I read an article about real estate investing in the Boston Globe that had some very interesting parallels to the world of domain name investing. Even the title (“Investors are flipping housing markets, and buyers are reeling“) could be slightly modified to reflect the business of domain name investing and what some domain name buyers believe.
The gist of the article is that real estate investors who are buying homes as investments are making it more difficult and expensive for first time home buyers to purchase homes. I imagine there are startups who would say that domain name investors buying domain names as investments make it more difficult for businesses to buy their desired domain names.
Here are a few excerpts and quotes from the article that I can easily imagine changing a few words to make it reflective of the domain investment market:
““If it weren’t bad enough out there for first-time home buyers, the additional competition from investors is increasingly pushing starter homes out of the reach of many households,’’ said Ralph McLaughlin, deputy chief economist at CoreLogic, a provider of real estate data.”
“The investors take many forms. There are fix-and-flippers who buy homes cheaply and resell them for a profit (sometimes to owner-occupants, sometimes to out-of-towners who rent the homes out on Airbnb). There are those who buy and hold, generally larger institutional investors who rent the properties out. There are traders who acquire properties and try to resell them once they appreciate, sometimes in weeks, sometimes in years.”
“What is happening in Atlanta is partly a familiar story of gentrification pushing up prices and driving out longtime residents. But those trends are being spurred by a fast-growing industry that promotes investment in single-family homes: lenders who provide the capital, brokers who handle transactions, wholesalers who buy homes by the dozens and sell them before they even take possession.”
“To existing residents, the flood of investors can feel like a threat.
“It’s almost like locusts came down and bought everything up,’’ said Robby Caban, a neighborhood activist in Atlanta.”
One massive difference between real estate investing and domain name investing is the lack of outside capital to help investors buy domain names. A company like Domain Capital offers funding options for domain name purchases, and Escrow.com enables domain name buyers to purchase domain names with a payment plan. Beyond these limited options, there really isn’t much in the way of capital coming in specifically to buy domain names – at least in an easily accessible manner. Put simply, it is much easier to go to a financial institution to get a loan to buy a piece of real estate than it is to go to the same financial institution to buy domain names.
Domain names are much different investments than real estate. There is no MLS nor are there tools to determine domain name values to a close enough degree of accuracy. In addition, minor differences in the spelling of a domain name can have a massive impact on its value – for instance SEX.com is worth so much more than SXE.com or XSE.com. Beyond that, real estate is much more tangible than domain names. Most properties can be used tangibly, and I would argue that the majority of domain names are not worth anything to anyone other than the registrant.
The article mentioned some of the companies that make it easier for investors to buy real estate. If that kind of money entered the domain name marketplace, I think we would see a massive increase in domain name values. I don’t really see that happening in the short term though.
I found this article interesting because the gripes of home buyers about the presence of real estate investors sounds similar to those of domain name buyers. The article does not really discuss the value real estate investors provide to the market (ie sellers selling their properties, “as-is” in some cases, more quickly. The same can be said about domain investors.