End user wants to lease dot com

[RaiderGirl]

I have a end user interested in buying one of my dot com domains, it's a single word and generic in a few ways, The end user has their company named after it, the second word in their domain describes the service they provide...

This is a domain I've received offers in the 30k range from resellers, the price I want for it is $60,000 minimum, the problem is the company does not currently have the capital to invest such an amount and has requested to lease the domain, I've never done a domain lease and wouldn't know where to start, so I'm reluctant but not closed to the idea.

There proposal is a 5 year lease @ $200 a month and $60k buyout anytime during the lease, I on the hand am asking $500 a month and $70.000 buyout and they pay any and all fees associated with the lease, whether it be escrow or a domain attorney.

I know that Escrow.com offers a lease service up to 5 years, has anyone use this service? I also suggested they use DomainCapital.com to grant the loan, but I'm almost certain the payment would exceed their budget.

Your thoughts would be greatly appreciated.

Thank you

 

[infosec3]

It is hard to say without knowing the name, but I understand your reasons for not disclosing it. In my opinion, if they are willing to buy now, it would be wise to consider an offer even if it is slightly lower than your $60,000.

Of course, it all depends on how much you need the money. The most important issue here, as I see it, is that they may lease the name, but soon after realize that the domain has not made the difference they expected in their business and then reconsider their intention to buy it. In short, the $40,000 or $50,000 offer they may make now, might not be there tomorrow.

Best wishes on your possible sale or lease.

 

[The New Guy]

I wouldn't take the deal. If it's worth that much now, you're basically giving them the ability to buy the domain for today's price and a small monthly payment - so if the name increases in value 50%, they're still able to buy at the reduced price.

Over the next five years I could get a lot more accomplished with $30,000 now than I could with $200 a month.

 

[garptrader]

I am yet to close a lease deal but on higher-priced names where I feel the sales price might inhibit a sale, I offer monthly lease terms of about 2% of the sales price as though it were a car payment. There is more work involved with collecting monthly lease payments and ensuring the site is not infringing the domain's resale value if they discontinue payments after six months. My view would be that if you are looking for a $60k sales price you should be leasing the domain at $1000/month minimum.

 

[Kate]

Given the amounts in question I think it would be appropriate to have a lawyer draft a lease agreement. The other party will see that you are serious and business-minded, and if they fail to abide by the terms they know the installments paid are lost for good.

Now what The New Guy is true. You will have a great domain tied up for a meager $200/month. That money will make no difference to your bottom line.
But if a another serious end user comes by, willing to pay your asking price - you can't sell the domain.

It's one reason among so many others why I think domain leasing is seldom a win-win arrangement.

I think they are not putting enough skin and good faith to the game. If they were willing to pay $1000/month, then after 5 years (60 months) they will have paid $60,000. With higher installments both parties have an incentive to hold the agreement to the end.

 

[buyselldoms]

I wouldn't lease a domain unless there is an upfront fee.
For a $60,000 domain, I would be wanting $10,000 fee upfront and $1000 per month to lease.
After 5 years, the business can buy the domain for $1.

You own the domain name, the fact they cannot afford to buy it is their concern, not yours. Offering a lease arrangement is you doing them a favour, not vice versa. Like @sdsinc states, you lose the ability to sell the domain to someone else, the small payments does nothing for you and it doesn't take into account any change in value of the domain.

You will need to get a proper agreement done and account for the issues of non-payment, goodwill, early buy-out and restrictions (i.e. subleasing, what if they sell their business). Determine what "leasing" means to you - i.e. do they get control over the domain or will you control the DNS like if it was rented. The worst thing you can do is change ownership and give them control, only for them to stop paying 6 months down the road.

Another issue you need to consider is abuse of the domain name such as blacklisting, internet archive, ongoing references etc. as if it fell through their use of the domain can impact future use of the domain. Its probable that forum references, business cards, promotional material etc. will continue for many years to come. Whether its a porn website, a genuine hacked website hosting a botnet or virus, or a company that has received hundreds of complaints for fraud or bad reviews - it damages the future ability of the domain.

Likewise, they might argue that by trading with the domain name and not getting ownership, that they have created backlinks, traffic etc. - or more to the point "goodwill".

So basically, never lease without a big fee upfront. Even if it is like $20,000 (say an amount they could afford) and a small monthly price of $200 - nothing exciting, clearly undervalued... but its better than a $0 upfront and $1200 month which they might walk away after causing damage a few months later.

 

[The New Guy]

Making a comparison:

Imagine you had a house you want to sell for $600,000 but no one has offered more than $300,000.

Along comes a potential buyer saying they can't afford it now, but they'll pay $2,000 a month for the next five years with the option to buy at any time during that time period.

