Lease for others, I’d rather not.

I have been asked a few times if I would list or lease other people’s domains, it’s not something I am particularly interested in at present, a pretty good example of why not happened this weekend and went like this:

I enquired about a nice one word UK domain, offered some money but the owner who had the domain since 1996 and ran a small unrelated business on it wanted £40,000. Far too rich for me but rather than walk away I decided to ask if he would consider letting me broker the domain for lease or sale as his asking price of £40k was not entirely unreasonable and I had a couple of people I felt I could hit up and offer the domain to.

So I needed to know 2 things
1/ What’s the lowest you would take for a sale, to which he replied £35k
2/ Would you consider a lease to buy, for example lease it for £400 per month with an option to buy built in for £40k thus enabling a buyer to build on it and buy once they got going, YES the owner replied.

I worked over the weekend sending emails and answering questions on this domain and yesterday agreed a deal with a pair of businessmen, they were happy to lease the domain on a 2 year lease for £500 per month with an option to buy for £50,000 written into the agreement. Pefectimondo I thought, this was much better than I had suggested and should surpass the owners expectations. Even though I would take 15% commission this would still give him £425 per month and a possible domain sale of £42,500

The domain owner agreed to phone me this afternoon and after thinking it over he decided that £500 per month probably wasn’t worth changing his stationery and moving his buiness, this completely contradicted his earlier conversation where he told me he was looking to sell the domain and had been actively moving all the important things away from the site over the last 12 months. So now the deal is dead and I’m pretty annoyed, it’s my own fault for acting in good faith and believing what I was told, I’m also going to look like a twat going back to the businessmen and telling them the deal I offered them is not going to happen. 🙁

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. That’s a shame they went back on their word 🙁

    Maybe they’ll end up coming back to you in the future after realising how good a deal it really was!

    Adam Dempsey’s last blog post..Happy New Year!

  2. Something like these chaps Scott? An interesting site at least. http://domainbroker.co.uk/

    Bad experiences can often tarnish a good idea. Worth trying again to see if you can achieve a different result.

    Dan @ PowerDosh.com’s last blog post..Breaking the Block – Finding Motivation

  3. Very annoying…. Especially having to go back to the clients you initially approached.
    It really irritated me when people waste my time. I get this a lot when I ask people about their domains for sale. had 5 in a row tell me “Oh, actually I´m not selling anymore.” One of them then cam back to me a month later and said he now did want to sell – I offered him half his original price….

    I was going to suggest you purchase it yourself if you have a 500 a month deal as that seems the hardest thing to accomplish, but looking at the figures it is going to take 70 months to make your money back – more if you have to borrow to purchase. Still represents 17% a year return whilst it is leased out… not bad?! I´d give it some thought if I had the funds available and depending on how good the domain is.

    • I’d have to borrow to buy it so at this point I’ll have to walk away.

      • Shows what a good little business this an be though.
        I get clients asking for advice all the time. They are planning on moving to Tenerife, buying a property and then have say a hundred grand left.
        Stuck in the bank it is 5,000 a year (if they are lucky) in addition to a wage if they can find work, plus inflation is eroding their initial capital.

        You look at this kind of opportunity:
        35k down, plus x amount to cover contract, legals etc.
        6,000 per year income with another 65,000 still in the bank. Money back in 6 years and a decent, income producing asset.

        Beats the crap out of a savings account.
        What is the major risk with this business do you think?
        Clients canceling after one year?
        Site being used by an idiot who tarnishes the reputation?
        Non-payment?

        I suppose you don’t even need to know a lot about web development because someone else will be doing all that. Pretty solid investments on the face of it. Definitely something I will be trying to accomplish myself.

  4. Im not sure how you could have protected yourself in this situation though? I think you just have to rely on your trust of the other person.

    Chris’s last blog post..Silly Domain Evaluations, Why Do You Bother?

    • I could have drawn up a broker agreement and had that signed first before I went offering the domain.

      • Yes, you could and probably should have.

        As a letting agent by trade there are many similarities between the two businesses. However even with an agreement to act on behalf of a client does’nt mean the eventual transaction will complete.

        When you go back to the business men, think of yourself as an agent acting on behalf of the owner, its not your fault the deal fell through.

        Ash’s last blog post..KD Beds Voucher Codes

      • This is the key thing here, you have learnt from the experience and will do things differently next time. With your real life experience with domains I think you have all the skills needed to be an excellent domain broker. If this deal had worked out it would of given a very nice steady income for no investment and no risk, what more could you ask for!

