I have never bought large portfolios, but on the occasion I was asked to appraise domainer portfolios.
So when you are contemplating the purchase of any 'asset', you need to 'appraise' it and also establish the possible liabilities.
I would divide the portfolio in at least 4 categories (this is only a rough guide, YMMV)
- the names that have immediate, liquid resale value - examples: LLL.com, generics. You can normally come up with a rough figure easily, even a conservative one.
- the semi-decent domains like brandable domains or double keywords - domains that have a good chance of selling but you know from experience it could take ten years. The renewal costs need to be factored in, always. Because a portfolio is like a tree: it can produce tons of fruit over several decades, but it will not deliver it all in one single year.
- the speculative category of strong keywords in poor extensions, where the prospects of a sale exist but are remote - example: firewall.io
- the more speculative category of new extensions. In the absence of "a track record of positive cash flow", I would derive a very conservative value.
- speaking of liabilities, the names that pose TM issues would deserve a category in their own right
When you have split the portfolio into Tier 1, Tier 2, Tier 3, Tier 4 categories, you value the lots separately. Thus you'll have a more objective view of the situation. The presence of a few premium domains can give the impression of a great portfolio and influence your outlook, but the portfolio could still be unhealthy and unbalanced on the whole.
As said above, always compute a realistic projection of renewal costs. A portfolio is expensive to maintain.
As for MWD, Mike probably sold well below theoretical value. This is the trade-off for liquidity and a nice retirement check. Selling in bulk is not the same as retail.
Domain names are illiquid, if you have a turnover of 5% and you are not a domain flipper - you are doing extraordinarily well. The lack of liquidity has to be accounted for like a liability. In practice, only a tiny percentage of your 'assets' will bear fruit yearly (in terms of sales).
Then there are business considerations that come into play. For example, losses can be written off for tax purposes. There may be tax-efficient schemes to structure your investment. Talk with your CPA.
Get all the figures that you can (and verify them). If there is parking revenue, then obviously it needs to be included along with the other figures.
You don't have to come up with one final figure. Instead, you can model different scenarios (optimistic/pessimistic). Then you choose which path you want to go.
