Renting a domain out for use by an end user?

[index2703]

I heard from a couple of UK domainers that people can and have rented out their domains for use by an end user.

By that I mean that the owner does not actually sell the domain but agrees to rent its usage out to an end user for a yearly fee.

Is this a good source of revenue for a domainer?

Has anyone had any experience of doing this?

I ask because I have an LLL.com which I am not sure what to do with and I am sure that somebody could use it for business purposes.

I don't really want to sell it because of the potential for capital growth - I'd rather keep hold of it and sell in a few years (or maybe leave it to the grandkids?)

Obviously, any rental agreement would require some kind of legal agreement but it would be extremely interesting to hear from anyone who has successfully "rented" a domain.

Looking forward to hearing any success stories or perhaps some opinions of potential downsides.

Thanks,

Ben

 

[DomainMayhem.com]

I wouldn't be surprised if renting names eventually becomes standard. I have heard of this myself just a few weeks ago. I have never done it, but would also be interested to hear of someone here doing it.

 

[muttley]

I've got a few of my domain names listed at leasethis dot com.

None have been leased yet

 

[mhdoc]

I asked Frank Schilling about it on his blog and got a rather generic answer to the effect that it goes in cycles.

Given the prices of top domains it seems to me like a natural evolution. I would think you could get a copy of a long-term commercial real estate lease, substitute the domain name for the property description and be very close to a reasonable contract.

 

[index2703]

Good point mhdoc, but I would imagine that any agreement would have to include some kind of clause where you can negate the contract if the end-user does something as stupid as sending out unsolicitated commercial email.

Guess it's something that a specialist internet lawyer would have to advise on...

What would you charge for renting a domain on a monthly basis? An LLL.com for example - $500 a month? If they really want the domain but you aren't willing to sell, it is perhaps the only way they will ever get to use it in their lifetime.

I wouldn't be surprised if renting names eventually becomes standard

If this was taken up by lots of domainers, do you think that it would inflate the price of domains? I mean, if we could all rent out our "virtual real estate" then less people would want to sell and available domains would be more scarce.

In the UK we have fast rising property prices because of large-scale property investment by "buy to let" investors which results in people having to compete with investors to get on the property ladder. This inflates the price because of the supply/demand.

Could go that way as well with domains if lots of domainers were renting out their "property" rather than selling.

 

[DomainMayhem.com]

Very interesting points index. I would imagine that leasing will very much drive up the value of domain names once it really gets going.

 

[Smiler]

Should there be a collateral for renting out your LLL domain especially if it has a potential of generating a good revenue for certain business. How does leasing your domain name work anyways?

 

[mhdoc]

How does leasing your domain name work anyways?

I'm sure no one really knows. Commercial real estate leases have been around for a long, long time and people are still figuring out how to maximize their benefits. One of the joys of the domain business is that no one really knows anything for sure and we all get to make up the rules as we go

Guess it's something that a specialist internet lawyer would have to advise on...

And what can you expect him to know? There is little or no case law for guidance. You can no doubt get an opinion, but I can't see that it would have any significant value.

I can't imagine Gutenberg asking a lawyer for advice about copyright law before he printed up those bibles; I think we are in much the same situation with the internet

 

[index2703]

And what can you expect him to know? There is little or no case law for guidance

Very true, good point

Perhaps this is the real beginning of something huge. If we, as domainers, have grabbed these domains (LLL.coms or if you are extremely lucky, LL.coms) and can continue to pay the low renewal fee each year then we have a very valuable asset to use.

Providing that you can get a contract to use with the "renter" that protects you, it could be a very good way to regain your investment on a high-level domain and also benefit from capital growth.

What about in the future - could you ever imagine getting a loan secured on a domain name like a mortgage? That could be interesting, an equity release on some virtual real estate!

 

[leede]

I've got a few of my domain names listed at leasethis dot com.

None have been leased yet

agreed, so do I.

maybe the price of domain is not high now;

everyone wants the full control or owned the domain totally....

 

[duceman]

Very true, good point

Perhaps this is the real beginning of something huge. If we, as domainers, have grabbed these domains (LLL.coms or if you are extremely lucky, LL.coms) and can continue to pay the low renewal fee each year then we have a very valuable asset to use.

Providing that you can get a contract to use with the "renter" that protects you, it could be a very good way to regain your investment on a high-level domain and also benefit from capital growth.

What about in the future - could you ever imagine getting a loan secured on a domain name like a mortgage? That could be interesting, an equity release on some virtual real estate!

Back in 2004 I put together a nice package of domain financing/lease/rent domains. I don't have 2 of the best .com's but I'm happy with the one's I have.

My URLLoans.com gets $3.20 a click. But only gets 2 clicks a month

Leasing will be the next wave. There are several companies that have had contracts thought out and put together by lawyers. The contracts that I've seen always give the leaser the first right of refusal to buy the domain for a set future price. That is the only way leasing can work.

 

[Ronald Regging]

I imagine any serious end-user would require a buy-out clause to gain full ownership of the domain. It just seems unlikely that someone would want to rent a domain, invest probably more money than the domain is worth in advertising, etc.. and then not even own the domain. And depending on the price of the buy-out clause and the length of the contract / option to buy, you might find the value of the domain rising above the cost you'll have to let it go for.

I'm sure theres money to be had here, but it's probably far more complex than we would expect it to be. And if it's not complex, someone is getting cheated

 

[duceman]

I imagine any serious end-user would require a buy-out clause to gain full ownership of the domain. It just seems unlikely that someone would want to rent a domain, invest probably more money than the domain is worth in advertising, etc.. and then not even own the domain. And depending on the price of the buy-out clause and the length of the contract / option to buy, you might find the value of the domain rising above the cost you'll have to let it go for.

I'm sure theres money to be had here, but it's probably far more complex than we would expect it to be. And if it's not complex, someone is getting cheated

Agreed, here is a lease option agreement I came across when I was looking for a name. https://www.keysecure.com/linkuwant.com/domains/buyFORM.php?domain=IndyACCOUNTANT.com

 

[Dave_Z]

I'm sure it's being done. Of course, they don't have to talk about it if it's very
profitable for them and they're able to manage its risks.

 

[mhdoc]

There is commercial lease language that would probably handle the concerns mentioned in previous posts.

For example:

There will be language to void the lease if the tenant stores hazardous waste (spam email).

Leases can be written for periods of years with renewals at predetermined rates. The tenant can be confident they control the property (domain) as long as they need it.

Leases often include a percentage of the tenants income so the landlord (domain owner) can share in the value created by the tenant.

Many businesses expect to profit from operations and are not interested in speculating in real estate (domains).

The laws, at least in the USA, make it stupid for the same business entity to own both the property and the business. A business is exposed to lawsuits resulting from operations and has the double taxation problem getting profits out. Better to have the property held elsewhere (family limited partnership, trust,etc.). Dividing the interests (land, buildings, leases) (domain, operations, content) is also a tried and true method of asset protection and tax reduction.

Even the fact each domain is unique may not be the issue it seems. How many businesses go 40-50 years without rebranding or spinning off parts of themselves.

If I were just getting out of law school, I think a year spent porting existing commercial real estate law over to the domain/internet space would set me up for life