You can read the first article in this series by clicking the following link:
Back to Domains – Real Estate VS Domaining Part I

In the first article in this series, I gave a snapshot of the real estate market, and used the United Kingdom’s property market to illustrate various points as necessary. I focused a bit on how one could go about earning an income by investing in residential properties.

The article looked at the residential market from a rental income perspective, and did not include the development of distressed properties by individuals for resale. I will write about property development in a later article, when I make comparisons with domain flipping.

Remember, the aim of this series is not just to draw comparisons with the domain industry and the real estate market, but to also demonstrate how the domain industry could benefit form the fallout of the US housing markets.

There are many ways to earn money in real estate. It is a very huge and diverse industry. What is scary about the real estate industry is that it affects each and every other industry in various ways.

The real estate industry is so important that any failure in one part of the industry could derail growth and confidence in the whole industry, and subsequently the wider economy.

To give you an example, the current economic downturn, credit crunch and recession was triggered by a failure in the US real estate market (Subprime mortgage crisis).

The real estate industry does not only involve bricks and mortar as the houses in your neighbourhood. Here is a brief list of the different players in the real estate industry:

- Banks (Mortgages);
- Estate Agents (sales and rentals);
- Surveyors;
- Solicitors/Lawyers;
- Mortgage Brokers and Financial Advisors;
- Property Developers (Construction companies and individual investors);
- Furniture/Appliance stores;
- Manufacturers of building materials;
- Equipment Rentals and Leasing (building sites).

The list just goes on and on…

Some of the people/companies in the list will be featured in later articles as I draw further comparisons.

In a similar fashion, whatever happens in the domain industry inevitably affects the wider Internet community. One such example is the introduction of new domain extensions.
Valuations
I will focus today on the factors that help to influence the value of a property, and those that are considered when valuing a domain name.

They say that the three most important things in real estate is location, location and location. It is true. The location of a property is just simply the most important factor to consider when valuing properties. A property in Beverley Hills is worth much more than a similar one located in downtown Los Angeles.

London will host the 2012 Olympic Summer games. There is now a mad rush and demand for land and dilapidated properties that are close to the London 2012 Olympic park. The area immediately surrounding the London 2012 Olympic Park is like a giant construction site.

The real estate complex that I live in was just completed last December. The major selling point for the developer was the proximity to the Olympic Park. This gave them the opportunity to overprice the units by over £100,000 more.

View of the London 2012 Olympic Stadium (under construction) from my apartment. The green cranes outline the inner circle, where the athletics track will be.

I will have a very clear view of the Olympic Stadium when it is constructed. I’m so close to the venue, I should be able to naturally hear the fans screaming during the 2012 Olympic games.

In normal economic conditions, the value of properties would have increased by 30-60% by 2012. For properties in my neighbourhood, there will be an even bigger increase when the Olympic park and its various sports facilities are completed. There will also be the Stratford International Rail Station next to the Olympic park, where one can board a train and get to Paris, France in just over 2 hours. There will also be brand new shopping centres, and a vast amount of new constructed properties and apartment complexes.

The face of neighbourhood is changing daily. Although the neighbourhood is like a giant construction site, when all is said and done, I may earn as much as a million dollars in the increased property values. Thanks to location, location, location.

Other factors affecting the value of a property would include the age of the property, state of the property, size, income potential, proximity to top schools, parks, transport links, shopping and recreation.

With regards to domains, the domain extension mirrors the location aspect of real estate. A dot COM is more valuable than a dot NET, BIZ, INFO and so on.

If the domain consists of a word that can be found in the dictionary, then it is even more valuable. Other factors that can positively impact the valuation of a domain name are:

- keywords – most popular search keywords are more valuable;
- length of the domain name (a shorter domain is more valuable, whereas a bigger property is worth more);
- Niche, industry or market sector that the domain name relates to;
- Previous uses of the domain name;
- Current traffic to the domain name;
- Past sales data/trends in the domain industry.

This is just a general overview of factors that help to determine the value of a property, as compared to those that influence the value of domain names.

The real juice of this series will be in the comparison between acquiring a property and the methods of acquiring a domain name. Other comparisons will include revenue streams, expansion of revenue streams, taxes and expenses, diversification and more.

I will aim to publish another article next week.