I’ve been a proponent of offering buyers the option to lease-to-own (LTO) my domain names. The primary benefit of an LTO deal is that it enables a fledgling business to secure a domain name today while paying for it as the business grows. It’s a win win if the seller gets the desired price.
Despite a reasonably good track record with LTO deals, I’ve been opting against offering an LTO option for my highest value domain names.
If you think about the top domain name sales from prior years, there are many that would be considered “steals” today. Perhaps you should discount the top outliers, but there are many domain names that seem undervalued based on today’s valuations. In essence, there are quite a few that sold that I think could be sold for much more if they were back on the market today.
When you’re offering an LTO option, you are essentially giving a buyer 2, 3, 4, or 5 years to complete a deal based on today’s valuation rather that what the domain name will be worth when it’s paid off. For instance, think about someone who agreed to a 5 year LTO on a great one word .ai domain name 3 years ago. That could probably be sold at a much higher price today.
Some platforms make up for this a bit by charging a premium on longer term deals. Many of those platforms take a chunk of that as commission. Separately, investors who transact via Escrow.com or legal escrow service likely don’t have a bump like that built in to the deal. Buyer and seller negotiate a price today, they agree on a deal term, and the buyer locks in a multi-year LTO deal at today’s price.
This discussion here only considers the valuation of the domain name. It doesn’t consider the fact that the domain name could be impaired by its usage by the buyer. If a startup fails (spectacularly) or the domain name is misused, that could harm the value of a domain name that should be worth more in the future. Those are separate risk factors that people need to consider for individual domain names.
I suspect most domain investors with good domain names are bullish on domain name values. This should mean investors think their domain names are going to become more valuable in the future. I think my top tier domain names – particularly the one word .com domain names that seem to be consistently in demand – will continue to appreciate in value. This is why I have been reconsidering offering the best of these for sale with LTO options.
