The true value of domain leasing

Before I leased out my second domain I had sent out a fair batch of emails to likely companies looking to flip the domain for a good price, bought for £450 I was looking for something in the £2000 kind of price range which would give a nice profit, it was not a domain on the development list.

I keep going back to leasing because it seems the most attractive and sensible option to me for a market where it becomes increasingly difficult to replace any domains you buy and subsequently sell.

Buying a domain for £450 and selling it for around £2000 would on the face of it look like a good deal, however I have now leased the domain out, I leased it to a company heavily involved in the keyword market and they were happy to pay £75 per month on a 3 year lease.

Funnily enough I just heard back from one of the emails I sent 2 months ago, a company is now interested in buying the domain, they have offered the £2000 I was looking for, but after leasing the domain out what is the true value of that domain now?

Domains are not easy to value, almost impossible, you can only deal with the facts.
The fact was 2 months ago I might have sold that domain for £2000
Today the domain is on a 3 year lease worth £2700 and at the end of which I will still own the domain and it will likely be renewed for £4000 over the 3 years after that, at the end of which I will still own the domain.

That shows the true value of domain leasing, it can turn a £2000 asset bought for £450 into one worth £10,000 overnight.

About Scott Jones

Scott hails from the north east of Scotland and started earning online at the end of 2000 building websites for local businesses during which time he won an award from Lord Alan Sugar for Excellence in Enterprise. After having quite a bit of success with domaining Scott mainly runs educational evergreen websites which generate over 3 million visitors per month but is always on the lookout for a fresh thinking out of the box way to turn a buck. Follow on Twitter.

Comments

  1. Scott, that’s a very interesting business model. I guess all the risk is on the company that leases the domain because if they build it up in the SERPs the owner can just leave them dry after 3 years or whatever the term of the contact is.

  2. Is part of the contract that the company can continue leasing the domain until they choose not to?

    Nicola’s last blog post..Block Table Lighter

  3. The contract gives the lessee first refusal at the end of the lease to renew and contains a maximum 50% increase when I review the monthly lease fee.

  4. I normally read your post and visit your site frequently. But I have some questions on this subject-

    How are you able to develop a domain and then leasing?

    Or does the domain have type-in traffic that you don’t have to do anything other than just own the domain?

    What about leasing – Do you forward the domain to another site or people built their site with your domain.

    Do you have a step by step post or if not are you planning to create one. I really interested to know how leasing works and how you can make your domain desirable for your customers.

    Thanks a lot!

    • Hi Nelson.

      This domain had no rank or traffic, I just bought it and leased it, if the company was called totalwoodfurniture then my domain was woodfurniture, that’s just an example and isn’t the actual domain as I would rather not say it. So it was attractive to the company, normally I would try and rank a domain with an info site and get some traffic going through and then lease, the domain must be product based and describe it’s product perfectly.

      Once leased I update the name servers so the lessee can control the domain and use it but I still own it.

      Once I get another domain or two leased I will probably try and more transparent about what I have done.

      • I really look forward to your “unveiling” of what you have done.

        Unfortunatly it is not possible to dublicate your way of doing business in Denmark because there is a restriction in Danish law that says you can’t register a domain for the sole purpose of leasing it.

  5. How do you get in touch with your “customers”?

    Denni Pultz Gottfredsen’s last blog post..Niche opdatering

  6. Is funnily even a word?? 😉

    Anyhow. I’m happy to say that all of your tips are paying off. As of today, 3 of my new sites are out of the sandbox, and I will be able to lease them soon!

    • I’m sure it is in our dictionary :) maybe used more on this side of the pond Justin, I have a lot of domains that are maturing so hopefully I can step it up soon, glad to hear you have had some domains promoted and released!

  7. Scott

    I’m considering attempting to lease scottishrealestate.co.uk, but it has a turbulent relationship with Google — one week it’s top 5, the next it appears to have dropped out of the index.

