There are many parallels between real estate and domain names, but I was reading an article in the New York Times last night about home teardowns, and I thought about this in relation to domain names. A fairly recent trend in real estate investing is purchasing a home on a nice lot of land, tearing it down, and building a nicer, more modern, and usually larger home. The investor then sells this piece of real estate for much more than the price he paid and the cost of building the new home.
In terms of domain names, I can see this being a profitable opportunity for an investor who happens to have development skills or a staff of developers on hand. If he is able to purchase a domain name earning PPC for a decent multiple, he could quickly build a custom website, get it indexed by the search engines, and start building traffic and revenue. Assuming that this website generates greater income than the previous PPC page, he could resell it for a higher price. By using the Hybrid Development approach I outlined before, costs would be kept down and this could be done across many domain names.
There are many advantages of domain names over real estate in this instance:
- 1) A person is not subject to weather that could impede a real estate rebuild.
2) Other than the physical labor involved with developing a domain name, there are not many material costs, other than hosting, with a website.
3) There are no added real estate taxes that will be incurred with a large property.
4) The Internet is worldwide, and geography plays a small role.
5) While searching for a buyer, the website is making money – the real estate property is costing money.
Whereas many domain investors buy and resell domain names based on the same PPC model (which I disagree with – but that’s another story), this could add tremendous value to the domain name. Many people believe they can increase the amount of money a domain name is earning by testing various parking companies and/or keywords, which may yield better results. By developing the name, you would almost certainly increase the value of the name much more than relying on PPC. Of course, development is difficult, so this isn’t for everyone. This is just another opportunity in the domain business.