Most people who buy and sell domain names as investments do so to supplement their main source of income. Domain investing can be a lucrative side hustle. With its steep learning curve, domain investing can also become a costly hobby. Earning a full-time living as a domain investor is a challenge with a high rate of failure.
Domain investing has been my full-time profession since 2008. I think this business has gotten more difficult since I started out, but I have forward momentum – with a domain portfolio, knowledge, and capital. This has enabled my business to continue to grow despite the challenges.
For those of you who are interested in pursuing a full time profession in domain investing, I want to lay out some of the math involved in making that happen.
To make a living, you need to consistently hit home runs on sales. While closing deals at a profit of $500k, $1m, $5m, or more sounds great, there’s a much bigger picture to consider. There are many expenses and costs that take a huge chunk out of the business profits.
There are federal and state taxes to be paid in the US. If a business has a good year, the taxes are quite high. On top of that, smaller businesses pay quarterly estimated taxes. When a business has a good year, they likely owe money in April, and their quarterly estimated taxes also increase. Paying taxes can be burdensome, but it means the business is doing well.
Beyond paying taxes, a growing domain investing business is capital intensive. I am always spending money on domain name acquisitions. My 5 favorite buys this year are Logical.com, Haps.com, Receivables.com, Stampede.com, and GottaGo.com. In general, my company spends well into the six figures on domain name acquisitions each year. Notably and unfortunately, I can not write off my domain name acquisitions for tax purposes when I buy them (FWIW, you should definitely consult with an accountant who knows your business and tax laws). Acquisition costs can be ratcheted up or down situationally, though.
While overhead like office space can be low, there are plenty of business costs to consider. Broker or platform commissions can take a % of sales. Domain name renewals can be expensive, depending on the portfolio size. This is one reason I like to keep my business at under 2k domain names and stick to the ~$10/year .com domain names. There are legal fees for purchase agreements or other reviews. There are hosting and/or platform fees for landing pages. There are travel and other expenses related to industry meetings and conferences. There are costs for various industry tools that are essential.
Other expenses include salary and benefits. While plowing all of my after-tax profits back into the business might help grow the business, I invest in domain names to earn a living. I built my business to enable my family to live a nice lifestyle. I am not living a lower quality lifestyle to build my business. It may be a trade-off, but I wouldn’t trade it.
People often ask how challenging it is to turn domain investing from a side hustle to a full time business, and I would say it is extraordinarily challenging. The cost to grow and run a domain investing business on a full time basis is very high. Once a business has grown to the point that it can become a full time business, things may be easier. A great deal of that ease is because of the time, effort, and money that has been invested over a long period of time.
I like logical .com & stampede .com.
Your approach to quality over quantity is surprising for someone with over 10 years domain investing experience.
I agree with your approach and disagree with the quantity over quality crowd.
A great portfolio is built one domain at a time.
I still prefer website investing over domains currently. I bought a two word domain name from afternic and built a website that on average earns 2-3k per month (-$69 expenses) and at least $1k per month during an uncertain rough economy. The website has been up for 3 years so far (earning roughly $70,000 in total). It can also be sold for 25 x monthly revenue (2k) = $50,000.
a $350 domain + sweat equity = ROI of $100,000+ ???
This is more ideal for me than waiting for a domain to sell for a few thousand dollars minus commission fees.
A good guide. For me outside the U.S., the amount PayPal and other providers take away through low exchange rates when I transfer from them to my non-USD bank account is pretty mindblowing.