Digital real estate is one of the last great frontiers on this earth. Investing in websites, or authority sites, can make you a fortune. But only few succeed. Sound intriguing? Read on to learn more.
Disclaimer: REthority is supported by ads and participation in affiliate programs. We may earn a commission when you click our links. The information included in this post is for informational purposes only and should not be taken as legal or financial advice.
Jump to:
- What Is Digital Real Estate?
- Benefits of Authority Sites
- Popular Types of Digital Real Estate
- Mistakes to Avoid
Ever Heard of Digital Real Estate?
Digital real estate is a uniquely accessible type of property investment. When you buy digital real estate, you’re investing in a type of property that only exists online: Website domains.
Investing in physical property usually requires a $10,000+ investment. Investing in digital real estate, however, requires as little as $10.
That’s why digital real estate website investing first caught our attention. It’s gaining incredible traction in the investing world.
The tiny upfront investment required makes digital real estate an intriguing option for seasoned investors and beginners alike. Why spend $10K when investing so much less can net similar returns?
The Upside
Anyone can invest in digital real estate. But no one successfully invests in it without a clear roadmap or plan. Unlike rental property, there aren’t many mentors or courses to teach you the ropes.
You’ll hear terms like SEO, sitemaps, script managers, CSS, and more. If you aren’t willing to dig in and teach yourself new skills, don’t consider digital real estate.
For those who are willing to roll up their sleeves and work for months to years without pay to chase an eventual profit, the rewards can be huge. We’re talking 90% profit margins with minimal capital outlay.
Want to know more? First, you need to understand the industry, what kind of digital property to look for, common mistakes beginners make, and a few keys to profitability.
This guide will help you learn the ins and outs of digital real estate. You’ll understand the basics, know what makes a good digital investment, and what pitfalls to avoid.
By the end, you’ll be ready to start building your own digital investment portfolio. We’ll start with the basics and build from there.
What Is Digital Real Estate?
Digital real estate is “property” that exists online in any form. The most common digital investments are:
- Websites: Active affiliate sites, authority sites, blogs, eCommerce stores, etc
- Domains: Website URLs not yet in use
- Apps: Mobile applications for smartphones and tablets
- Digital products: Courses, training classes, guides, membership programs
Digital real estate isn’t so different from traditional real estate. When you invest in digital real estate, you buy property online and let it appreciate in value before selling it.
You can earn cash flow from both traditional (rental income) and digital (ad revenue or affiliate income) properties. You can increase the value of both types with improvements and renovations.
Digital real estate is all about speculation.
In digital real estate, you’re buying affordable virtual property that you foresee being much more valuable to someone later on.
What This Means
This could be a fully built-out website that targets a certain audience and receives ample traffic or earns monthly ad revenue.
It could be an unused domain name that you believe a company or investor may want in the future. In any case, to be successful in digital real estate, you have to be strategic.
Investing in digital real estate is exciting because it’s a relatively new practice. Think about it – the first domain name was only registered in March 1985 (Symbolics.com).
Domains were actually free to register until 1995 when the National Science Foundation permitted tech consulting company Network Solutions to charge $100 for 2-year domain registration.
Today, domains are offered much cheaper, and anyone can buy one. Anyone can build a website for a very low cost, too.
But you need to choose a domain name that is likely to be in demand sooner or later, and if you’re building a website, it needs to be done well to get plenty of traffic.
We’ll talk more about building websites and buying domains as digital real estate investments further down in this guide. But first, let’s dive into the benefits of digital real estate.
Digital Real Estate Benefits
Investing in digital real estate has so many benefits. It’s worth looking into even if you don’t consider yourself the investor type. Here’s what makes this form of investing so noteworthy.
- Low Startup Cost: Spend as little as $10 to register a domain and $5/month to host it, then build a website to start getting traffic or wait and sell the domain to the right buyer later on.
- High Margins: With such a low cost to invest and build, you can achieve gross margins of up to 80%.
- Fast Appreciation: The value of a website often grows 5X within one year, so your asset appreciates quickly.
- Availability: Domains and websites are never in short supply, are available worldwide, and anyone can buy them.
- Cash Flow Potential: You can earn cash flow from a website or domain before selling by placing ads on the site to earn revenue or becoming an affiliate to earn revenue by sending traffic or sales from your site to another.
- Easy to Improve: If you buy a cheap website with a good domain name, you can add content and improve the design more easily than you can renovate or remodel a house.
- Less Risk: Investing hundreds of thousands of dollars into a house or apartment building is always risky; spending less than $20 per domain carries a lot less risk.
- Forward-Thinking: The digital landscape will only become more and more part of our daily reality, so getting ahead of the game and buying online real estate is a smart financial move for the future.
