Buying Domains on Credit

[Spade]

I recieved an offer in the mail a few weeks ago that I have been considering. A $25,000 dollar loan, no collateral (based solely on good credit) for a more than reasonable interest rate (not compounded daily like a CC).

So - I began debating on pullin the loan to consolidate some minor debt. It didnt really make sense as my debt is very manageable and my vehicle is nearly paid off....

But.......... if I had $25k what kind of damange could I do in quality domain names? Ive been tossing the idea of purchasing 5-6 high xxx names and attempting a quick flip. Now, Ive been playing with domain names for over a year now, Although I dont have the experience of some of the major players who have been in the game since the 90's, I have found some moderate success as a secondary income. Although I may falter on 1-2 of my acquisitions, I am confident that I could purchase a quality domain name and produce an ROI of 200% within several months.

What would you guys do? Too risky?

 

[Gene]

Never invest more than you can afford to lose. It's "risky" only if you can't afford to lose the amount you invest.

 

[Spade]

Never invest more than you can afford to lose. It's "risky" only if you can't afford to lose the amount you invest.

Agreed. Lets assume I can can "afford" to lose that money. I am relatively young and bring in a steady income. This is primarily an investment for me. The question is what would you do?

 

[stscac]

Never invest more than you can afford to lose. It's "risky" only if you can't afford to lose the amount you invest.

Some great advice, Gene.

Although "affording to lose" is a depressing statement, it's true.

-Steve

 

[Gene]

Agreed. Lets assume I can can "afford" to lose that money. I am relatively young and bring in a steady income. This is primarily an investment for me. The question is what would you do?

First, before investing anything, have a solid "plan b" in place if the investment goes bad. Be sure you can pay back the loan without jeopardizing your basic lifestyle. If you can honestly be sure that you'll land on your feet if it goes bad, then sure, I would take an educated chance. By that, I mean be sure to do a lot of research on the names you plan to invest in. Get the opinions of other domainers who have already invested a similar amount on names. Before you invest, have a solid marketing plan in place to sell the names you invest in. Get all the preliminary work done (research and make lists of companies and their contact person, etc). The more you can complete before you invest anything, the better chance you have of recouping your investment quickly. The rest is gravy. Good luck!

 

[bobdigital]

buy traffic/revenue domains.
You will get a much better return than any 12 month CD at 5%
you can always resell traffic names, often for a profit.

 

[smartpc]

I wouldn`t use borrowed money to invest. Who is to say you will flip the domains in a short enough time space. Nothings ever guaranteed in this world.

 

[Spade]

buy traffic/revenue domains.
You will get a much better return than any 12 month CD at 5%
you can always resell traffic names, often for a profit.

My problem with Traffic Domain names, in this logic, is that you must consider that the money being used to purchase is a loan. Im not sure a traffic revenue will cover the cost of the loan. Also, with the questions floating around about traffic and PPC - Im not sure that is a wise investment at this time.

I wouldn`t use borrowed money to invest. Who is to say you will flip the domains in a short enough time space. Nothings ever guaranteed in this world.

I agree, who is to say Id flip it? But have you ever heard the line "It takes money to make money"? Bottom line is that I have some money in savings, that I would like to keep as a safety net. This loan money would give me more freedom to take chances. In my opinion, if you never take chances youll miss plenty of oppertunity. I also believe risk is a neccesary element in making money, successful people just find a way to minimize it as much as possible.

 

[Mark]

Nice advice Gene :tu:

Make sure ALL of your ducks are in a row before even considering borrowing the money. Once you sign the final Dotted line and are handed the check ... You are officially in the "Red".

Myself .... I wouldn't go for items to turn over , I'd go for something that already makes income or a domain with traffic on a subject you already have an interest in - Develop for long term.

 

[Spade]

I wouldn't go for items to turn over , I'd go for something that already makes income or a domain with traffic on a subject you already have an interest in - Develop for long term.

I suppose I shouldve said I was more interested in a quick flip, then a longer term investment. I do have some sites in development, including one that is doing well that is completed.

So this is more like a roll of the dice, with decent odds.

 

[Ronald Regging]

Well, even with lots of money to spend, a quick flip STILL requires you to find an under-priced domain and/or a motivated buyer.. Those facts don't change no matter how much money you have to invest.

So look at your ability to flip lower priced domains and consider the following.

The pool of people who can afford to buy a domain decreases as the price increases. This is important depending on how you've gone about flipping domains previously. If you've done it on these forums or others like it, you're pool of potential buyers probably just dropped by about 50% or more (I know I'm out at least).

Other domainers who have that kind of money probably are only looking to part with it when they come across a good deal, so if you can't offer it at a decent price and still make a profit, you're probably not going to sell it to domainers. Pool of potential buyers just decreased alot more.

