I could be wrong in my calculation, correct me if I'm wrong. If somebody will start now to build a portfolio of 25k, at least medium quality domains, it should be either closeouts or cheaper auctions, so a $30 on average could do it? So that means a 750k investment upfront+ 1st year renewal, 225k+2 year renewal, 225k +3rd year renewal, 225k, so that means something like a 1.75 million investment in the first 3 years without making any money or maybe just a small %. With the forth year, let's say you will make 1% STR , with 2k average, that means 500k minus 225k renewal, so 275K profit just for year 4, but overall over 1 million less, after 4 years. If you go ahead, the first year that you break even will be the 8th year and after 12 years or so you could double your money, not counting your time spent. I don't have 1.3 million $, but I don't think that I will be happy to double it in 12 years.
@boker .. No .. if you aren't hitting your target STR (1% in this case) on the portion of your domains that you've held at least one year, then you're getting the wrong domains. If your target is 1% STR, and you're you're growing your portfolio at an steady pace (more or less same number of domains per month), then even your first year you should have a 0.5% STR because in theory you'd have held all your domains an average of 6 months (1% STR x 0.5 years = 0.5% STR/Yr).
That being said .. obviously the domains you acquire during your first year will be weaker than your latest year, but if you blow your $$ and you've acquired 25k domains in your first year and not getting your needed STR by the end of the following year, then you're in serious serious trouble.
Here's more reasonable math for you using the same expectations that you gave. Let's say you're want to hit 25k domains in 5 years with mostly closeout and low bid expired domains .. acquiring a steady 5k domains per year.
Assuming avg $30 cost (including y0 renewal if applicable) and average STR of 1% and avg sale of $2k.
Every year you acq 5k domains @ $30 avg acq = $150k cost, w/ STR or 0.5% = $50k in sales
For there every year all existing domains get 1% STR with a $10 average cost (renewal). With these domains your costs are $50k * # of years and your profits are $100k * # of years.
This would be what your annual profits would be:
Y1) -$100k
Y2) -$50k
Y3) +$0k
Y4) +$50k
Y5) +$100k
So in theory you should have broken even by the
end of your 5th year.
Then at the end of your 6th year you'll have profited $150k (for a running total of also $150k)
At the end of your 7th year you'd have a running total of $350k, Y8 a running total of $600k.
By the end of your 10th full year you'd now have 50k domains and running total profit of $1.25M, and you'd have profited $350k that year.
That being said, I think acquiring 5k domains per year is a little aggressive, but at $30 acq, it's not impossible. The real key is to maintain the 1% STR quality. Which is easier said than done. *IF* you know what you're doing, then it's doable. If you're prepared to acquire fewer domains, then your avg acquisition price will likely go down and your avg sales price will go up a bit because in theory you'd acquire the best of the 5000.
So basically if you halved those numbers, you'd actually have a much higher chance of getting half the results.
The real number you want to hit is a combined 100x your acquisition cost when you factor both STR and Avg Markup together.
So if your average acquisition price is $25, then you're hopefully selling 1% of your domains a year at $2,500. But if you sell them higher then you're ok with a lower sell-through. Like if your average sale was $5k, then you're fine with a 0.5% sell-through.
As long as you're hitting that magic 100x, then you're never really losing money after a year on the domains you bought 1 or more years before. More importantly, with your renewals costing 40% of acquisitions, this is where you'll find your long term profits as more and more of your portfolio has been held by you for over a year.
Keep in mind .. there's no interest or inflation in my calculations.
Also, I use $10 for average renewal because it's an easy number, and most domainers should not be paying more than $8.5 renewals for .com domains. So at $10/domain it's a pretty typical domainer portfolio with mostly .com domains, and a handful of .co, .io or .tv (etc) with renewals well above $10.
MOST IMPORTANTLY .. remember that most new domainers do NOT succeed in hitting 1%. Yes there's a noticeable portion of people here on NamePros who do .. but remember that the average "active NamePros poster" is losing money .. and even worse .. the average "active NamePros poster" actually does better than the industry average when considering the majority of people who quit domaining by the time their first renewal cycle hits.
Hope that all made sense!