Most Profitable Digital Real Estate Types
With these benefits in mind, let’s dig into the most profitable types of digital real estate. By far, websites and domains are the most common forms of digital real estate investments.
They both have the potential to be wildly profitable under the right conditions. Think of the internet as a giant mall. Inside, there are lots of stores and kiosks that are open for business.
These are like websites – they’re already active, they have a customer base, and if you buy one, you can pick up right where the owner left off.
If you want to make changes, you can. But overall, when you buy a website, you’re buying a ready-made “business in a box” and benefiting from the work that’s already been done.
There are also a lot of shops and kiosks that are unoccupied and available. Some are in great, highly trafficked areas of the mall.
Some are more tucked away, but would still be a good fit for the right business. These empty stores are like domains. Like an empty store, if you buy one and open for business, you can earn excellent returns.
But you’re also tasked with getting people to come to the store, finding ways to make money from it, and investing in the materials you need to make it successful. You need to have a plan to do it well.
1. Websites
Websites are a very popular type of investment in digital real estate. Buying a domain and building a successful, highly-trafficked website on it creates an attractive offering for other investors and existing companies.
If your website gets 200,000 visitors each month and steadily earns ad or affiliate revenue, investors will want it. They’re thinking of ways they can improve on your results and earn even more.
If your website is relevant to an existing company’s product or service, they’ll see it as an opportunity to expand their reach to their target audience. That’s beyond valuable to a company that wants to invest in growth.
Your small investment to buy a domain, host it, and build content and links can achieve gross margins of 80% or more.
It’s easier to buy a website that is “move-in ready” (we are talking digital real estate, here) than it is to buy a domain and build a website from the ground up.
The targeted traffic is already there. The website has existing content that works. It may already be earning money and ranking in search. That’s a win-win.
It doesn’t matter if the website is strictly informative, an eCommerce shop, or a motherhood blog. If the traffic is there and the website makes money (or has great potential to), it’s an asset to any digital investor.
And if the subject matter is right, there are lots of companies who will snap it up. Investing in digital real estate by building websites isn’t easy, though.
You’ll need skill, patience, and a good strategy to make it work. We’ll cover this in more detail in just a bit under Digital Real Estate Mistakes and Misconceptions.
2. Domains
Domains are another popular form of digital real estate, though it’s become much harder to make meaningful income doing this since the dot-com boom popped.
Investing in domains to build valuable websites requires hard work, but the barrier to entry is low, and some digital investors consider it the best option.
You’ll sometimes hear investors who buy domains referred to as “domainers” or “domain investors”. If you’re investing in domains to sell outright, you need a little patience.
The URL you snag for a few bucks today might not be in demand right away. But when it is, you’ll hold the key and get to name your price.
You might make a nice profit. Or an insane one. Let us give you two examples of domain investing and one example of website investing.
Example 1
A serial entrepreneur I worked with started a new company. The domain he wanted was already owned by someone who had “parked” it – purchased the domain and displayed ads on it while waiting for someone to buy it.
The entrepreneur ended up paying $5,000 for the domain that probably cost $10 – $20. He saw it as a necessary piece of digital property if he wanted to start his business with his already chosen name.
Example 2
A more impressive example is the sale of the CarInsurance.com domain. Digital marketing company QuinStreet bought it in 2010 for $49.7 million, making it the most expensive publicly sold domain name of all time.
They also purchased Insurance.com for $35 million and Insure.com for $16 million in the same year. Imagine if you had been the owner of one or all of these domains!
In both examples, the key to profit was the domain owner being willing to sit on the domain for as long as it took. The company or organization that wants to buy your domain may not even exist yet.
Example 3
If your strategy is to build an authority site, you will either buy or start a site with the goal of maximizing traffic. Say you are able to build a site to 50,000 monthly readers.
Using an ad network like Mediavine, you’ll realistically get paid about $.03 for each visitor. At this rate, you’ll earn $1,500 per month on ads alone.
If you wrote the content yourself, earned links through guest posting, and your expenses are $200 per month (keyword tools and hosting), your profit margins are 87% every month. Pretty good, right?
And that’s totally doable. You can realistically earn that much traffic from 50 or less posts. If you have 500,000 monthly visitors, you can earn $15,000 per month on ads alone!
Digital Real Estate Mistakes and Misconceptions
It would be misleading to say that digital real estate investments will enable everyone to “get rich quick.” Ask anyone in the industry.
There are loads of mistakes and pitfalls that you must avoid if you want to do well. Because digital real estate investing is so comparatively new, there aren’t that many established, proven best practices yet.