So you're left with end users? Not sure if an end user market would qualify for a quick flip scenario.

I'd probably do it, I mean you aren't going to get rich by sitting on your money waiting for it to hatch I would just have a serious plan before taking any action and only invest in domains that you know will increase in value over the next few years even if you can't manage to flip them. This way, even though you may be taking a hit now with the loan repayments, eventually you'll get paid off. Honestly I think the LLL.com route or generic.coms would be a better investment and a 1-5 year term for that investment would be more feasible. However, you may have some uncanny ability to flip domains, I dont know

I know you're an intelligent guy, so I think you'll be fine, just make sure you put the time and research into it, have a plan, and don't go on tilt

 

[Spade]

Well, even with lots of money to spend, a quick flip STILL requires you to find an under-priced domain and/or a motivated buyer.. Those facts don't change no matter how much money you have to invest.

So look at your ability to flip lower priced domains and consider the following.

The pool of people who can afford to buy a domain decreases as the price increases. This is important depending on how you've gone about flipping domains previously. If you've done it on these forums or others like it, you're pool of potential buyers probably just dropped by about 50% or more (I know I'm out at least).

Other domainers who have that kind of money probably are only looking to part with it when they come across a good deal, so if you can't offer it at a decent price and still make a profit, you're probably not going to sell it to domainers. Pool of potential buyers just decreased alot more.

So you're left with end users? Not sure if an end user market would qualify for a quick flip scenario.

I'd probably do it, I mean you aren't going to get rich by sitting on your money waiting for it to hatch I would just have a serious plan before taking any action and only invest in domains that you know will increase in value over the next few years even if you can't manage to flip them. This way, even though you may be taking a hit now with the loan repayments, eventually you'll get paid off. Honestly I think the LLL.com route or generic.coms would be a better investment and a 1-5 year term for that investment would be more feasible. However, you may have some uncanny ability to flip domains, I dont know

I know you're an intelligent guy, so I think you'll be fine, just make sure you put the time and research into it, have a plan, and don't go on tilt

I think youve made some solid points Herb! I agree with just about every point youve made. And Yes, these domain names would be headed straight to the end-user market. Nothing would be done without thorough planning and obviously a backup plan in the event that quick flips dont materialize. But I also like your attitude and I think you and I see eye to eye on this one.

Justin

 

[Kate]

Gene is right. Don't invest more than you can afford.

If you do not have the cash to purchase big-ticket domains then why not offer brokerage service to the owners... you have nothing to lose (except your time) and don't have to put cash on the table. You can make a good margin if you do things right.

Anyway, consider the specifics of that domain ie. premium keyword or traffic domain. In the case of traffic domain does it earn enough monthly to cover your installments etc.

 

[fonzie_007]

Just curious where this financing is coming from? An unsecured loan at a low interest rate seems to be a rarity.

 

[Spade]

Just curious where this financing is coming from? An unsecured loan at a low interest rate seems to be a rarity.

Bank of America. They actually sent me 2 offers - 1 for upto 50k and one for upto 25k. Seems theyve got some extra money that they want me to use.

 

[fonzie_007]

Bank of America. They actually sent me 2 offers - 1 for upto 50k and one for upto 25k. Seems theyve got some extra money that they want me to use.

I assume this was just a line of credit and not tied directly to your business? Just curious, what APR as we talking about?

 

[xman]

I am confident that I could purchase a quality domain name and produce an ROI of 200% within several months.

What would you guys do? Too risky?

If you think you can produced 200% ROI.. go for it. Even if you couldn't get that from traffic revenue you could probably sell the quality domain for more than you paid for. I've taken some risks and the greatest risk i ever regret is the one i didn't take..

 

[Spade]

I assume this was just a line of credit and not tied directly to your business? Just curious, what APR as we talking about?

Fonzie -

No, it is not tied to anything. Its intended as a consolidation loan. I believe the rates were between 7-8% - non variable.

Justin

 

[faisj]

I wouldn`t use borrowed money to invest. Who is to say you will flip the domains in a short enough time space. Nothings ever guaranteed in this world.

I agree

 

[mirrorcube]

I think it all comes down to opportunity. If you see a great one extend yourself, if you dont then dont extend yourself. Domainers are natural gamblers so i think your instinct in in most of us in the forum.

Sometimes you extend yourself too far and need to sell off names you wish you could keep. I think a portfolio is the constant flux until you get to a certain level.

Either way risk is needed for reward. but dont take risks just for the thrill of taking a risk. The difference between gambling and investing is due diligence. That being said sometimes you have to just go for it.

Curious to know if you take out that loan and what names you buy with it. Keep us updated.