A Domain Name and Real Estate Comparison | DomainInvesting.com
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A Domain Name and Real Estate Comparison

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Domain investors are often criticized and called out for the “non-use” of their domain names. Whether these domain investments are parked with PPC advertising or totally undeveloped, there is often criticism lobbed at domain name owners for not utilizing their domain names, forcing people who want to use them to purchase lesser alternatives.

When I hear or see criticism like this, I often discuss the parallel between domain name speculation and real estate or land speculation. Just like a real estate investor should be able to do what he wishes with his property within the law, domain investor should be able to do what they want. Sometimes I am rebutted with the argument that real estate investors don’t just let their properties sit idle, as they rent them, live in them, or use them in another way.

I want to share this MyFoxNY.com article with you, and I think it helps to show the parallel between real estate and domain name investing.

Despite the fact that there is an apparent “housing crisis” in New York City right now, there is a luxury apartment building that doesn’t have many residents living there. From the article:

“Jonathan Miller appraises the units at One 57. He said if you were to walk by at night the skyscraper would be largely dark because a majority of the units’ owners are international and don’t live here. They are using the apartments strictly as investments.”

Yes, there may be a lack of housing in NYC, just like there may be a lack of great domain names available. However, this does not mean that the investors have any obligation to do something with their investments, and they should be free to do as they wish.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (22)

    Mike

    Hold real estate for 2 years and pay no taxes on profit.
    Hold domain name for whatever time and pay bulky taxes.

    Compare taxation…

    July 10th, 2014 at 4:19 pm

      Elliot Silver

      Holding costs are much lower for domain names though.

      You don’t have to pay property taxes or maintenance costs with domain names.

      July 10th, 2014 at 4:48 pm

    Leonard Britt

    Domain investors will often use the real estate analogy to promote the value of domains while developers will disagree as they see an endless supply of domain names.

    Domains can bring targeted traffic, facilitate search engine traffic and make for very nice brands. Companies will spend enormous sums of money attempting to attract business via Google Adwords, TV, radio, newspapers, magazines, billboards, postal mail, etc.

    However, I will have to say that one when attempts to market one’s portfolio and sees the &%$#@! domains that many small businesses operate on (three or four words, double-hyphenated, .biz, this morning I ran into a hyphenated .info when promoting a city+real estate .COM)and yet they refuse to even pay $XXX for a decent domain, you scratch your head in amazement. It appears that many end users just don’t see any reason to spend much more than reg fee on a domain name for their business and would prefer to spend resources on other aspects of their business.

    July 10th, 2014 at 5:33 pm

      brand

      Leonard,i have to say MOST end users don’t see any reason to spend much more than reg fee for a domain name.
      I have seen so many commercials on tv lately.
      breakupwithmybank.com.. long tailed domain for a credit union.
      iwantashower.com..for a walk in tub company.
      reverseminded.com for a reverse mortgage company.
      All could have got a better domain name to represent there company, but couldn’t see spending the money on a good .com.
      If you saw the post here on Elliots site on that realtor that was looking for another domain for her business.
      Her blog had over 25 comments saying they would not spend more than a few hundred on a domain name, i think only two comments saw the value in a good .com
      Like i have said before on blogs.IMO 95% of domains sold are to other domainers, that leaves us all looking for that one company in the 5% category that see’s the value in a good domain and is willing to spend a few bucks.
      It does leave you scratching your head, on one hand you have Mr. Rick Schwartz saying…you can’t make money selling domains to other domainers.
      Then as you and i have said…end users don’t see any reason to spend more than reg fee…lol.

      In reply to Leonard Britt | July 10th, 2014 at 6:42 pm

      Leonard Britt

      Yes, another example from today. A travel agency responded to an outbound inquiry about a two-word .COM relevant to their business. They operate on a four-word .COM and my domain was priced mid-$XXX. They thought I might be selling a database of potential leads but when they discovered I was merely offering a domain name, they were not interested.

      In reply to brand | July 10th, 2014 at 8:15 pm

    Londoner

    I get the parallels you’ve illustrated E, but that doesn’t equate to justification. Not suggesting that’s what you’re implying.

    I live in London (or should that be .london? tisk.) and it’s the exact same situation here in terms of the housing crisis. I’m priced out of the market whilst the house prices are inflated largely by, though not limited to, foreign investors or entities who cumulatively own hundreds if not thousands of properties across the city which go uninhabited for extended periods of time or even indefinitely, so I can actually empathise with the frustration here.

    What probably makes me a hypocrite however is that I have no remorse when it comes to securing a domain name that I believe to be of commercial value because, at the end of the day, when presented with the opportunity to make money in a legal way, most people would probably do the same.
    Be it the foreign investors jacking up the prices of houses in major cities by causing demand to outstrip supply, the landlords who subsequently increase rents because fewer people can afford to buy, or the domainer who happened upon or otherwise acquired a great domain the full value of which has yet to be realised.

    It’s usually those who didn’t have the foresight to capitalise on an opportunity that we all had at one time or another who later bemoan those that did. ‘Twas ever thus and it will be ever thus.
    I’d be sitting pretty if I had bought a London town house for £250k in 1995 just like I’d be sitting pretty if I bought Credit.com or Cars.com or Diamonds.com in 1995. Heck I’d have been barely into double-digit ages but you get the picture.

    Just got back from the pub so I hope that even made sense!

    July 10th, 2014 at 5:43 pm

    chris

    a day will dawn when end users will pay for a decent domain, that day just isn’t here yet.

    if you can buy an average domain now for reg fee and hold it for 10 years the cost is in the region of 100 bucks, chances are that if you buy wisely you will 10 fold your investment.

    most single word domains are grossly overpriced because they are not suitable for the needs of most end users

    July 10th, 2014 at 7:39 pm

      brand

      I hope your right.
      If they think they can buy a new gTLD for a cheaper price than a .com to escape the high price.
      They may think twice after they see the renewal fee’s.