But from the research we’ve done and the things we’ve learned first-hand, there are a few common mistakes that are easily avoided when you know what to look out for. We’ll cover each in detail below.
“Buying digital real estate is a miracle investment.”
Nope. There are no miracles here. Your success in this sector depends entirely on your choices and strategy. If an online “guru” tells you that you can earn a profit in a month, they’re lying.
The domain names you buy, the audience you target on your website, the website design you select, the affiliates you partner with – these are the important things that determine how profitable your investment will be.
In fact, with most valuable domain names picked over, you’ll have the best chance of success at starting an authority site. But it won’t happen overnight.
The reality is that by the time you plan, design, and build the site, you’re looking at at least 18 months of work. But don’t get discouraged — you’re investing in future recurring revenue.
“Domains with trademarks will be worth a lot to the trademark holders.”
Trademark holders spend a lot of money to protect their trademarks and enforce them. That means if you purchase a domain containing a trademark, you could find yourself in an expensive legal battle.
Even if you don’t realize what you’re doing, it could end in disaster. You will more than likely end up in court, forced to pay penalties to the company for trademark infringement.
To avoid this, we highly suggest creating a unique, but brandable name to serve as the business and domain name. Ours, for example, is REthority.
I bought the domain for $12, and it was cheap because I created it myself (it didn’t mean anything before). But it’s unique enough to convey the main points of my site (authority and real estate).
“It’s easy to register a desirable domain and sell it for millions.”
If you want domain names that someone will actually buy later, you’ll have to roll up your sleeves and get to work. After all, it’s not the 1990’s anymore, and the good names are largely picked over.
It’s a highly competitive industry, and the top players design or use bots and software that “catch” the most desirable expiring domain names the millisecond they’re available again.
It’s worth noting that most domains don’t sell for millions – there’s a reason Business.com, CarInsurance.com, and VacationRentals.com are the major success stories you hear about over and over.
“I’ll register these domains and forget about them until I get an offer.”
Please don’t fall into this thought process! Don’t forget that domains need to be renewed regularly, anywhere from one to ten years.
One man shares that he owned community.com in the 1990s and failed to renew it. Today, SalesForce owns it, and it’s estimated to be worth six figures. That’s an expensive mistake.
“I’ll register a domain, build a website, and sell it for a profit next month.”
Building a website to the point where it’s attractive to companies or investors takes time. A lot of high-quality content, careful attention to SEO and marketing, and partnerships with affiliates will put you on the right path.
If you write the content yourself, use a budget hosting provider, and use free versions of graphic design software like Canva, you can create a site for under $1,000.
However, you’ll be doing much of the work yourself, and much of your time will be spent learning new skills. In any case, a quality site takes 12-18 months on average to start turning a profit.
Treat this just like physical real estate. The more you invest in it, the greater the return you get down the road. I highly suggest hiring professional writers and investing in a nice (or custom) WordPress theme.
After all, your goal it so attract investors down the road, and someone involved in this space will want your site to stand out from the mom-and-pop blogs that look stuck in the 90’s.
“As soon as someone offers me money, I’ll sell.”
Whether it’s a domain or website, selling too quickly is not smart investing. That’s why patience is a big part of this. Hang onto a domain or website until you get a fair offer.
However, as we stated above, it’s not the 90’s, so most good domain names are picked over. Today, the money is made creating high-quality, brandable websites with impressive content libraries.
Getting into Digital Real Estate
Digital real estate is an affordable, exciting, and unique way to invest in property. You can turn an investment of a few dollars into something potentially worth thousands if you do your research.
Knowing what to avoid and coming up with a solid strategy will give you the best chance of success. But don’t be fooled by online “gurus” that promise quick fortunes — it’s a ton of work.
Expect to spend between 12 and 18 months before seeing any money. However, if you have experience creating websites or enjoy researching domain names, you might consider getting into digital real estate.
This is what I’d consider one of the last unexplored frontiers, and now is one of the best times to get into it. With a simple, brandable domain, some hard work, and a strong work ethic, you can make a small fortune.
Your Next Steps
Be smart when you register a domain; look for .coms and generic keywords, avoid names with typos, and don’t go anywhere near a trademark battle, unless it’s for your own unique mark.
If you’re building a website on your domain, put effort into it. Make sure there’s great content, market it well, and choose something you think someone will have a commercial interest in.
Above all, don’t expect to become a millionaire overnight. Think of it as a money-making hobby with limitless profit potential. Never stop learning, and don’t get shiny object syndrome.
Invest the time and money it takes to make a great website, and you might find that digital real estate is a perfect fit for you. Will you be a prospector on one of the last great frontiers?
