Leasing seems to be the “new” hot topic in the domain industry these days. There are positive and negative aspects to domain name leases, and I want to give you a bit of insight into when I might offer a lease deal.
There are really just three times I would offer to lease one of my domain names:
1) The potential buyer is a great fit for a domain name, but our valuations are way different. If I don’t think we’ll be able to bridge the gap, but I know the domain name will be built and that it will lead to much greater monthly income than the domain name is generating at present, I would likely propose a lease. This might be intriguing to the buyer since his upfront costs are substantially lower and he may be able to buy the name at a later date.
2) The buyer is a great fit for a domain name, but the company doesn’t have enough funds to purchase the name right away. Similar to the above instance, but I am banking on the leasee to significantly enhance the value of the domain name and want to purchase the name at a later date to secure it for his or her business.
3) I treat a lease offer as a last ditch effort to prevent a qualified buyer from ending negotiations on an acquisition. If it’s gotten to the point where the potential buyer and I value the domain name in the same ballpark but the buyer doesn’t have the funds to make the purchase right away, I might suggest a lease deal, or perhaps a lease to own deal. Assuming a lease deal is made, the leasee will likely want to eventually buy the name (assuming lease terms aren’t too good).
I treat most of my domain names like inventory. I need to have liquidity to continue acquiring great domain names. I don’t want to tie up my names for long periods unless they are going to produce substantial income. As such, I would never advertise a lease opportunity.
I think there are many good reasons why a domain owner should consider leasing some domain names, but for my business, a lease opportunity is more of a backup plan, and the conditions must be right to make it work.
How about just leasing and no chance to buy? That’s what I’m pitching currently on certain domains.
It’s a hard sell but a handful are starting to bite.
It’s getting harder and more expensive to replace great domains. I’d rather start holding on to some select properties for the foreseeable future and just leasing them instead.
Very well said
Elliot … In my case I have leased domain so, that the guys could see how many uv he could get and calculate ROI before he bought it ..
Great post 😉
Having a fallback position is a good strategy and shows you are willing to get the deal done which is something a lot of end users like.
Hi Elliot, I see the leasing model as the most profitable option for most domainers, lets say one have a large potfolio and 100 domains get leased at a min of $300/pm, thats 30k/pm on a constant basis of which neither parking nor sales would give you.
I wouldn’t say it’s the most profitable, especially in the short or mid term and when compared to a sale.
If you are selling a name for $5,000 but the buyer does not have the cash in hand you can also do a payment plan for 12 months @ $625 a month and in the end you get $7,500 and gain an extra $2,500 and everyone is happy. Obviously this is hypothetical and the terms can be whatever you are happy with. Easier to do with less expensive names so you don’t tie up large chunks of funds. Terms can be for 3, 6, 12 months etc….
I do not feel you can use leasing for the first case because leasing without option to buy virtually does not exist (has been largely commented/discussed previously).
So the buyer must be comfortable about the sale price to accept the leasing with option to buy route.
I still had the case yesterday.
Case 2 is fine and it’s the main reason a leasing can be a solution.
Case 3, I will say the solution is often a seller financing (sale with a payment plan) and far behind a lease with option to buy. Mainly because probably not suggested by the domain owner.
Leasing a domain without the option to buy is simply referred to as Local or Niche Directory advertising in the world of Local Marketing Consulting.
Yes it can be done and is currently being done by niche marketers the world over.