        John Essex’s last blog post..Permitted Development Regulations Update

  5. Might not want to write it off completely yet Scott. Sounds like the owner has cold feet. Perhaps they’ll come around with a bit of persuasion. I’m sure you pointed out that the £10K they will get over the next 2 years is money in the bank that they wouldn’t otherwise have, and they still have a significant asset at the end of the lease.

    Another possibility, perhaps a long shot. Rick Latona (http://www.ricklatona.com/) brokers sales and offers very good loans to help buyers get into a domain (his latest offer is 10% down and 1.25% financing with interest only payments). You might approach him to see if he would broker a sale where you buy the domain and he carries the finance. That would let the owner sell for a reasonable price and let you get hold of the domain – which you could then lease out.

    E.G. Domain sells for £40K. Rick gets £4K broker fee. Owner gets £36K. You put down payment £4K with monthly payment of £450. You lease out at £500. You make £50 a month and you own a great asset. Of course, taxes etc. could change the equation a bit.

    Nigel Hall’s last blog post..parallelp: How weird. Looking at follows for twitter user @Marina8154, who just started following me, and all she follows is users called Nigel!

    • Just had a look over there. Seems like a decent enough offer by all accounts although the interest rate is 1.5% PER MONTH he does offer interest only for an unlimited time with the option to pay off the capital as and when.
      Could be some nice arbitrage opportunities there.

      Do you know if this is limited to US citizens or if there are any T&C´s – credit check and the like or is it simply a case of “don´t pay and you no longer use?”

      • When I looked into it I think there are no credit checks, presume it’s like pawning, Rick would take ownership of the domain and as long as you pay interest you can use it and buy it back at any point.

        • The you could own that domain for no money down – lease it and you´d be paying 25 per month until you can pay reduce the capital.
          Although you´d be left with a 525 per month commitment if they canceled the lease I suppose.
          I suppose it would also depend on whether they agreed with you and the seller on the valuation as the domain would be their only security.
          Looks like a useful service, I just signed up for his newsletter to get a better idea of the service.

  6. Well, despite the fact that it fell through, I’m still quite impressed that you were able to put together a deal with a lessee that quickly!

    Justin Cook’s last blog post..When digital theft is a good thing!

  7. I agree with Justin, that is some pretty serious stuff…keep going – they will soon want that £500 / month..

  8. I feel your pain Scott but at even if this deal will never get anywhere you’ll have learned something from it. It sounds like you would be able to do this stuff in the future as well (creating a nice extra income stream) so you might as well get that broker agreement done.

    BTW didn’t you write a post not too long ago about not wanting to buy anymore domains in the near future? 😀

    Mikael’s last blog post..Tips til forbedring af din Adsense indtægt

  9. I totally agree with everyone here…EXPERIENCE. Learn from it and Keep GOING !

    The main lesson is: Draw an agreement before starting the hard work.

    Thanks again for sharing this. We are actually ALL learning from it.

  10. Is there any chance the businessmen had contacted the owner of the domain (behind your back) and negotiated a better deal therefore missing the middleman (you the broker) out?

    Michael’s last blog post..Motorola Atila

  11. Well, not a good business ethics shown by the domain owner.

    Lucy’s last blog post..3 INQ1

  12. I don´t think it was your fault at all.. there wasn´t really much you could do. I hate relying on other people! Things like this ALWAYS happen to me as well – I rely on someone else, while someone is relying on me… then it all breaks down because of the original person! I find doing things your own way works a lot better.. we all know where the boundaries are and you can only really let yourself down!

  13. Scott,

    Was thinking about this the other day. I work in Insurance Broking by trade, and one of our sales guys sits opposit me. They are taught the following which you can apply to MANY different situations…

    Broker: So you interested in _________
    Seller: Yes
    Broker: Ok then. What we can possibly achieve for you is ______, _______, ______ & ______
    Seller:
    Broker: So if we do ______, _______, _______ & ______, then you will go ahead with the deal?
    Seller: Yes
    Broker: For certain?
    Seller: Yes
    Broker: Ok then well we will go away and bust a gut to get the deal for you

    So afterwards, when they renege on the deal, then you politely remind them of that conversation you had and how much work you have done for them. You make them feel like crap, but in the most diplomatic way possible – then at least you feel better.

    What happens nine times out of ten is they put the phone down or leave the meeting suddenly thinking “bloody hell – Have I just signed up to that?”, and they generally stick to the deal.

