Category Archives: Real Estate

Looking to find a place to invest your money that will give very impressive returns when compared to just about any other investment product out there?  There’s a strong argument for buying websites as an alternative to stocks and an alternative real estate investing, or stocks if you want to grow your money. Here’s how it stacks up:

Website Real Estate (investment) Stock Market
Price Range $50 – $1,000,000,000+ $20,000 – $30,000,000 $1000 – unlimited
Cash Flow $0 – $100,000/month couple hundred/month dividends
Risk can be almost eliminated no tenant and you’re on the hook for mortgage payments/ bad tenants/ real estate market can crash managing risk can be tricky
Typical P/E ratio 1 ? value stock : 10 momentum stock : 30-50
Buying/Selling Cost 0% – 5% 5%-10% $0-$50
Work Involved none to full-time job moderate very little to full time

Price Range: A real estate investment pretty much requires you to get a mortgage.  That extra debt adds risk to the investement since if you fail to find a tenant for the property and can’t make payments you could lose everything in foreclosure.  Both websites and stocks offer entry points that are accessible without taking on debt.

Cash Flow: A website is a business and you are the owner which means that all the profit goes into your pocket.  With dividend paying stocks you are a part owner and the CEO will decide how much of the profit gets distributed.  Typically with a rental property you’ll make enough to cover the mortgage payment/repairs plus a small amount of cash profit.

Risk: Because you get a chance to negotiate the deal when buying a website it’s possible to greatly reduce the risk.  A good review of the working of the website and it’s history of profits will help identify solid businesses that will continue to perform in the future.  Thus risk is almost eliminated.  As for real estate, there is tremendous risk.  The property could be destroyed by fire or flood, bad tenants could cause your repair bills to increase or not pay rent leaving you to pay the mortgage.  Default on the mortgage and you risk a hit to your credit rating or even bankruptcy.  The stock market risk can be managed by diversification and using stop loss orders.  Even the best stock market wizards can only pick good stocks 60% of the time – it is impossible to know what the stock market will do in the future (legally).

P/E Ratio: The Price/Earnings ratio is a measure of the value of what you’re buying as it relates to the earnings it will provide.  A P/E ratio of 2 means that it will take 2 years worth of profit to pay off the initial investment.  Surprisingly the typical selling price of a website is around 1 times earnings that means that a website that makes $10,000/year will sell for around $10,000.  This is almost unheard of in other investments.  In real estate since returns on have historically matched inflation you can expect real returns matching just what you can sqweak out above your holding costs.  For stocks the high P/E means that you get comparatively less value for your money.  That means that you really depend on the stock price increasing in order to get a good return on a stock.

So what’s the catch with buying websites?

The catch is that you have to be prepared to run them or hire someone to run them for you.  There are many sites out there that are completely automated, but even those sites will require maintenance from time to time or additional promotion to grow the business.  A website is a business and it requires some amount of management to grow and remain profitable.

Where to buy Websites

The absolute best way to buy websites is to contact website owners directly and see if they would like to sell.  In many cases website owners have lost interest in their websites and are letting them whither and die and will gladly take your money for them.  In some cases you could quickly renovate the website by monetizing it and immediately turn a junk site into a cash machine.

Alternatively there are a number of places that will connect you to people who are actively trying to sell their websites:

Final Note

If you are looking for something to invest in take some time to consider an alternative to stock investing and real estate.  Websites are currently under-priced in comparison to those established investment categories.  There’s a huge potential upside and the downside risk can be limited.

When investing in real estate your money is made when you buy not when you sell. There are two basic investment situations, either you’re picking up a piece of property to sell again, or you’re looking for a passive rental income. In both cases make sure you make your money on the buy side.

When turning the property around for a quick sell it is imparitive that you buy the property at below market value. The difference between the purchase price (plus carrying costs, fees, and other charges) and it’s market value is the amount of built in equity that you have in the deal. It means that in all but the most extreme circumstances if you buy below market value, you’ll make money.

In the second case where you’re going to use the property for rental income. It is important to work out all the numbers up front and know that you’ll be making money, and not subsidizing someone else’s rent. How many properties can you afford to buy if each one costs you $200/month? How many properties can you afford to buy if each one pays you $200/month? If you see a possible deal, make sure you negotiate the interest rates and terms on the loan it could make all the difference.

Buying and selling property is a killer way to make some big bucks. But it’s important not to jump right into it. Knowing how to write solid contracts that allow you a way to back out of a deal that goes sour is key to lowering your risk. Risk management is a big part of any investment plan, and it starts with knowledge. The more you know the less likely you’ll fall into traps, and the quicker you’ll be able to evaluate a potential deal and close it before someone else beats you to it.