      I like Elliot’s petaccessories.com, it appraises great on estibot, has great searches and his asking price IMO is very fair, i think we would all love to own it.

      But an end user that can’t see the value can get for reg fee.

      premiumpetaccessories.com
      getyourpetaccessories.com
      and maybe yourbestpetaccessories.com.

      I’m seeing more and more of the old [end around move]and these long tailed .com’s
      so they don’t have to pay the higher price.

      This is just me talking…

      In reply to chris | July 10th, 2014 at 8:08 pm

      Snoopy

      “a day will dawn when end users will pay for a decent domain, that day just isn’t here yet.

      if you can buy an average domain now for reg fee and hold it for 10 years the cost is in the region of 100 bucks, chances are that if you buy wisely you will 10 fold your investment.”

      ///////////////////

      Most have no interest in aftermarket domains and never will in my view. Domaining is about finding domains that could potentially apply to a lot of businesses, so hopefully given enough years you can strike it lucky with one buyer. It is a needle in a haystack stuff.

      The average domain bought for reg fee now will be worthless forever, it isn’t going to be worth $1000 in 10 years which is what your comment seem to imply. Be very very selective.

      In reply to chris | July 11th, 2014 at 12:13 am

    Leonard Britt

    Here’s a thought – how much is a beachfront lot worth if several lots on both the northern and southern sides of it are also vacant and for sale? Now how much is that lot worth if all the lots along that stretch of beach are taken but there are plenty of vacant lots one to two blocks from the beach? How about when the only vacant lots are three miles from the beach?

    With domains part of the reason the one-word .COMs are worth so much is that all reasonable options are taken. With new TLDs you may be able to reg a one-word domain but there will still be two-word reg fee options available as well as numerous other TLDs to choose from. So how much is that new TLD worth with so many other alternatives to choose from?

    July 10th, 2014 at 8:47 pm

    brand

    A domain name and real estate comparison.
    IMO nothing, you can do as you wish with your property.
    You can sell it, develop it, lease it.
    I have a friend that bought all the homes around him.
    He bought the house across the street, the house to the left of him and to the right and they all sit empty.
    Yes he has to pay property taxes and the up keep but to him it’s worth it not to have any neighbors.
    But when it comes to selling property, it’s totally different than selling a domain.
    When you sell a home, deposits and down payments are required. With domains, they do it on a hand shake and take a person’s word that they will pay.
    IMO,that is absurd in this day and age.

    July 10th, 2014 at 9:32 pm

      brand

      The difference is the sale.
      When you sell a home, deposits and down payments are required.
      When you sell a domain, they do it on a good old hand shake, they take the person’s word that they will pay.
      IMO,that is absurd, those days are over…

      In reply to Brad | July 10th, 2014 at 10:08 pm

    CN

    I would say that both real estate and domains are only for a select few to earn real money. I do hear domain or real estate deals taking place, but when you go out to sell you know the real market scenario. I dont deny that deals do happen, but its usually between select few and rest simply pay annual fees to the registrar hoping one day someone will buy their “premium domain” and no one needs it. The day you drop it suddenly you hear there is value for the domain and it has sold for big $$$. I have yet to experience or come across anyone who has earned good money developing and selling domains other than through domaining forums. But not all is hazy and like I love developing domains even though no one buys them from me yet have some domains with PR3/5 after a few years of organic growth hoping one day I too am able to post such rave reviews about how domain investments do really make money :)

    July 11th, 2014 at 11:15 am

      Steve

      @cn
      More inquiries and sales this year than ever. I am noticing more end users are reaching out and inquiring if a name is avaiable. Once they hear the price they usually pass but each name only needs one owner.
      Keyword generic .com and cctld get the most inquiries.

      @brand
      closing via Escrow.com is a bit more secure than a handshake and most buyers like the 3rd party feature.

      In reply to CN | July 16th, 2014 at 12:38 am

    NameYouNeed

    If I could build every single domain I own, I would.

    July 13th, 2014 at 10:58 am

    Art

    With regard to taxes, does the long term capital gains tax rate apply to domains as it does with real estate?

    July 16th, 2014 at 10:31 am

      Elliot Silver

      Good question for an accountant.

      July 16th, 2014 at 10:32 am

      Art

      I considered that first. My accountant had no idea.

      In reply to Elliot Silver | July 16th, 2014 at 10:57 am

    Ray Redican

    Charge taxes call it something else juice the price in the end they don’t mind if someone is paying $25,000 they are ok with paying $2.8K + $3.3k really. If they don’t have it just say they will be responsible for the balance within x amount of time they will agree. Include a clause that if they default on the balance owed it reverts back to you …was this a quit claim deed in real estate? anyway.

    Taxes we get taxed on all the efforts used in delivering the final product. I charge taxes or call it something else.

    October 6th, 2015 at 4:20 am

      Ray Redican

      I need to edit the comment I smoked weed and spaced out a little the above should read …in the end the customer you have that is interested in moving forward with you you are rounded to a 100% close ratio with very little chance that anything is going to get messed up so its going forward add some extra fees they are priced in at this point they don’t mind if someone is paying $25,000 they are ok with paying $28K – 33k on something that was suppose to be $25k.

      Create a separate billing company that you and some other people in your click have ownership interest in. Your billing company would get a fee. You can expand on this if you want. HOW DO YOU EDIT HERE ES? Please Sir thank you.

      In reply to Ray Redican | October 6th, 2015 at 4:27 am

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