What you get out of the deal:

- Payment of at or below market rental rates for a $600,000 property
- Chance that your home could be trashed by the renter
- Loss of ability to sell the property at market value for five years - but buyer has the ability to BUY at below market price for five years.

That means if home values in your neighborhood shoot up and your house is worth $1 million, you can't sell it for five years - but your RENTER can buy the house for the lower price and then flip it for a nice, quick profit.

This is a bad deal for you. This would be the kind of deal I'd try to get as a buyer if I was into speculating on other people's domain names: Lock in the property at a low price and a small monthly payment, then if I can sell it (and who is to say they won't try selling it and flipping it while renting), just buy it out for the low price and sell it for the high price.

 

[DU]

I have a end user interested in buying one of my dot com domains, it's a single word and generic in a few ways, The end user has their company named after it, the second word in their domain describes the service they provide...

Some questions I'd ask:

if they don't have the capital they don't have the capital but to me it sounds like the domain they have is more than sufficient for what they need. Is there a huge upside to the single word? If they have your keyword+service - they should be doing fine. The value would be more for someone wanting that keyword without having second best. Would anyone taking the single keyword clearly be competing with their business in the future? Would that be one of their concerns? Or would they own enough of TM to lower that risk?

Some opinions:

I think that sometimes two-words is better than one-word; people don't always agree with me but there is always the fact that an over-generic term doesn't provide enough value alone to warrant a large purchase. If they DON'T have $60K then they aren't a big company when you consider a typical restaurant franchiser must show $250,000 LIQUID cash and $500,000 of cash in general.

They may NEVER have $60,000 and $200 is peanuts.

If they are relatively young and don't have capital you have to wonder where the capital is going to come from... are they expecting growth? You could ask for renewal options on a 6 monthly/yearly basis. At some point they should be building capital reserves.

So something like $5000 up front, $200/month with a $5,000 yearly option.

You should also consider a seller option whereby you can call it back at any time for a fixed fee: that is, I can buy you out of the contract for $x if someone else comes along. But the great SDSINC says it best - at these value you need a lawyer because there are lots of intricacies and a decent domain lawyer may have a baseline lease contract laid out and approved by the bar.

Final notes:

You also have to consider jurisdiction very carefully - California law isn't New York law isn't European law, as well as restrictions in use (can they spam? what if they blacklist your domain).

If I were you? Figure out your sales price and (a) Sell it or (b) Keep it. If they are interested enough they can find the $60K. It's not that hard to find $60K investment capital.

The caveat:

I have not ever leased a domain and I'm the worlds worst domainer.

 

[stingrae]

Not knowing the business or the company, another option would be a potential equity stake in the company in exchange for selling the domain below market price. If that is the case, the equity potential should far exceed the $60k you think the domain is worth or it wouldn't be worth the risk.

I agree with the others though that $200/month is way too low and not worth locking the name up. Good luck!

 

[Ms Domainer]

Given the amounts in question I think it would be appropriate to have a lawyer draft a lease agreement. The other party will see that you are serious and business-minded, and if they fail to abide by the terms they know the installments paid are lost for good.

Now what The New Guy is true. You will have a great domain tied up for a meager $200/month. That money will make no difference to your bottom line.
But if a another serious end user comes by, willing to pay your asking price - you can't sell the domain.

It's one reason among so many others why I think domain leasing is seldom a win-win arrangement.

I think they are not putting enough skin and good faith to the game. If they were willing to pay $1000/month, then after 5 years (60 months) they will have paid $60,000. With higher installments both parties have an incentive to hold the agreement to the end.

*

The contract is a good idea, especially including a clause that would stipulate that should the business become wildly successful that the company would not turn around and slap a UDRP on your domain (instead of buying it).

Is it possible to negotiate a piece of the company, say 5%? Of course, that depends if this is something that would appeal to you.

Whatever you decide, good luck!



*

 

[The New Guy]

Before trying to negotiate stock / partial ownership of the company, be aware that there are potential tax issues with that if you are in the US - not just when / if you sell, but at the time the granting of shares takes place.

 

[verbster]

Lots of good advice given. It's not really a lease they want, it's a payment plan for ownership (or not) at your expense. If the company wanting a $30k - $60k domain can only afford $200 per month, that's a red flag. The one obvious piece of advice I would give is never give up registrar control of the domain.

 

[biggie]

leasing can be a good income stream

whether it's $50 a month or $500, doesn't matter

if the agreement is structured properly, you will benefit......especially if they stop paying after a few months or a couple of years.

why?

because you'll still have the domain and all the money they paid.

contact me if you need assistance.