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Domain Leasing Risks

Labeled as sales in General Domain Discussion started by targetpro, Jan 5, 2020.

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  1. targetpro

    targetpro Upgraded Member Gold Account ★★★★★★★★★★

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    Got an offer today to lease a very strong category defining domain in an industry that is known for aggressive email marketing. My worry is that the user can pay for a month or two and essentially "burn" the domain by spamming it and/or getting it delisted in Google. It is an exact match generic that will rank #1 for a major keyword with minimal SEO effort.

    When leasing, what sort of protection does the seller have? The lessee can destroy a name by spamming it by mail and potentially lose the domain name to registrar TOS violations. A domain can be delisted in Google and nearly impossible to relist (takes alot of time and money best case to relist). Or the lessee can create some infringing content that could lead to a UDRP.

    It seems like leasing domains is a bad idea, unless you are dealing with a massive company that has signed an extensive contract that protects the lessor. But this type of company can usually just buy the domain outright anyhow. Leasing would be unusual by any well funded company, so I don't understand why people take the chance to lease? Seems way too risky for me. Thoughts?
     
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  2. Rob Monster

    Rob Monster CEO, Epik Epik.com Staff PRO Gold Account VIP

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    Domain leasing is a very effective way to bait the hook so to speak, i.e. to get an end-user on board with a domain that they will eventually buy.

    On the other hand, there are domain speculators that are basically uses leases as options. We know who they are, and they have a role to play too.

    In short, there is a growing group of speculators who are getting leases, seller-financings, or purchase options and then immediately trying to flip the domain in order to arbitrage the exit value.

    One important reason we do give you the full contact details of the inquiring party is so that you can establish whether they are a logical retail buyer or a speculator.

    So, yes, leasing is still great, but you have to know who is your counter-party before you give them the exclusive license to shop around your domain!
     
  3. Sutruk

    Sutruk Established Member

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    Are they just interested in lease? I mean, did they ask for the price? or did they just asked you for a lease, without asking the price of the domain?
    Because this can indicate a lot about their intention to use the domain.
     
  4. targetpro

    targetpro Upgraded Member Gold Account ★★★★★★★★★★

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    It is a six figure domain and they know this and are supposedly willing to pay that six figures but over a few years. Just seems way too risky to even consider. Unless i'm missing something about the leasing market? A registrar can suspend your domain just based on a single spam complaint and Google can delist for so many reasons. I don't understand why somebody would give up control of their domain without insurance? It would be like letting somebody rent your car without a specific policy that covers this. So much can go wrong. Maybe another @Rob Monster service? Lease Insurance?:xf.wink:
     
  5. Samer

    Samer Top Contributor VIP

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    i only Lease to OWN.

    misconception, lease is only rent.

    i disagree with assessment of “risk” especially if you use reliable provider like Epik Escrow!

    i’m currently financing$100 name, with $20 month and zero percent interest, and anytime i dont pay, they just re-process domain (u allowed to use while “lease” btw) and can pay off the rest, whenever to own 💯%

    Epik is the best, and leasing should be utilized more.
    To each his own, different solutions, different needs,
    you probably operate on a larger scale than $100, but —no chance i was goin to drop $100 up front on this one
     
    Last edited: Jan 5, 2020
  6. targetpro

    targetpro Upgraded Member Gold Account ★★★★★★★★★★

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    It makes no difference who you use or whatever the intention is to own or rent. The moment somebody uses your domain in commerce, you can lose that domain for a multitude of reasons (usually abuse). And the lessee is not going to keep paying the lease if the domain is suspended or delisted from Google even. Your domain becomes a brick or close to it. Then what?
     
  7. Sutruk

    Sutruk Established Member

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    You could make an insurance then, specified in the terms and conditions. If they make you lose the domain for bad practices (practices specified on the leasing contract) then they must pay you the total price of the domain.
    I am just thinking about a solution :)
     
  8. targetpro

    targetpro Upgraded Member Gold Account ★★★★★★★★★★

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    Also, what if a company gets a bad reputation with your domain for scamming consumers or whatever? It can end up on RipOffReport and ComplaintsBoard and ConsumerAffairs or even the BBB if they use the .com as their company/brand name. You will never be able to kick this reputation for anybody searching even years later. So risky to put six figures of value in somebody's hand for a couple thousand dollars or whatever. Makes no sense to me?
     
