold for $6000. The domain cost me $11.88 per year which meant I spent $23.76. I didn't even have the domain up for sale but was approached by a domain broker. You can read about that transaction here
With this in mind, I thought I would begin some thoughts on how you can make money out of different types of domains and how you can convert them into profit
There are basically three types of domains to profit
1) Domain Flipping
2) Domain Investing
3) Domain Development
Domain Flipping is probably the aspect that you are most familiar with many of you will have heard of the concept of buying a domain and selling it for profit. Don't confuse this strategy with the strategy website flipping.
Domain flipping is buying a domain with the intention of selling it for a profit. Website flipping on the other hand is building a website that you intend to sell for a profit. They both involve a profit (hopefully), but they are two completely different strategies.
I am not the slightest interested in building a website for profit it is much easier to flip domains. The reason I am so interested in flipping domains is that it's so much quicker and easier and gives you consistent every-week sales.
The way the strategy works is that you buy a cheap domain certainly for less than $12 and then sell the majority of them from between $100 to $2500. Obviously, you can sell domains for very much more, and in my last article, I stated that I probably have domains that are worse at least 50 K. This high-value domain flipping is not your everyday strategy. Most of the domains I have bought which are worth that price are over 20 years old and they were bought specifically to flip as part of my pension fund. Most of you are considerably younger and this is the strategy that you can be looking at now as part of a long-term plan.
I called it my retirement fund it's interesting but only recently has it come to my attention that the time for my retirement fund is now, at least in my case. Domain flipping is a fantastic way of earning a living because at this present moment in time domains have never had the value that they do now. This in part is due to lockdown because people businesses and companies have realized how absolutely crucial it is to have an online presence.
One of the reasons that you want to concentrate on flipping domains for less than $2500 as well is that it gives you small but consistent sales. I wouldn't sneer at registering a domain for $12 and selling it within a week for $60.
I would quite happily sell a hundred domains a month that this sort of profit. Unless the domains are particularly valuable don't make the mistake of holding onto domains for big bucks. I have about 25 domains that are over 20 years old that fall into this category but the majority of my 500 domains I will sell for less than $250 each. Some will sell between 400 and $700, but most will fall into the lower end in terms of volume. In terms of profit, the three which are worth over 50 K obviously will return the highest reward
Another advantage of selling a domain for a small profit is that you're not sitting on the domain for too long and you also have the opportunity to understand how the process works. Once you have some experience under your belt then you can start catching the bigger fish!
There is less risk and also less investment with this strategy. You can start with 25 domains. Do bear in mind though that not every domain will flip at any price. Work on the basis that you should be working towards a profit with 50% of the domains that you buy. If you have the developers license for a premium theme then for those domains that don't sell you can create a website with a premium theme and sell it for say $80 with five articles on it.
Domain investing does not involve you registering a domain name. On the contrary, you buy an existing domain for hopefully a small amount of cash, but more than a year's registration, and then take the time to sell this for a much larger profit.
There are several drawbacks to this for the beginner not least of which is the amount of capital you need to start. Obviously, you can start small a domain for $100 and attempt to convert it into $200. More likely you would be wanting to invest $5000 for a domain and sell it for $10,000+.
Another obvious drawback to this strategy which is without experience it's very difficult to tell which domain will sell, for instance, the domain I've just sold for $6000 I would have happily sold for $250. In other words, I didn't think the domain had any value.
If you going into domain investing you have to understand the domain market and also know where to find the big spenders where domains are concerned. It is a high-risk strategy market but you can turn this into a six-figure business
Domain development is where domain flipping and website flipping cross. There are a lot of people like me who are quite happy to market sites but don't want to spend the time and effort building them. I am not the only person that thinks like that lots of people want to put their knowledge straight into the marketing arena.
The first step is to look at markets that are trending. In 2018 for instance Google had the second-biggest spike in its search history using the word "vegan". In that year I bought at least 20 stellar domain names with the word vegan in the title.
I still have a few of them left and it is possible that I will develop them as a domain and website. The danger for me going down this route would be if I've gone to all that effort to choose a fantastic domain name and it might take me three days research to get this far and then build a website with 80+ articles on, then the temptation is to keep it.
In my head, I think why would I go to all the effort to sell it because if you keep it is only going to get more valuable. If you're not going to fall into that trap then it is worth investigating this technique as it can be very popular and profitable.
If you can understand the trends that are coming it's a great strategy if you build the websites before they become hugely popular. In other words, the trend is still going up.
All these three strategies the easiest is of course simple domain flipping for an easy and quick small profit multiple times over. If I was spending all of my time flipping domains and over the next year that is all I intend to do then this is where I will apply the Pareto principle. In other words, I will be spending 80% of my time doing this.
If you intend to go on and make full use of domain development and domain investing then it we'll definitely be worth your time starting by domain flipping. Every single day 100,000 domain names expire and I have picked up over the years some cracking domains.
There are two choices if you want to go into domain flipping you can get the word out there that your domain is for sale and wait for people to approach you. On the other hand, you can take a much more proactive approach by contacting potential buyers directly.
Obviously, it doesn't take a genius to work out that the passive approach using a parked domain is the easiest way to go about this. You can also use a company like sedo.com or flippa.com and list them for sale. Just because you've listed a domain for sale doesn't also stop you from using the proactive method as well.
One of the advantages of using a company like Sedo is the fact that they use an escrow system. The escrow system gives both the buyer and the seller protection. Someone make an offer for your domain you accepted and then they pay as the buyer Sedo and they put it in what's called an escrow account. In other words, the buyer has paid for it but you haven't got the money. As the seller, you then transfer the domain to the buyer, once this is done Sedo releases your money into PayPal or your bank account.
There is no limit to the number of domains that you can put up for sale at Sedo so go ahead and give it a go. You don't pay anything until the domain is sold and then you pay 15% of the sales price if you hire a broker. Certainly, I would definitely recommend a broker if you're new to the business because they know who to sell to and how to get the best price. The highest ever domain sale was $350,000 this year in 2021 for Portugal.com. So whilst 15% may seem high to you, bear in mind that if you had a domain like that would not likely be able to sell it for that price on your own.
Interesting. I learned something new about domain investment, the buy and sell for profit as a business opportunity. Thanks for this blog info. I saved your blog and tagged it and bookmarked it.
I did see some domains for sale but most were e-commerce like Shopify stores. Some for 300 USD or less. E-commerce stores aren’t my thing but there are people who build stores and sell them as a profit as well. That’s a business opportunity. The key word is business opportunities are all around us, the idea is to be creative.
I will check out the sites you mentioned.
Yes there are indeed people who want a built shop so yes it is a good domain development plan
Once I heard that a domain name was like having a virtual real estate property I had to buy several just so I had something. It was much cheaper than trying to buy real world property. I don't think any are valuable right now but I'm glad I have them. It's like going to the Kentucky Derby. You want to have a ticket for the race.
Domain flipping is the only one I'm interested in Catherine. At my age the rest are far to risky. Jim
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I was not aware of Sedo, as I remember Flippa charges you in advance for listing domains but they take less % from what I remember. This makes Sedo more convenient in spite of its 15%. Thank you for this information.
Because of your recent texts, I have been searching for good domain names and now with Sedo in mind, I might really enter this area more actively.
With so many domains you have registered, it costs a lot. Why not selling and buying, instead of keeping them long terms?
I have sold quite a lot but have bought more. Sedo aggressively helps you more than flippa I also use Uniregistry they have brokers too