Some years ago I started examining the real estate markets. It was then the safest method of securing growth and Returns On Investments. The markets were booming, and you could sit back, hardly do anything and receive as much as 15% return in a year.
A property worth £250,000 ($500,000) would gain as much as £37,500 (US$75,000) within a year. The figure may seem a bit high, but the real figure was often much higher than a 15% return.
There are quite a few ways to make money in real estate. I concentrated on residential lettings (rentals). You only needed a 15% deposit, and then get a mortgage to cover the rest. Your main objectives were to ensure that the rental income covered the interest-only mortgage, and that you secured qualified tenants.
With the expansion of the European Union and the subsequent influx European workers trying to earn pound sterling here in the UK to send back home to their families, the demand for apartment/house rentals grew significantly, and just kept on growing. You would have a tenant waiting literally months before the real estate deal was completed. This means that your property started paying for itself the very minute you collected the keys.
If you bought the property off-plan (buying the property before its built, with only the architect’s drawing to work with) you would get discounts and incentives that would give you instant equity in the property upon completion. This means when you pay a deposit and exchange contracts now, you would complete on the property anytime within 6 to 36 months.
Buying off-plan was really attractive. You would purchase at today’s market price, sometimes with discounts, such as 5% deposit paid, and incentives, such as stamp duty and legal fees paid. You would then complete on the property, only when the construction of the property/complex is finished.
The value of the property would have increased in line with the new market prices. This means that you would gain instant equity, and if you choose to sell, would make an instant and most likely, large profit.
However, for tax purposes, selling was not so attractive, as you would have to pay capital gains tax on any profit. It would be better to refinance, and pull the equity out of the property. The refinanced amount could then end up providing the capital for the purchase of a new property.
Repeat the process over time, and you could end with a sizeable real estate portfolio within a short period of time. You would hardly have to introduce fresh capital, as you are simply benefiting from the increases in property value. After a few years, you could consolidate your real estate portfolio, and have more equity and less debt.
However, the fallout of the US property market has disrupted the cycle of capital generation. The US housing crisis has spread beyond the US shores, and has hit the UK’s and other countries’ housing markets like an uncontrollable plague.
With banks having liquidity problems, and are experiencing difficulties borrowing amongst themselves, they inevitably had to cut back on how much they lend their customers.
This means that mortgages are more difficult to obtain. In my experience, you now have to find higher deposits (between 35-45%, compared to 15%), have to ensure that the rental income covers the monthly mortgage payments by a minimum of 130% (compared to 100%) and a lot of banks cut back significantly on how much they would lend on new-built properties.
This created a significant nightmare throughout the whole real estate industry. Buyers could not get mortgages, as the banks ran out of cash, and real estate developers, real estate agents and other affiliated industries were going out of business as properties were just not selling.
The rest as they say, is history. I was quite lucky to be able to negotiate some really fantastic deals on the remaining properties that I had left to complete on. I have good tenants and the mortgage deals will not expire anytime soon. Perhaps long after this credit crunch is sorted.
However, one thing is for sure. I will be halting all new investments in real estate. The real estate industry will never be the same again.
This has caused me to think and to draw parallels between the domain industry and the real estate industry.
In Part II, I will outline the differences between the real estate industry and the domain industry, and why I think the domain industry is poised for exponential growth, in the wake of the collapse of the real estate markets.
Nice post, it describes well what’s been happening. I think like a said in a previous post, that the domain market is going in the wrong way, at least among most domainers. Because it’s all about speculation, they value non sense short domains with a few letters over good keywords longer domains that are for sure more desired by end users. Domainers are forgetting that domains are for end users, not for domainers speculative game. Like i said before, i believe a webmaster prefers a better keyword in a different extension than a worse keyword just to have a .com
Then there’s a lot of confusion due to some rules among domainers, put yourselves in the shoes of a newbie like me and think about this: More experienced domainers tell newbies, stick to dot com, but at the same time they say most good dot com are taken, so what does a newbie do? They tell a newbie to focus on LLL.com LLLL.com CCCC.com or NNNN.com and at the same time they also tell us to put ourselves in the place of a buyer, well an end user will always prefer good keywords i believe.
Another confusion to a newbie is about other extensions, some love TV, others say NET or ORG are the best after COM, others will say INFO is the best for some domains, then i see ME with good keywords being sold for very high prices. Others say IN and CN are the future, others say it’s just speculation.
I think things are very confusing right now, and i get the feeling this market doesn’t know where it’s going.
In my idea, i’ll keep thinking about end users, i haven’t sold much yet, but i’ll keep on this track.
Sorry for getting a bit off topic, but i would like to know your thoughts on this
Thanks
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Helder,
Just to point out a point. Most of todays good .com might be gone but domaining sometimes can be like farming. If you want to reap good rewards, you need to sow first. In farming the strongest trees like the oak tree take years to majure. So what you sow today can make you a big time domainer somtime in the future. However if you goal is to sow today and harvest tommorrow, then you are in a whole different ball game. That said, imagine what people will be buying 5 years from now not what they are buying today. Now go ahead and research those keywords, register them and pray.
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Helder,
I totally understand your frustration.
Let me quickly see if I can answer some of your points.
Firstly, I am not sure if everyone who uses the term “end-user” refers to the same set of people. When I use the term “end-user” I am not referring to people/web surfers who will be using the website that is subsequently published using the domain name.
