I have been buying and selling domain names for quite a while. The vast majority of my sales are $3k-$20. I like the price range, as each time I make a sale I receive 2-3 times the amount that I paid when taking into account my fees.
So, if I purchase a domain name for $1,500 and sell it for $5,000 then I receive:
+$5000 (Sales Price)
-$1000 (Commision with Afternic, Dan etc.)
– $60 (Approximate Paypal Fees)
– $20 (Approximate registration fees)
= $3,920
which in my opinion is a nice bit of cash that I can then use to buy further domain names and build up my portfolio.
My portfolio consists of approximately 100 domain names and the rule of thumb industry standard is 1%-5% sales a year. So, if I made 5 domain sales a year, then my profit would be approximately $20k ($3,920*5). However, I also need to pay the renewal fee per year on domain registration. On 100 domains, that would be $1k if renewal is $10 each. So, the profit would be approximately $19k a year.
Obviously, the above figures are approximate but are based on my experience.
For example, you can omit the 20% commission fee if you sell directly. However, in my experience, most of my sales come from Afternic and are usually at full price.
Using the above approximate figures, that is a $20k return on $150k of spend or an annual return of 13.5%.
Problems with the $3k-$20k market:
- The biggest problem is the infrequency of sales. They are fairly random. I could go a few months without any sales and then a few sales in a week. I haven’t even noticed any particular seasonal trends.
- There is a large outlay. Most people don’t have $150k lying around that they can tie up in an investment that isn’t so liquid (in general).
- Mistakes are expensive. If you buy a domain name that never sells, then you have lost potentially 1000s of dollars. I recently bought a domain name on a whim which I regret as it was an impulse buy rather than a thought-out buy.
These may not be problems with a more active trader, however, most of my selling is fairly passive. I put it on the marketplaces and then it sells (or not).
Domains That I Buy
Generally, I buy expired domain names from Godaddy. I realize there are other places to buy. I also realize that I could potentially make more money using other places. However, this suits me and my style of business especially as I put very little time into this.
Domain names that I buy are generally branding names. I consider whether a new (or old) company would be interested in buying this domain as their main website. Also, if a company would be prepared to spend the amount of money that I need to sell it for in order to make a profit.
My three most recent sales were similar to:
hatshop.com
ph33.com
powertothenation.com
NOTE: These are NOT the domains that I sold. They are just similar in concept so that I can describe why I bought them.
hatshop.com is a great name for an eCommerce shop that…well sells hats. If you are setting up a new hat shop then you may be prepared to spend several thousand dollars on that name.
ph33.com is a bit of a funny one as it seems quite generic. However, if a company calls themselves ph33, then it would be a perfect domain name and they actually have little choice but to buy it from you. You need to be lucky with this one. Obviously don’t buy a domain that already has a trademark etc.
powertothenation.com is a very different kind of domain name and not one that I usually buy. However, it is very brandable for an organization or someone that wants to use that slogan or a new company.
Another kind of domain name that I also sometimes buy is a keyword domain name. An example here could be farmersinalaska.com . However, I generally wouldn’t buy this to resell but to use myself to build a content site around. It’s not very brandable and I don’t think that a farmers union would pay a premium to buy this domain name. However, if I wanted to do a content site about farming in Alaska then it would be the perfect domain. I very rarely am able to sell a keyword domain name to an SEOer. I assume because if they don’t get the exact domain name, then they buy something similar. eg. afarmerinalaska.com that is available to register from new.
Plan for the $10k Domain Buying Case Study
Taking the above into account, I want to try an experiment to see if a different tactic will work better. That is to take $10k and use it to buy approximately 100 domain names at $100 each. I am keeping the number of domain names approximate as there will be some cases where I consider a domain name so good that I need to bid higher. However, that will be on a rare occasion and only up to $250.
I will then list each domain name for $500 and hope that sales will be more frequent.
Doing the maths if I buy at $100 and sell at $500:
-$100 (for domain)
– $3 (Paypal fees)
– $20 (registration fee)
+ $500 (sale)
-$100 (commission)
This basically means, that using this figure I will get back $277 for each $100 that I spend.
If my sales rate increases to 10%, then I will make $1770 on an investment of $10k or 17.7%.
The other thing to realize is that with each sale, I will be able to buy 2-3 more domains which should increase my sales rate.
How I Find Domain Names:
I’m going to keep it simple. Each day, I will go to Godaddy Expired domains and do a search for domains where the auction is ending in less than 24 hours. Also, that there is at least 1 bid, and that the current price is under $100. I will then put a bid for $101. This is so I will beat people whose standard bid is $100. There are ways that this could be improved in terms of tactics and strategies, but it also keeps it very systemized and automated.
In the case study, I will show you which domains I bid for and which I win and lose, and also a running total of $10k. When I win an auction, I will replace a letter of the domain with an xx so that it won’t appear on a search of a potential buyer. As this blog has started off with next to zero readers, I don’t feel that it gives me an unfair advantage to reveal the names I have for sale as this is tactical that anyone else could use without any name recognition.
After doing that search, I then search by time left so that I have the soonest ending at the top and ‘watch’ any auctions that I find interesting. I then go straight away and bid $101 on each domain.
These are my results from yesterday:
I lost the following auctions:
I didn’t actually win any auctions!
My favorite were:
mraustralia.com
comicbookmuseum.com
hookupnation.com
etheriumsilver.com
I think the best of those is etheriumsilver.com
So, at the end of day 1, I still have $10k and 0 domains!