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 transferred 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.