I’ve been a big fan of lease to own deals for quite some time. Before Dan.com existed, I had several LTO deals, but they required quite a bit of legal review and discussion with the counterparties. Dan.com made the LTO process quicker and easier, although I believe the seller takes on more risk without a customized purchase agreement. Afternic has continued Dan’s efforts, allowing for quick and easy LTO transactions.
I have LTO enabled for most of my inventory quality domain names listed for sale on Afternic. The LTO length varies based on a few important factors that I want to share below.
Risk Tolerance – I believe there is more risk for the seller with LTO deals. I previously wrote about the potential risk incurred due to LTO usage. I also wrote about when I am cautious with LTO deals. I tend to offer shorter – or no – LTO deals on domain names that could be used for gambling, crypto, finance, or other types of businesses that could put the domain name at greater risk of problems. I also owns some sassy domain names (like FuckYouPayMe.com), and I have those on shorter payment plans to try and reduce risk.
Trend Domain Names – I offer shorter LTO deals on trendy topics that might not be popular or be in the public eye for very long. I don’t want someone to use my domain name while the trend is hot and then let the lease deal expire as the trend expires, leaving me with a domain name that is worth less than before. If someone wants to capture this lightning in a bottle, they will need to put more money down and have a shorter payoff period.
Acquisition Cost – I always consider my acquisition cost when deciding on the length of the lease term. I don’t want it to take a long time to earn a return on my investment – even though that’s not totally related to how my accounting works. The lower the potential ROI for one of my domain names, the shorter the LTO length I will usually offer.
Domain Name Value / Price – I don’t particularly want to deal with very small monthly payments, so the BIN price plays a big factor into the length of time I will allow. This is more about not wanting to deal with accounting for small monthly payments for a long time. In general, I think most of my names priced below $2,000 have a 12 month maximum LTO length and those priced below $5,000 have a 24 month maximum.
36 Month Maximum – Unless the LTO deal involves a six or seven figure asset, I don’t generallt go beyond 36 months for LTO deals. This is a bit of an arbitrary number, but I figure if a business can’t pay off a 5 figure domain name within 3 years, it’s probably not going to be a successful business. I don’t believe I have any LTO domain names longer than 36 months. Domain names on which I am willing to go beyond 3 years LTO need to be negotiated in private.
Domain sales platforms seem to recommend 60 months for LTO length. I think this is because they make more money and the numbers are more appealing for buyers. I don’t want to lock in long term deals like this unless the money is worth it and I have a customized LTO agreement with adequate protections in place.
This post appears to be divine providence because this was squarely on my mind and some tried to buy me out of something recently.
What about if you don’t want the “TO” part, i.e. what if you want “Lease To Lease”? Is there a platform that handles leasing only and not “LTO”? And which one is the best? I know E**k used to do leasing, but we all know what happened there. I’m just not up on whether there are any good pure leasing platforms now. Are there?
Otherwise I guess Afternic must be the best “LTO” one.
I was reluctant to use LTO; I preferred digital LTO contracts similar to those for retail stores, with an early payment between 10% and 20% depending on the sale price. I actually worked them out with a lawyer to be legal, but I think this is for sales starting in the high 6-8 figures.
Today, I converted my domains on Afternic to LTO in 12 and 24 months.
Atom.com to do the LTO.