As an Internet Entrepreneur, I’m always coming across unique ways to earn money online. I do everything from e-commerce, to selling on Amazon, to SEO Consulting, and perhaps my favorite part of Internet Marketing and usually where people know me from – Affiliate Marketing. Since I made the decision to take control of my long-term financial investments and retirement accounts, I’ve always looked for ways I could leverage my own expertise in this field to help myself achieve 100x returns on my money long term. Yes, I said it – 100x. Today I’m going to share with you my latest initiative, and that’s investing in domain names and websites with my Self Directed IRA.
If you don’t know what a Self Directed IRA is, I suggest you read this page first.
How to Leverage Your Self Directed Ira to Buy Domain Names and Websites
There is a lot of red tape when it comes to investing with your retirement accounts, but most people don’t know that you can do much more than buy and sell stocks. In fact, most people don’t know that you can invest in real estate and even loan money to people through a Self Directed IRA.
I don’t have to tell the world that the Internet can be a very prosperous place to make money. In fact, since I was 23 years old I’ve never had a job, and my income has solely been based on revenues earned from Internet Business. Investing in domain names, while it’s not a primary focus for me, has been a source of income from time to time. I’ve essentially scooped up domains from cash hungry sellers for $1,000, held them for a solid buyer with a game plan, and sold them for upwards of $5,000. I’ve bought domain names for $5,000 that are appraising at $150,000 just six short years later. I could go on, but you get the point. If you know what you are doing, Digital Real Estate, as I call it, can be quite lucrative.
The Digital Real Estate Gold Mine
Many people, including those in my industry, are probably scoffing at the notion that there is value in domain names. I could not disagree more, and love that fact that they are looking the other way. (Hey, more for me.)
While the glory days of registering a solid one word domain name and squatting on it while waiting for that seven figure buyer are long gone, emerging industries are sprouting up all the time. Think about every time a new toy is launched, like the hoverboard, for example. These didn’t exist several years ago, and people made millions registering domains and becoming affiliates of brands selling on Amazon and elsewhere. That niche sprouted up out of nowhere, grew on a hockey stick curve, and made a lot of people some serious coin.
Another example is cryptocurrency. Those in the know who had the stones to take a chance on buying domain names around this highly lucrative, somewhat dangerous niche were paid off in spades. Some of the early news blogs are now boasting insane traffic numbers. My point being, there is always something new and exciting in society and naturally, people will find a way to capitalize on it online. I’ve been proving this year in, and year out.
Raw domains are like raw land. They are valued by the number of searches the corresponding keyword gets every month, as well as the potential of building a brand around that domain name. Short, memorable, niche-specific domains are highly valuable.
- VacationRentals.com sold for $35 million in 2007.
- PrivateJet.com sold for over $30 million in 2012.
- Beer.com sold for $7 million in 2004.
You get the idea. If you want more whoppers, click here for a list of 15 of the most expensive domains of all time.
As far as your IRA Account is concerned, raw domains are the best vehicle for a solid return with IRA funds for two reasons:
#1: Zero Management
This lowers the potential of mingling with potentially disqualifying parties.
While a website or online business can certainly work, the management has to be separate from the investors. You’ll have to prove that you aren’t the one running the operation if you are ever audited. For this reason, it’s probably best to stick with raw domain investments because you can just flip it later on and it’s a clean transaction.
#2: They Can Be Directly Owned by Your Self Directed IRA
The domain becomes a qualified asset, and it can be bought with the LLC, held, and later sold.
Of course, you can buy websites that kick off cash flow, and it’s easiest if you do this with a site that runs itself hands-free when you purchase it. However, these deals are few and far between, and let’s be real, not many web businesses are truly hands-free. Anyone who tells you that is full of hot air. The rare exceptions would be a parked domain name that earns ad revenue from clicks. In that case, the domain will naturally be very pricey to obtain.
Purchasing Digital Assets
General market knowledge is absolutely necessary when it comes to domaining. If you are simply guessing, it’s best you don’t partake in this atmosphere. I happen to have been around the industry for a while, and can tell a good deal when I see one. Of course, having inside information on a niche or trend is ideal.
Also, to help assist me with pricing guidance, I have a subscription to Estibot, who I consider a very solid source of domain appraisals, but in reality, a domain is worth what someone will pay for it, and they are far from liquid. However, if you are playing in this game at all, the subscription is absolutely necessary. It’s an essential tool that is akin to knowing a property appraiser who will tell you how much a home is worth within seconds.
Buying domains that “drop” (which means someone owned it but did not renew it) can yield huge returns as well. You wouldn’t believe the number of domains I’ve scooped up from lazy parties who just let solid domains expire. Sometimes I use them just to get ad revenue, or sometimes I re-brand them and incorporate them into Affiliate Marketing Projects.
Will Domains Always be Valuable?
People have grumbled for years that .com domains will become devalued, but in my opinion, that’s a bunch of mularkey. I’ve seen the .net, .org, .biz, and now .club, .me, .yeah, etc extensions become introduced but guess what? The good old .com’s remain valuable. I’m not saying they will always be more valuable than other extensions, but for brevity and branding, there is no better way to buy a domain. That’s not to say I don’t own other extensions, because I own many, but for my money, a memorable, brand-able, .com is where it’s at. With raw domains going for six and even seven figures (heck, even eight, see above examples), savvy investors will always buy a domain name for the right price.
About Tim Schmidt
Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started this website to share his expertise in using his Self-Directed IRA. Most recently he's been advising individuals to diversify into precious metals ahead of a certain recession. He invested with Goldco.