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Domainers need to think about their long-term strategy for the domains they buy.

Rick Schwartz wrote his viewpoint on the state of domain investing today. He’s never one to mince words, and I think he has some fair points in his post.

What stuck with me is how he concluded the post. Writing about what happens when you invest in a domain, Rick noted:

“They are not liquid. You own it and there is less than a 50/50 chance you will sell it in YOUR lifetime.”

Depending on the type of domains you own and/or the prices you sell them for, 50/50 is actually overshooting the mark. This is especially the case with Rick. He owns some fantastic domains but holds out for top dollar. Unless he ultimately sells his portfolio or liquidates them, he’ll take a lot of his domains to the grave.

That might sound harsh, but it’s the reality of domain names. Some people churn through their portfolio at 1%-2% a year. Others sell their portfolio to GoDaddy to head into retirement.

What amazes me is when people hold onto their very illiquid domains, passing up great offers with no real plan for the end game.

I’ve seen multiple times where the very best possible buyer (i.e., one of the only people in the world who could possibly be interested in a domain) makes a very generous offer on the domain. Their maximum offer. It is rejected.

Let’s say that person offers $60,000 for a domain. Given the domain and the pool of buyers, there’s maybe one or two other potential buyers in the world. The domain owner passes.

What are they waiting for? What’s their goal? Do they want to wait until the one-in-a-million buyer comes along and offers $100,000?

You also have to think about your annualized return. If you pass up $60,000 and that one-in-a-million buyer actually does show up 10 years from now and you sell for $100,000, you only made about 5% a year in that decade you waited. There are plenty of other investments that can return 5% a year.