Buying Domains for Investment and Exit Strategies

Finding a good domain name to acquire for investment is like finding a needle in a haystack. A good domain name might be available but the price is too high to even start making an offer. Most of a good domain name is already owned by domain investors or companies.

Related: How to Own a Premium Domain Name.

How do you buy a domain name? Do you have some method or formula to follow before you buy a domain name?

I purchased my domain properties from different investors, company and mostly auctions. The problem with auction, too many competition and it will easily raise the domain price outside my purchasing budget and worst case – way above the market value. So, I follow my own 7 steps guide before making new acquisition of investments.

Here’s a simple 7 Steps Guide I follow based on buying a real restate properties for investors.

1. What is my initial investment?
2. What is my Return of Investment (ROI)?
3. What is the upside?
4. What is the downside?
5. What is the best case scenario?
6. What is the worst case scenario.
7. List my exit strategies.

Here’s an examples.

Investment Example 1. I purchased a two words domain property in baby/parent category.

1. What is my initial investment? I won this domain for the total price of $210.47 which I had a budget to purchase for $1250. So, in this case I own this domain property way below my budget.
2. What is my Return of Investment (ROI)? I expect to re-sell this domain property double my initial investment budget of $1250. The target price is $2500 to sell, but the problem is I don’t have a buyer. ROI = [(Gain – Initial Investment)/Initial Investment] x 100%. ROI is 1087% if I sell the domain property within 30 days.
3. What is the upside? Based on my own experience, the domain name is an excellent name for my niche category.
4. What is the downside? I will lose my initial investment of $210.47. I think it’s not bad.
5. What is the best case scenario? It will generate continuous monthly revenue through parking or develop a website. This assumption is subjective, no proof of revenue stream because the buyer is selling through auction. See latest update as of March 6, 2017 below this article.
6. What is the worst case scenario? I will lose my initial investment of $210.47. Can I afford to lose this money? I think I can.
7. List my exit strategies. I want to have at least four exit strategies when owning this specific domain properties. Listed below.

My exit strategies are:

1. Retail. Find a buyer that will pay retail value of the domain property.
2. Wholesale. Sell to other domain investors.
3. Auction. List it.
4. Develop. Create a website. I intend not be in this route because of management.
5. Park. My last option, to use a parking service.

Investment Result.

I tried selling the domain in our Newsletter subscribers, Facebook community and Auction but no luck. Parking service which is my last exit strategy actually works.

I received a monthly passive income between $22.30 (lowest) to $66.78 (highest). I didn’t get the immediate 1087% ROI that I anticipated but my initial investment is paid off after 5th months of revenue.

This is a win acquisition of domain property added to my portfolio. I grade this domain investment a SUCCESS.

Using the same method, but this time acquiring a single word premium domain name in food/restaurant category and a higher budget to purchase.

Related: What is a Premium Domain Name

Investment Example 2. I purchased a single keyword domain property in food/restaurant category through auction.

1. What is my initial investment? I won this domain for the total price of $5948.47 which I had a budget to purchase for $3000. So, in this case I won the this domain property way above my budget. A sign of a bad investment because I over spent.
2. What is my Return of Investment (ROI)? I expect to re-sell this domain property double my initial investment budget of $5948.47. The target price is $12,000+ to sell, but the problem is I don’t have a buyer that’s another sign of bad decision.
3. What is the upside? Based on my own experience, the domain name is an excellent name for my niche category. Though another bad decision, this simply chasing appreciation value of a domain name.
4. What is the downside? I will lose my initial investment of $5948.47. This is a big chunk of investment waiting for a buyer. I don’t know when that buyer will come :(. That’s the risk to take.
5. What is the best case scenario? To find a retail buyer for my asking price.
6. What is the worst case scenario? Investment money on hold for a period of years. Maybe 2-3 years hold before I can sell it. The sooner the better.
7. List my exit strategies. I want to have at least four exit strategies when owning this specific domain properties. Listed below.

My exit strategies are:

1. Retail. Find a buyer that will pay retail value of the domain property.
2. Wholesale. Sell to other domain investors.
3. Auction. with reserved might be a good exit option.
4. Develop. Create a website. I intend not be in this route because of management.
5. Park. My last option, to use a parking service.

Investment results.

For this domain property. The retail is not working as I expected, and wholesale is not an option because of low ball offers. Auction with reserved might be a good exit option.

I think this is not a good investment for me as it hold my money for long period of time and no residual income coming in.

I grade this domain investment FAILED. This will change if I can get my money back plus inflation value.

The 2nd example of domain transaction doesn’t really work in my favor.

For safe investing. I will continue to follow the 7 Step of Buying Domains and Exit Strategies to build a strong portfolio and continue to increase passive monthly income.

Domains are not created equal. You might find a two keywords domain names that will provide you a passive monthly income. Premium names is an excellent long-term investment, but I prefer to see income coming in.

I hope this help minimize your risk of investment.

UPDATES:

March 6, 2017. Investment Example 1.

MONTH	AVG. DAILY UNIQUES	AVG. DAILY REVENUE	MONTHLY UNIQUES	MONTHLY REVENUE
Feb-17	7.5	$1.00	211	$28.09
Jan-17	7.7	$0.50	239	$15.58
Dec-16	6.7	$0.38	208	$11.93
Nov-16	7.4	$1.57	221	$46.98
Oct-16	5.5	$0.95	171	$29.37
Sep-16	5.9	$1.18	177	$35.37
Aug-16	8.3	$1.84	258	$57.13
Jul-16	5.0	$0.37	156	$11.53
Jun-16	6.8	$1.61	205	$48.33
May-16	7.9	$1.24	244	$38.41
Apr-16	8.8	$1.08	264	$32.27
Mar-16	8.5	$0.72	264	$22.30