Just like art, jewelry, real estate and digital currencies, buying domain names can be a valuable investment. Corporations regularly purchase them for more than $100,000, but in the last decade, there have been more than a dozen publicly reported sales above $10 million, with some approaching $50 million.
While the return on investment for domain names can be just as profitable as the other asset classes mentioned above, the expense to own them is quite small. You don’t need a private vault and there’s no maintenance required like a house, just an annual renewal fee of about $15/year.
An entire industry has developed around buying and selling domain names, but it’s accessible to anyone. The next domain you buy could just as easily sell for millions of dollars, regardless of your experience. And the best part? Selling a domain name is really easy.
However, that doesn’t mean you should run out and start buying random domain names. With the right process and perspective, you’ll dramatically increase your odds of making a profit. Follow the quick guide below to buy and sell domain names like a pro.
Do the math to make money
It may not seem like much of a commitment to buy unclaimed domain names and hold them since they only cost about $15/year, but you have to consider how the expense can multiply. Ten domains will be $150/year. One hundred will be $1500/year.
And just like any other business, you’ll want to make a profit so you can keep expanding your selection. If you have $1500 in domain renewal fees each year, you need to sell enough to cover that expense while also allowing you to buy more. This means it’s a good idea to base your budget on how many domain names you can likely sell in one year. A commonly reported sell-through rate in the industry is 1-3%, so with 100 good domain names, most sellers should expect 1-3 sales per year.
It’s also important to be realistic about how much you can get from selling a domain name. They’re not all going to sell for more than $1 million. Some may not sell at all. Across the industry, most privately sold domains are sold for more than $2000, with professionals aiming for a range between $5000 to $20,000.
Carefully select the domain names you buy
The most important thing to remember is that buyers only purchase domain names that are valuable to them. Just because tinymonkeyart.com is available doesn’t necessarily mean anyone will want to buy it.
Smart domain name sellers buy in areas where they have some expertise. Your insider knowledge of the industries you’ve worked in gives you an advantage over others who can only guess what words and phrases are valuable. Start by making a long list of all the words that relate to your expertise so you can check their domain name availability later.
Another option is to consider the audience you want to target with domain names. Are you interested in pets? Maybe a specific breed of dog? The more you can narrow it down, the easier it will be to learn details about them and the types of domain names they may want.
Understand your purchasing options
How you buy domain names is just as important as which ones you purchase. As you become more knowledgeable about the industry and the variety of ways domain names are sold, your purchasing strategy will get more complex. The primary ways to buy domain names are listed below:
Unclaimed domain names - These are the least expensive domain names to purchase. This is a great place to start building a portfolio of domain names, but it does come with some risk. If no one has claimed the names you find by now, odds are good they aren’t highly sought after. It’s also possible you could purchase names that don’t mean anything to anyone, so they won’t sell. But that doesn’t mean you shouldn’t try. Think of it like panning for gold. You only need to find one nugget to strike it rich.
Domain name sales - Many websites allow domain name owners to list their names for sale at a specific price. Any buyer who sees it can make a purchase immediately. It’s also possible to reach out to a domain name owner who hasn’t listed theirs for sale. You can do this yourself, but many buyers hire brokers to contact domain name owners and negotiate deals for them.
One word of caution: Before you buy a domain name from a private seller, always get an appraisal. You’ll get a range of values for what the domain is worth compared to similar sales. This is how professional buyers know if they’re getting a good deal, and it drives how they negotiate the price they’re willing to pay.
Domain auctions: These platforms post specific domains for sale at a designated time and allow buyers to place bids on them. The highest bidder wins at a domain auction and is obligated to buy when they win. Sellers can sometimes set a minimum price for their domain names, so bids will need to be higher than the minimum for a sale to go through.
Domain backorders: Some domain registration websites will post domains for sale that aren’t available yet. For example, if a domain name owner hasn’t paid the annual fee, after a period of time, that domain will become available to the public again. Sometimes, you can backorder these domain names to buy them automatically when they are released. Some platforms will not charge you until the sale is completed, but others may require the fee upfront.
Domain buying services: If you don’t have the time or the process seems too complicated, an easy shortcut to take is with domain buying services. They allow you to hire an expert who can research and recommend what domain names to buy, negotiate their prices and even sell the ones you already own.
Market your domain names to sell
Once you have some domain names to sell, you’ll want to list them where businesses and professional buyers can easily find them. Some platforms charge a fee to do this, while others allow you to list them for free. Here are a few popular ones you may want to check out: dan.com, sedo.com, afternic.com, godaddy.com, and brandbucket.com.
You may also want to approach individuals and organizations that you think would be interested in a specific domain name you own. Most sellers find they get the best response using an informal approach rather than a hard sales pitch. It’s also common for sellers to hire brokers to handle this part of the process as well.
Make your first domain name sale
Congratulations! You’ve made it through the buying and selling process. At this point, review the steps you took to get here and evaluate what worked and what didn’t. You want to find areas where you need to improve. There are a lot of ways to make money in this industry, including buying and selling domain names for someone other than yourself. Keep learning and you’ll eventually find your niche.