Investing in domain names has a lot of parallels with investing in real estate, becoming a domain investor takes time, capital, and research quite similarly to real estate. When using the right method domain investing can be quite profitable. But like with real estate only the best properties are going to sell quickly or turn you a profit. Domain investing can be a fun side business and it is still possible to make a profit.
Building a portfolio
To become a successful domain investor you are going to have to build a portfolio of domains. When you achieve a certain economy of scale you have much bigger chances to regularly sell domains. To acquire domain names that are valuable you have to be very picky, unprofitable domains names can drag down the cost efficiency of your portfolio significantly and most domain investors drop those domains quickly. Renewal fees add up over time decreasing the profitability of your portfolio. So keep buying domains that are actually valuable, you can use the checklist here to make sure that you buy a good domain name. Of course, that is no guarantee that you will sell the domain quickly, usually, it's a long game. Domain investors on average sell about 1% of their portfolio annually, which is not a lot. It means that you have to make sure that you sell domains that cover at least the expense of keeping your portfolio.
Picking a niche
When starting out as a domain investor it's important to pick a niche or few niches to be active in. This will let you better understand your target audience and figure out which domains are in demand. It also offers you the opportunity to offer more than one domain name to potential buyers. You can focus your marketing offers on a specific niche and become the authority on domains in your favorite niche. It makes selling domain names a lot easier when you understand your target audience.
There is a distinction between keyword domain names and brandable domain names. Keyword domain names are domains that contain one or two keywords for example golfcourse.com contains the keywords golf and course. These domains are great for companies who are active in that particular niche. This is also a good reminder that if you pick keyword domain names is that have to make sense, it's very unlikely that you'll succeed in selling golfunicorns.com.
Brandable domain names offer you a bit more freedom in choosing because they don't have to consist of actual words. Many famous domains are made-up words like Google, Nike, Visa, and Twitter.
So when you acquire domain names you have to set pretty strict criteria for yourself to ensure that you buy only high-value domain names without good names after all investing in domain names is very hard.
In the end, domain investing is obviously about turning a profit. Most domain investors use spreadsheets to calculate how they are doing financially. There are also some great online tools available to track your portfolio and profits, like NameCRM for example.
Let's make a simple calculation: You have hundred .com domain names and the renewal fees are 10$ per domain per year. That means that you have to sell at least one domain name for 1000$ just to cover your renewal fees. It's very important to keep that in mind while domain flipping, you have to carefully track your portfolio and the associated renewal fees to know if you are profitable. When you realize that 1000$ will only cover your expenses it becomes obvious that you have to sell higher valued domain names to make a profit.
Listing your domains
When listing your domains you have to choose the right marketplace depending on if you invested in keyword domain names or brandable domain names. When doing domain investing it's important to create visibility for your domains on as many marketplaces as possible; this will increase the likelihood of making any sales.
Selling domain names
When you have received an offer for your domain it's time to consider if you are willing to take the offer. Putting a price tag on a domain is not an easy thing to do as there are many factors at play when selling domain names. Even though you might have a valuable domain name that meets all the criteria, it might still be hard to find a market for the domain.