    Do you think it’s better to work on getting decent SERPs results before approaching potential lessees, or is it worth my while trying right now to find someone?

    • You should probably wait until after the first 12 months, during the first year of a new site they tend to be very unstable and pop in and out, I had a domain that was 7th and I sent out emails and someone agreed to lease it for £250 per month, that very day it disappeared again! so we put the deal on hold which is a pain, realistically it will be the start of next year for me when I think I will have more stable rankings and leasable domains so it’s a 12 month lead time, a long wait but should hold rich rewards next year.

    • For sure. We had tried to lease out a couple when we only had them ranked on Yahoo & MSN. Even though they were getting traffic, the people basically said “call us when you’re ranked in Google”

  8. Im kind of confused here. In one comment you say you leased an unranked, no traffic domain and later you suggest waiting a year to maintain a stable ranking. Were you just able to lease out the unranked domain because of a good oportunity or are you just suggesting to hold onto these domains for a year or so and get them ranked to increase the amount of the lease value? Basically, why wait a year to rank one domain but then lease another domain with no rank and no traffic?

    • My second lease was a domain, unranked, my first was based upon a ranking. I managed to lease the second domain purely down to it’s generic value as a domain that described it’s product perfectly, this was for £75 per month, my first lease was for £500 per month and this was based upon it’s ranking in the top 10 in Google. So I feel I could lease out domains for £30-£75 per month unranked but get hundreds per month for ranked domains which is more what I am aiming for Andy, this means get stable rankings and will mean for me the beginning of next year before I can up my income significantly.

      • Scott,

        Could you explain a bit more about leasing out a “ranked” domain. I am guessing that once leased then the ranking ceases to be your responsibility or is part of your monthly fee paid so that you guarantee a certain ranking ie on the first page of google?

        Also if its not your responsibility once it is leased does this create a large risk for the people taking on the lease?

        Cheers
        Car

        • The ranking is not my responsibility, it’s added value and should remain if the lessee are careful but it’s not guaranteed, I offer a domain/site for lease that has had on average x amount of visitors per month due to it’s ranking, all the lease is for is the domain. There is little risk as long as any site they put on is on the same subject and continues in the same vein without doing anything naughty just like buying a site.

  9. Sounds like I should start flipping domains… great post :)

    One Year Millionaire’s last blog post..Issue 72 : 10 Bullet-Proof Ways to Increase RSS Subscribers!

  10. I wouldn’t lease any domains (and any cars, houses) for it is simply too risky and unsafe….as about domains…just imagine…well performed SE campaign brought your domain name in top 10 for hmm… “teh beatles”… and next month your domain owners would edcide to cancel your contract….

  11. I guess the when the other benifit to you is that while they are leasing the domain that domaain is aging and hopefully gaining links.

    Do you place any restrictions on what methods the leasee can use to market the domain? The last thing you’d want would be for them to have the domain banned from Google for buying links etc.

  12. Hi Scot,
    I ‘ve over 500 domain names that I’m now considering leasing after reading your very interesting and educative blog.
    Pls. I’ll like you to send me a copy of letter you send to potential lessees.

    Regards,

    Steve

Trackbacks

  1. […] the Self Made Minds blog has a post that offers some tips for domainers thinking of leasing rather than selling their domains. Once you have read this, read this post about domain leasing agreements and then look at […]

  2. […] have talked before about domain leasing and having some good domains ranked being my preference and for some of those I have been using […]

  3. […] This year needs to be the year I take this side of my business up a notch, the basic strategy which I have detailed on the blog is sound and I’ve tested it out enough times to feel happy with the principle. I decided in January my goal for this year will be to get up close to around £2000 per month from leasing which will be a pretty decent sideline, you have to remember that if I get it up to £24k annual income by the end of this year then not only is it a business earning pretty much £24k net passively, it also has assets that amount to far more than that, the lease itself increases the value of the domain hugely. […]

  4. […] leasing out the second one it really opened my eyes to the added value this gives a good […]

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