Instead, I am referring to the owners of the domain and website, who will be responsible for branding and promoting the website, in a view to conduct a successful ebusiness or information-related website.
Now, to explain this simply, this is how I see it. When an end-user is about to launch a website, they will start brainstorming the domain possibilities. They can register a new domain for as low as $8.95 or buy an aftermarket domain for as much as $12 million, well lets say $2,500 to keep it real.
If the end user wants to sell motor stereos, and you have MotorStereosForEveryCar.com selling, the end-user will ponder if they should really pay you $999 for that domain name or simply register MotorStereosForAllCars.com for just $8.95.
What am trying to say is for end-users to part with their money the premium quality of the domain name must be very obvious. It must be so obvious and compelling that there is simply no unregistered domain name that comes close. If you had MotorStereos.com and offered it to the said end-user for $999, am quite sure that they would buy it if they can afford it.
With regards to domain extensions and methods of valuing domain names, this is and will always be a debatable issue. You can take comfort in that all domain extensions are being registered, and all of them are having sale transactions in the domain aftermarket.
The question is, who is buying them, what price are they paying for them and what do they do with these domains when they buy them.
I do still buy other domain extensions, but only to be used as part of an end-user/domain branding strategy. For example, eBusinessDomains.com, PremiumDomains.net and PremiumDomain.net were all bought off the aftermarket. I also bought eBusinessDomains.net, as well as e-businessdomains.com, Smallbusinessdomain.com and Businessdomains.net. I simply use all these domains to generate traffic to eBusinessDomains.com.
I sell domains which I would use to brand a business if I operated in that particular niche. Hence why we are eBusinessDomains.com. My market is not to fellow domainers, although I often offer fellow domainers discounted prices via my newsletter.
Personally, I would only brand dot COM and dot TV extensions. Let me know if you find this helpful.
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@Frankie i understand what you mean and i agree, i always try to find good .com domains, with the best possible keywords, but i meant to say is that i believe that’s also worth to buy good domains in other extensions, when the .com is already taken, because good keywords will always be worth it, at least i hope so, and yes i want to be in this business for long.
@Kevin i think about end users in the same you do, people who want to develop a business/brand, not only those but specially those. That’s why i sometimes find hard to value some non sense 4 letter domains, i position myself as someone wanting to develop a business and i would surelly prefer good keywords. Thanks for your advice about the why to buy other extensions.
Why do consider TV superior to the other extensions like NET, ORG, INFO, ME or BIZ? Some of these extensions are being sold for high prices, recently i’ve seen belgium.info being sold for $15 000 that’s a lot of money for a domain.
If you don’t mind i have just one more question related to registrars and .tv, which registrar has the best dot tv prices? Most of my domains are being registered at name.com and they sell .tv for $35 , at godaddy it’s only $19 but i’ve read a lot of very nasty things about godaddy, even things like them stealing good domains from their costumers and other similar things, so i’m not too confortable with them, i only have one domain with them.
Sorry for such a long comment
Thank you to both Frankie and Kevin
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Helder,
From what I gather domainers, and end-users as well, look at the dot TV extension differently, based on what part of the hemisphere they live in.
Here in Europe, the dot TV extension is quite popular and is used successfully to brand some major product/company websites. Some companies even use the dot TV for separate products or promotions, in addition to their own brands.
Dot NET is rarely seen in advertising campaigns on television or in newspapers.
I personally have not seen any other TLD being branded here in Europe, apart from the country codes such as dot CO.UK.
Country codes are widely used, but for obvious reasons, they are only used with websites that service the needs of that particular country or geographical area.
If you plan to take your brand to international markets, then your country code extension will seriously hamper your market reach.
I have quite a few dot CO.UK domains, but I will not be renewing 95% of them, as I can’t be asked with the tedious transfer process. In my opinion, Nominet, the dot CO.UK registry is not fit for purpose where the domain aftermarket is concerned.
With regards to domain registrars, the good, bad and ugly is said about almost each and every domain registrar.
I use Godaddy.com and Widest.com. Godaddy.com offers great service and has one of the best user-interfaces. I believe they have got the cheapest prices for most extensions, including dot TV.
My advice with dot TV is to test the waters before diving in. The inventory carrying costs for dot TV domains can become burdensome, as not all dot TV domains generate PPC revenues. Be sure to register only domains with end-user potential.
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Not to get too far off topic here but if .com is waterfront then I think .tv can be considering pond front.
Certainly not as good as waterfront but certainly second for a global reach.
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Thanks Kevin and you also answered to another question i had in mind, that was about country codes, more specifically co.uk, .de and .eu
Perhaps you could write a post about it, the value of ccTLD’s specially the European Union TLD, not being a country it’s being a very controversial one, i see some domainers saying it will be the future, almost a second .com, others say it’s the biggest flaw ever.
I think that could make an interesting post, for me being european (Portugal) it’s something that i’m really interested in a future perspective.
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Rob,
I think a better analogy of .com to .tv would be that .com is “oceanfront” and .tv is “lakefront”. still very much desirable, but not quite as “big time” just yet!
I do think .tv is about to blow up in the next 5-10 years. I will say that much.
Cheers Mate.
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Now we’re talking.
As a Real Estate Agent and a Domainer I look forward to hearing the following parts of Back to Domains – Real Estate VS Domaining Part I
This is undoubtedly a great comparison and well written by Kevin.
Bring it on!
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Thanks Mick. Will aim to publish another article on Thursday.
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