It might sound strange to you to hear the phrase “digital real estate.” After all, real estate is something we associate with physical property.
But this is a growing trend in the investment world that might be a good idea to keep an eye on. The practice of “flipping” websites—buying them, refurbishing them and then selling them for a profit—is becoming more common.
It isn’t a guarantee, though. If you don’t know what you are doing, you can easily cost yourself a lot of money. Just like investing in real estate, it is important to know the market you are heading into. This will help you avoid any pitfalls and make sound investment decisions.
Here are some key things to know when you begin your journey into the world of digital real estate:
Websites aren’t the same as domain names
This is a helpful piece of advice for those who are new to digital real estate. There have been a few cases about people who buy domain names similar to those of valuable companies and then can cash in big when these companies buy them.
But these cases are rare, and this is not really a smart investment strategy. There are very few domain names that carry real value on their own.
You’ll instead want to focus on finding profitable websites. These either have steady traffic allowing for the sale of ad space, or some other source of revenue that is both sustainable and scalable.
In this sense, it is helpful to keep in mind that you aren’t just buying the digital space, but you are instead buying a functional business that has actual value.
Look for hands-off operations
Don’t confuse this with the idea that you can make money doing little work. However, there are ways to make money in the world of digital real estate without having to spend 60 hours a week working on it.
For this, you’ll want to familiarize yourself with the world of search engine optimization (SEO), as this will give you an idea as to what to expect moving forward.
SEO is the process of optimizing content and web design so that your pages show up at the top of search results. One of the key components of this is backlinks, the number of links that go back to your website.
Those that rank for valuable keywords have entire teams dedicated to “link-building,” so if you are starting from scratch, it can be difficult to keep up. It is better to instead try and find sites that already have an existing profile of backlinks so that when you do optimize content, you are already in an advanced stage of the link-building process.
You’ll also want to look at the processes of the website you are going to buy and get an idea as to who is behind the business. The best-case scenario is to buy a website that runs relatively on its own so that all you need to do to boost its value is invest a little in marketing and/or sending it in a new direction. This will decrease your headache and increase your return.
Don’t sell on your own
The most popular site for flipping websites is “Flippa,” as the name suggests. But this is not where you should be trying to sell your websites. It might seem attractive; it’s a whole marketplace of motivated buyers, but the majority of the people looking to buy a website on “Flippa” are looking for a deal.
There are so many different websites to choose from, people aren’t often looking for a good one, but rather a cheap one they can flip. Because of this, this is a good place to buy your next website, but not to sell it for a profit.
To sell it, you should enlist the services of a broker. These companies work to help determine the value of your business and then use their network to find someone willing to pay that price for it—not anyone willing to buy it.
This will help you fetch a higher price for your business, and if you engage them early in the process, it will also help you take the necessary steps to build more value into your online business as you grow it, leading to more attractive offers in the future.
There is a lot to learn about the digital real estate market, so the best thing might be to try and start small. Invest in low-risk opportunities and take some time to learn how things work. After a while, you’ll start to see some patterns and you can expand your reach, attracting larger offers and more profitable investments.
About the Author: Jock is the founder of Digital Exits, a brokerage service that specializes in the buying/selling and appraisal of online businesses. He has bought and sold several websites throughout his career and now works to help others get the most for their digital real estate investments.