  9. Sutruk

    Sutruk Established Member

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    Ask them to pay the half in advance, then lease the rest.
     
  10. targetpro

    targetpro Upgraded Member Gold Account ★★★★★★★★★★

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    Sure but they would need to put the entire amount in Escrow and that means they have the money to buy the domain in the first place, so why lease? The only time I can see leasing working is with a extensive due diligence and a very established company that enters into binding contracts. But again, a company like that would likely just buy the domain outright as the legal fees and payments probably just a hassle, unless we are talking an 8 figure deal or something.
     
  11. JoeCanadian

    JoeCanadian Established Member ★★★★★★★★★★

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    Why not structure it is a payment plan with say 1/3 at the beginning? Epik offers this as an option. The 1/3 down means they hurt themselves if they hurt the domain name from a Google viewpoint.
     
  12. Sutruk

    Sutruk Established Member

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    Tell them the domain is only for sale. Tell them to go to their bank and ask for a loan :) They will pay monthly, but to the bank. :)
     
  13. Samer

    Samer Top Contributor VIP

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    i dont understand all the doom-and-gloom scenarios.

    you’re making monthly payments to an accredited registrar who takes over makes process seamless beginning to end. i trust Epik more than “insured” Escrow.com with my domain, for all my dn leasing needs

    Never give away freedom of taking ownership one day.
    never enter lease without option to buy, so maybe, i try, control, as many things can stem out control as possible.

    Samer
     
    Last edited: Jan 5, 2020
  14. targetpro

    targetpro Upgraded Member Gold Account ★★★★★★★★★★

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    I don't see how anybody can consider less than the minimum they would sell the domain for outright as a downpayment. I'd only make the deal if whatever I get up front would ultimately satisfy me for the sale and the rest is just gravy.
     
  15. Sutruk

    Sutruk Established Member

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    I am just trying to give some ideas... :)
     
  16. targetpro

    targetpro Upgraded Member Gold Account ★★★★★★★★★★

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    That has nothing to do with it. The domain can be suspended, cancelled, delisted or simply defamed. All of which destroy the value of the domain. It is like if you lease a car and crash it. Obviously the bank won't lease you the car without full insurance coverage. With a domain lease you don't have that protection. Again, it makes no difference who the counterparty or registrar is. It is YOUR domain and YOU take the hit with no compensation (other than whatever payments you received up to that date).
     
  17. targetpro

    targetpro Upgraded Member Gold Account ★★★★★★★★★★

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    That is what I did. I just don't understand why "leasing" is even a thing? Without insurance to cover loss or damage, one would be crazy to "lease" a domain.
     
  18. Samer

    Samer Top Contributor VIP

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    oh no for sure, and who wants to be on the other end!

    i’m interested in knowing #’s and i may be ignorant!

    You probably are on to something, Sounds like a lot of features epik can add for their “DNProtect.com” release.
    Maybe Rob can chime in on all the doomsday scenarios.

    Still trying to wrap my mind with that “Sinkhole” scenario!

    Samer
     
    Last edited: Jan 5, 2020
  19. Sutruk

    Sutruk Established Member

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    I have just given my ideas, but I still haven't done any domain lease. And I understand that there's some domains more "risky" than others, in terms of possible uses.
    Just do what you feel more confortable. If its a 6 figure domain, you must be very sure of who is the interested party, in order to lease the domain to them.
     
    Last edited: Jan 5, 2020
  20. stub

    stub DNStore.com PRO VIP ★★★★★★★★★★

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    @targetpro - Thanks for this thread. I haven't done any leases, primarily because of the problems you have elaborated in this thread. To which I haven't seen any concrete solutions in here. Is there anywhere on NP where this has been discussed in length with some concrete solutions to these problems.
     
