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03 May

What My First Domain Sale Of The Year Taught Me: 500% ROI in 6 Months, Trends & Protecting Against Downside

Oliver Krautscheid Jan 12, 2016
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There’s nothing better than starting the year with a small accomplishment. It doesn’t really matter how big it is, because it’s simply a small goal that you should set yourself to motivate you. This stuff is incredibly powerful and can set you up for the rest of the year.

My Challenge: Making A Sale Within 30 Days

It’s been a while since my last big domain sale, so I was keen on starting strong this year and was prepared to sell a name for four figures. I knew I had acquired some beautiful names last year and did some smart trading as well. For example, I sold upht.com for $1200 on Flippa and acquired THREE four-letter names with that money with actual meaning in Chinese. Heck of a deal if you ask me, considering that the ROI will be approx. 300 to 500% if not more! That’s really what I love about domains as investments rather than stocks. Stocks are great and the compound effect of dividends is something you ALWAYS want to keep in mind but it’s rare that you get a 500% ROI after only a few months. In fact, it would take you more like 3 to 5 years to get that kind of return on bluechips. So it’s a very good idea to invest a small portion into domains especially when a stealth bear market is killing your returns on smallcaps.

Last weekend I finally landed my first sale of the year. I acquired the name on June 26th, 2015 for $500. It was a domain with very favorable lucky numbers but not a com or net which greatly lowers the price tag. The actual sale took place on January 9th, 2016, so approx. 6 months between the initial acquisition and the sale. I managed to sell it for $3000, giving me a ROI of 500%. I know the investor is going to make money on it but so did I and sometimes it’s a better idea to sell if you believe that money can be put to good use elsewhere.

Also, make sure to understand the difference between greed and a trend. There is a fine line. Many trends are driven by greed but sometimes they aren’t and then you should buy in early even if that means spending some money. Nonetheless, don’t get greedy yourself. A 500% ROI in 6 months is a serious return every trader on Wall Street can only dream of.

1 Advertising on Flippa

The first thing I did was to list the name on Flippa back in mid-2015. And only a week later I’d start getting offers of about $900. I did not sell at this point, because I knew this name would be worth more if I’d just hold onto it for a bit longer, but the $9 I spent on the auction was well spent: Gauging interest and demand is the first thing you should do to get a clearer picture of the price of any asset.

Pro Tip: Advertising on Flippa’s new domain category will send you a lot of eyeballs that can turn into bids or useful contacts. Domaining is highly competitive and being well connected helps tremendously.

 

2 Advertising on SEDO – Auction vs Direct Sale

Next, I simply held onto the name for a couple of months. November is usually a very good month to sell just about anything digital. Apparently, Chinese buyers seem to be very active during the late months of the year.

Then in November 2015, I listed the name on SEDO. I paid 39€ to list the name on the SEDO homepage. And as predicted, this time I’d receive much better offers. The first offers for the name were around $1000. Then some time later I received a 5000€ offer. That was a decent offer, but this was during the midst of the first Chinese domain rush so I thought I’d gamble a bit and try to auction it off, rather than sell it immediately and if no one else bids the initial bidder was obligated to buy the name anyway. Bad move. No one else bid on the name.

Although it was worth the shot, I ended up NOT selling the name. Buyers on SEDO frequently don’t honor the sales agreement. The SEDO support staff was very friendly and helpful in this matter and they will usually disclose buyer details like their address but I did not pursue any legal steps and cancelled the transaction because that’s just not a good way to conduct business and wouldn’t have been worth the trouble. Now the real question is whether he would have paid had I sold the name right on the spot. I believe so. This mistake possibly cost me 2500 EUR, however having the chance of possibly doubling the ROI was definitely worth it. Still, next time I’d probably be more cautious.

3 Increasing Interest

Lastly, aside from relisting the name I did a lot of tweets with domainer hashtags. It paid off quickly, just a few days later I was approached by a Chinese investor via email. Apparently, he found me via a simple whois query, but it’s very possible he either saw my tweets or my auctions. His initial offer was ok but I wanted a little more. We talked a little, I increased his interest in the name and ended up selling the name for $3000 via Escrow.com – all fees paid by the buyer. It was a win-win for both sides. I am pretty sure he’s going to sell it for at least double that down the road and I ended up with a 500% ROI.

Takeaways

Here are some takeaways that you should keep in mind:

  • – Know the difference between greed-driven trends and a real trend. Real trends can last a long time, giving you ample time to buy into it. Trends driven only be greed and excitement can crash very quickly and leave you broke for good with serious downside.
  • – Buy in early, but sell when you’re ahead – don’t get greedy and be a bagholder if the trend is not as stable as you thought
  • Protect against downside (an early sale can offset losses that occur later during the year)
  • Be proactive
  • – Flippa is a great place to gauge interest and cheaper than SEDO
  • – SEDO is a great place to get serious offers, Flippa in comparison will yield lower offers but can significantly increase the interest in the name if you advertise on Flippa
  • – November and December are great months to buy stocks and to sell digital assets
  • – Auctioning a name off always comes with the risk that the buyer backs out of the deal, especially if there are no further bids. Consider the odds of how likely it is that there will be additional bids.

Participate in forums and peer discussions as much as possible but always make up your own mind. You can’t expect extra-ordinary results if you do what everyone does. Sure, you may take on more risk and most certainly you will soon enough find out what risks entrepreneurs in this world take every day, but the lessons you’ll learn about taking educated, calculated risks are extremely valuable and much more than the money you stand to lose.

It’s transactions like these that can teach you valuable insights into business and international markets.

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