How I Make Money in Domain Investing: Part 2

Yesterday I wrote part one of how I make money investing in domains and it seemed to go over pretty well but there were a few more questions that were asked and I thought I would take them a few at a time

Q. You keep talking about “liquid” domains in your post. What are liquid domains and which ones would you consider the most liquid?

This is the part of buying and selling that most new domain investors just don’t get. Anyone can buy a domain, some can sell, and even less sell consistently for an overall profit. Everyone starts out the same. They don’t have a very large bankroll or even if they do, they buy less than quality names. Then they sit and wait for offers to come in. They don’t. So then they starting looking for buyers. The try to mail what they think are end users. No response. Then the hit the forums, spam the comment sections of blogs, or email random people in the industry with “I think this name may be on interest to you because ” . Some times it works, some times it doesn’t. If you have 10,000 names you can most likely keep up the cash flow to build your portfolio by waiting for offers. With 500 you probably can’t. In my opinion it is best to start out by having at least a few names that are liquid. Domains you know you can sell to another domineer or put up at Godaddy and at worse get your money back or close. You should be able to tell what those are if you look at the auctions each day.

3 Character dot coms
LLL.coms
LLL do nets and dot orgs
NNNN.coms
LLLL.coms
(notice how I didn’t include 5L.coms, too many junky names available)

These range in price from $50 up. This group contains a price range for everyone and they ALWAYS sell. They may not sell for more than you paid but they will sell which is more than I can say for many domains. The discussion of whether they are better than generic dot coms is irrelevant. I want domains that trade similar to stock. That have a minimum underlying value in the minds of other domain investors. In good times they go up, others down, but regardless they will sell. Yes, you are most likely selling to other domain investors with these names, but again I don’t care who I’m selling to. As long as I sell it for more than I paid, I don’t care if its a 65 year old woman from Omaha or a guy that owns 5000 domains. As long as I can sell it for a profit, I’ll be happy. Let the guys standing on the sideline tell you that you could have sold it for more or that the guy that bought it is going to sell it for $10,000 more than you. Good for them. I’ll take my profit and move on. I always want to sell a domain for maximum profit but there is a thing called time value of money that people completely forget.

Sello.com was a nice name. One of my favorites. I sold it for only $1000 profit. I took the $4K, added another $4K from other sales and bought a short name. I then sold than 45 days later and doubled my money. So while I only made $1K on sello, the sale of that name really led to $9K in profit. Could I have held on to it and made $5K more of profit from it down the road? Maybe, but who knows how long I would have waited. I now have my profits in hand ready to buy the next domain.

Liquidity is the core of every market. Unless it is a product that you are going to actually use, there is no reason to buy something for resale without liquidity. Some domains have more liquidity than others. I probably know the value of the liquid domains above as well as anyone in the market simply by doing my daily list every single day and seeing the results. I also am reminded every time I get a chance at a portfolio that’s for sale and the same domains are always picked off by the time I see it (I’m low on the totem pole so I usually see it last). It’s always the names above.

Again, this is only my angle of domain investing. It’s not right or wrong but it works for me so actually it can’t be wrong. Generic domains are incredibly valuable and I think they will continue to grow in value but their pricing is less consistent and it is very easy to overpay. Many instances I have absolutely no idea how much a generic will sell for at auction. Like all domain investors I try and guess and I’m always wrong. Usually very wrong. The short names have a much tighter range and for me, the value that’s in my head is usually much closer to final auctions results or DnJournal’s sales prices. It doesn’t mean I don’t buy generics. I do every day. But just like my short, liquid names, I try and keep them in a niche I know or getting to know. If its not its a name that is obvious to all that its a good name. A name like Puddles.com (leased to a mobile marketing company). I knew it was a decent name so it wasn’t a big risk. As my bankroll builds I’ll be able to invest in more valuable generics and sit on them and wait.  I hope to have enough bankroll to continue my flipping AND hold generics.  I’m not there yet but I’m working every day trying to get there.

Tomorrow Post:  How many hours each day do I work to achieve my results?

Please feel free to email me more questions that you want answered in this series and maybe I’ll share