  21. bmugford

    bmugford www.DataCube.com PRO ICA Member VIP ★★★★★★★★★★

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    Without a doubt a leased domain can be damaged by the usage of it.

    If you have any lease it better have rock solid wording on that in the contract.
    Even then, the damage could already be done.

    Brad
     
  22. Samer

    Samer Top Contributor VIP

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    Can we know the end result?

    Can we run a new poll, bet risks wont outweigh rewards

    Leasing will more mainstream, another 2020 prediction...

    thank you for not taking shots, hope Lease DN to some1 one day, instead finance a small-scale lease...flexibility.

    Samer
     
    Last edited: Jan 5, 2020
  23. bmugford

    bmugford www.DataCube.com PRO ICA Member VIP ★★★★★★★★★★

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    I would be skeptical when leasing a high value generic domain, unless the buyer has enough skin in the game.

    If they, for instance, put a substantial some of money down they are more unlikely to do something that damages the value of the domain.

    Brad
     
  24. DanSanchez

    DanSanchez Brokerage & Acquisitions Epik.com Staff VIP

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    Great points so far here. In my opinion, leases are a great approach to extracting long term value out an otherwise single profit experience.

    What you describe is a low entry point to a high value asset that would otherwise yield a big payout for the owner. Your risk is higher than I would personally recommend if the asset is truly a 6 figure asset, I say that because only around 3-5% of the domains today will get to that valuation.

    There are very real risks to leasing any domain and they are very well presented here. A bad actor can certainly utilize a lease to minimize their entry cost to a big payout of their own. Question is, how can we safely operate with this model at a minimal risk?

    My own experience with leasing so far has been where I currently work. Not trying to market here, but the truth remains. The premise of doing a "lease" without the backing of a trusted third party sounds terrifying, personally. And that's one of the key points I only saw one person mention in brevity.

    My main goal with offering a lease to a known buyer (key aspect here will develop further) is to extract immediate and partial value from an asset without losing two things: 1. Title of ownership 2. Ultimate control of the asset.

    The terms of a lease can be used to your advantage instead of being left to chance. I am using the first domain in my personal account as a sample case for the purposes of this discussion. 24HourDoctors (com) has a simple lease deal of $2,999 initial payment and $399 monthly, for 11 months. Possible yield of almost $7,400 in a year. It may seem like a lot, but for a high yield medical office, that may be their monthly advertising budget. This niche in particular falls under the "concierge medicine" so their yields are considerably higher than normal. My target price for releasing an asset that yields $7400 per year could be mid-high five figures! A true reflection of the value of an asset that continues to perform year-over-year for a business.

    Here are a list of choices that I picked from,
    [​IMG]

    Ultimately you can decide the exact length and yield from your individual domain,
    [​IMG]
    And this is where the wall around your asset begins to take shape, you can read the full agreement on the parked page for detailed context.
    [​IMG]

    The most relevant section of this agreement may be point 3. Operations - Read it and see if you could add anything further. It appeared clear to me that the user would instantly lose rights to the lease agreement if any of the violations can be quantified. This is where your responsibility comes in, in my opinion, you should be monitoring their use to some extent. See if any negative reviews pop up, or if they are CAN SPAM compliant, for example.

    In essence, it may open up new venues for our assets to outperform current single-sale models. But it comes with certain risks and responsibilities. Leasing is not a single step process, you are being rewarded handsomely to maintain an asset that is likely going to increase in value with use. My opinion remains positive on leasing, we just need to take different approach to the process because it is truly different than single-sale models.

    High value domains may yield even higher profits than something as niche as my example. I think we just haven't delivered the products for this to function at minimal risk yet. This could mean new companies or services from existing lease-leaders to develop with community input. Thanks for posting this thread, seriously.

    My gears are turning.
     
    Last edited: Jan 5, 2020
  25. stub

    stub DNStore.com PRO VIP ★★★★★★★★★★

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    On the example domain of $100,000, what would you consider substantial? 1/4, 1/3, 1/2?
     

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