    However, I may be “teaching my grandma to suck eggs here” and you do that anyway, but if anyone doesn’t then I hope its a nice tip.

    Classic other example is Detailed specs for a software / website build…

  14. Keep both parties happy and make sure you keep a good profit margin for yourself. Always get it on paper, after all it makes both parties more comfortable, early pul out clauses etc. Great site by the way, first time here and I will be back, thanks George

    George Snyder’s last blog post..Well, this is the new look

    • Getting the details written down is always a good idea, verbal agreements are fine but the problem is that people forget or misunderstand what was discussed. Once its written down on paper people tend to pay more attention to the detail. Good communication and understanding is essential when making agreements.

      John Essex’s last blog post..Preparing for a Loft Conversion

  15. I must admit I’m getting a bit frustrated with the whole leasing game from a buyers perspective.

    I’ve put bids in for a number of domains where the seller has said no to a sale, but would I be interested in a lease. I’m not interested in building value for a domain that I’m going to end up losing… No thanks.

    • More often than not the person leasing ask for an option to buy to be written in, even if it’s a large number it gives that added security as an option, as does an option to renew on the same terms at the end of the lease.

    • But you could apply that to many things Ian.
      Its like saying I am not going to look after the house I rent – I am not going to mow the lawn because one day I will lose it.
      The point is, it is has a lease-to-buy option so if you cannot afford it now but want to develop it, you can.
      Or think of it as “try before you buy”
      maybe the domain is great but later a better opportunity arises as different trends emerge. You can move the site across to another domain and 301 everything and continue renting it for 12 months or so until your new site gets established.
      That way you are not left with a an obsolete domain that you have just shelled out 50k for.
      I think there is definitely a market for this and it is a useful addition to the domaining world.

  16. what’s interesting to me is the length… obviously online is different than brick and mortar but typically stores here sign minimum of 3 years and usually 10 year leases. 2 years (even with an option to buy) seems almost short term for a business.

    the other thing is that once you stop leasing the domain, you lose any backlinks and online reputation that you’ve built up.

    Jeff’s last blog post..iHandstand is Literally a Hand Stand for your iPod

  17. I’ve read this post a couple of time and it’s a shame you’ve got bad experiences from it. Perhaps a better go-between like written contracts, pre domain transfers etc., would be the best option. This may scare off a new domain sellers, but shows that you are serious.

    BTW – I’d love for you to sell some of my domains haha.

  18. Umm… domain leasing? That’s totally new concept for me. Seriously, never heard about it 🙂

    As for the situation, shit happens. But now you know what to do next time to avoid it.

  19. How do you setup a domain to be leased technically so that you can hold on to the domain without giving it away; but leasing it out to someone else and receiving a monthly payment that goes into your bank account?

    How do you setup Paypal or your Payment processor to
    recieve monthly payments from leasing out domains?

    How do you setup a domain to be leased without pushing the domain to the other person’s registry
    account?

    • You change the name servers to allow use of the domain without handing it across.

      • Thank you Scott for your answer.

        I just have some more questions.

        When you change the name servers to allow use of the domain without handing it across;you would change th name servers to their hosting company’s name servers?

        So they would have to have a hosting account
        at a web hosting service?

        How do you setup Paypal or another Paypal like service to receive a monthly payment from your web renting customer?

        Do you build a payment button that you add to a webpage or do you use special software to collect payments; how do you setup Paypal or another Paypal like service to receive a monthly payment from your web renting customer?

        • Yes I would change name servers to their own hosting account which they would need to setup.

          For paypal their website has documentation on setting up payments. I prefer to ask the client setup a standing order to my bank.

        • How is the whole leasing side of things going Scott?
          Have you had any problems with non payers or anyone negotiating a reduction during the recession?
          Is it still a sector you your business you are building?

  20. Quiet this year Andy, no issue with payments though, just under £1300 per month coming in from leasing domains. Hardly any enquiries but I don’t have much stock to be fair so probably a numbers game to an extent, it’s still something I want to grow more but the present economic climate makes people less likely to expand and spend.

  21. Have you had a look at Rick Latonas offers?
    they offer financing on some of them but most of the domains seem overpriced to me.

    I was looking for an arbitrage opportunity through leasing but prices are putting me off a bit.

  22. Yeah I get the newsletter, by the time Rick gets the domains or lists them too many people are making money on them so still prefer to dig out my own domains from owners.

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