Investing in Domains for Profit

How To Get Started In Domaining As A Domainer
By Jeff Behrendt Investing in domains can yield dramatic returns - much higher than investing in stocks, bonds, real estate and precious metals.  In fact, doubling your money in one to three years is quite common for the average investor.  

The reason for this is that by buying a domain, you literally own a piece of the internet.  As economic activity and marketing move online more and more, the value of domains will continue to go up.  

Here are the resources you need to start investing in domains:  

Get the Domaining Knowledge You Need

The first step to being a successful domain investor is to be an educated domain investor.
Try:  Subscribe to several blogs.  Find them at this list of all the blogs in the domainersphere.  As well, join a forum.  The three main ones are Domainstate, DNForum, and Namepros.  If you are interested in domains from specific countries, AcornDomains.co.uk concentrates on UK domains, INForum.in concentrates on Indian Domains and USforum.us concentrates on .us domains.  You can also check out this directory of domaining resources for further information.

Take it Slow

Yes, you're excited about domains and want to get going right away. That being said, it's best to wait at least a month before buying your first domain. Spend that time reading about domains voraciously and perhaps attending a domain conference to meet people in the field and learning the stories behind their successes and failures.
Try:  There are three main domain conferences, and all are worth attending.  They are T.R.A.F.F.I.C., DOMAINfest, and Domain Roundtable.

Stick with .com at the Beginning

There are a variety of top level extensions you can invest in. You are probably already familiar with .com. Some other extensions are .net, .org, .info, .biz, and .mobi. Each country also has their own extension: e.g., .us (United States), .uk (United Kingdom) and .de (Germany). Each extension has its opportunities and pitfalls. However, historically .com has outperformed all other extensions and many experts believe that this will continue in the future. As a beginner, the .com world is the safest place to be. As you grow more experienced, you can decide whether you want to branch into other extensions.
Try:  You can read about which extensions increase in value the fastest, in which extension three letter domains increase in value the fastest, why a mediocre dot com may well be better than a stellar dot net or just view the highest sales of the year to see how .com's dominate the charts.

Choose a Domainer Friendly Registrar

Frankly, a lot of registrars are not that secure, and a valuable domain is at risk of being stolen. Indeed, one registrar has even tried taking domains from its clients. You want to make sure that your domains are registered at a place that's secure and understands domaining.
Try:  The domain registrars that are best known for catering to the concerns of domainers are:  Fabulous, Moniker, and Rebel.

Choose Domains with Terms That are Searched

One reason why Work.com is such a fabulous domain is because people actually search for the term "work" and also use it in their day-to-day conversations. While you may not be able to afford a domain like Work.com, there are many much cheaper two and three word terms that people do search the internet for.
Try:  The way to find out what terms people search for on the internet is to use what are known as "Keyword Tools."  These are tools that collect and aggregate people's internet searches.  They allow you to find out how many times per month (or per day) a particular phrase is searched for.  The main keyword tool that exists is Overture.  There is a tutorial on how to use the overture tool for domaining, and what its strengths and weaknesses are.  A couple of other good free keyword tools are Keyword Discovery and WordTracker Free Keywords.

Learn How Domains are Valued

You need to gain some sort of a gut feel based on experience as to what the market value of a domain is. The best way for someone new to gain this experience is to pour over previous reported sales.
Try:  The main source of reported sales is DN Journal.  You can also find handy searchable databases of past sales at DN Sale Price and Namebio.

Know the Law

Domaining is no longer a wild west - there are many laws you should be aware of. Avoid trademarks: registering a domain, even inadvertently, that includes a trademark can get you into legal hot water. And large corporations tend to over-reach when it comes to claiming what is covered by a trademark, so you want to make sure you are not pushed around by cyber-bullies.
Try:  Read a basic introduction to the laws that apply to domainers.

Sell A Few Domains

Even if you are investing for the long haul, it makes sense to sell a few domains to get an idea of the process - e.g., how to negotiate the sale, how easy or difficult it is to sell a particular domain, and the mechanics of escrow and domain transfers. Selling a few domains will give you a good reality check as to whether your domaining efforts are on the right track.
Try:  There are a number of places at which you can sell your domains.  The domain forums listed above are popular.  You can auction cheaper domains on ebay.  The largest domain marketplaces are Sedo, Afternic, and TDNam.  Higher value domains can be listed at one of the many industry auctions announced on industry blogs.  Usually one is held in conjunction with the conferences listed above.  As well, some of the companies that run auctions  are Moniker, Godaddy, Snapnames, and DomainTools.

• Understand the Difference between "Wholesale" and "Retail". In simplest terms, wholesale is the price that a domainer buys a domain for. Retail is the price that a person who plans to develop the domain (known as an "enduser") buys for. There can be a big difference between the two. This is for several reasons. Domains aren't a very liquid investment - they can be very difficult to sell. In fact, if you are looking for a sale to an enduser (preferred obviously, because retail prices are so much higher than wholesale), it can take years before an enduser is interested. In fact, for lower quality domains, there may never be an enduser who is interested. The smaller the chance of a retail sale happening, the lower the wholesale value is.
• Specialize in a Niche. It is difficult to be an expert on all types of domains. By specializing in a niche, you will get a much better understanding of what types of domains in that niche sell and at what prices. If you are in the financial industry, consider concentrating on financial domains. If you are in the health care industry, consider concentrating on health related domains. Another popular niche is geo-domaining (domains that include geographic locations).