5 Ways Domain Names Are Better Than Real Estate
Monday, March 3rd, 2008
Domain names are often compared to real estate…but are they that similar?
The comparisons between domain names and real estate are countless. But here are five ways that domain names make for a better investment than traditional real estate.
1. Unique assets. No two domains are alike. Compare that to many new residential neighborhoods, where there may be three identical houses on similar lots all for sale at the same time. This gives the buyer bargaining power. But if you hold the only domain someone wants, you are in control.
2. Low entry points. Even the most expensive domains sell for less than most houses cost. You can invest in a quality domain for $10,000 and a high quality domain for under $100,000. Try buying a decent house for that amount.
3. Low transactions costs. Transactions costs should be measured in both money and time. The traditional sales cost for homes is 6%. Sometimes you’ll pay more than that on a domain name — perhaps 10% to 15%. But, unlike real estate, it’s typical to not use a broker. You can pay 0% commission if you want. Also, a domain can be purchased and transfered in one day rather than the long prep, loan, and title time of a house. Not to mention you don’t have to “pretty up” the domain before putting it on the market!
4. Low carrying costs. In Texas, property taxes on a $300,000 home are about $6,000 a year. Ouch. A domain costs less than $10 a year to hold.
5. Easy tenants. Thinking about real estate to earn rental income? Have fun fixing the toilet and trying to collect your rent checks. And don’t forget about vacancy. Own a domain? Point the DNS to your favorite parking company and start earning money right away. No maintenance, no headaches, and no worries about collecting your payments.
BONUS. Lack of transparency and illiquid markets. How is an illiquid market a good thing? Well, it gives you the opportunity to get a 10x or 100x return overnight. It’s hard to find comps on domain names. A buyer can rarely say, “well, the identical model down the street just sold for $500,000, so I won’t pay more than that for your property.” If you have the ability to hold your investment, you can reap big returns.
Check back tomorrow for the flip side of this story.
Further Reading:
- 5 Ways Real Estate is Better Than Domain Names
- Online Real Estate for Offline Real Estate Companies
- Domainer Selling Virtual Real Estate to Buy Physical Real Estate
Tags: domain names
Hello Andrew:
A customer of mine told me on Saturday that his son had 30 Million in real estate sales last year all off of a premium real estate domain name! I understand the competition is crying that something bad or wrong is going on for this large amount of company real estate sales!!! This unknown premium real estate domain name is this guys big secret to success!
@ Pete – it sounds like that guy has found a way to make money in physical real estate by using virtual real estate
All real estate has value compared to 90$ of domains equivalent to toxic swampland
hmm i though it was at around 2.7% for property taxes in texas: like $8,100 per year. Good point on the carrying costs: also there are many other expenses for home ownership in this regard. And domain names, if chosen correctly, appreciate much much faster.
@ Bryan – it was about 2.7% and I almost put $8,000. But a recent change reduced the school tax portion from about 1.5% to closer to 1.2% in most areas. After homestead exemption it gets the taxes closer to $6,000.
But the school tax will go back up again…
[...] So which of these two are a better investment? Domains or Real Estate? Domain Name Wire recently made an argument for domains with their recent post, 5 Ways Domain Names Are Better Than Real Estate. [...]
I agree that at the higher end ($10K to $100K quality generic domain names), domains hold several advantages over real estate as an investment. But domains also hold risks. If you don’t really know what you’re doing you could spend $100K on useless, lame domains that will generate no revenue and have no re-sale value. At least with real estate you could buy an acre of empty land out in the middle of nowhere, and in 10 years I guarantee it will have gone up in value.
[...] With this latest turn of events it makes one wonder which is the better or worse market: Real Estate or Domain Buying. [...]
Hey Andrew,
Your post is excellent and very insightful. I embraced your “pro-domain” points and responded to them with my own flip side of this position hopefully adding on to your follow up post on the subject here: http://www.internetrealestatedevelopment.com/2008/03/real-estate-inv.html
I hope you find my points interesting and would appreciate any feedback.
Cheers,
Rob
I like it better than real estate because of its liquidity in terms of mobility. It goes with you where ever you go. unlike real estate.