Facing The Absurd

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december 12 2012 asteroid

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Unbelievable, I did my first real estate deal today. I have generally always avoided this asset class as the ROI didn’t meet my criteria – buying a house at a 5% rental yield is and was a waste of money for me. That’s why I never bothered even to buy my own apartment to live in since renting made sense to me. But I finally found a way how to improve ROI significantly with blending in some development as well.

I bought an unused attic in an apartment building today, where me and my building partners will develop two pretty exclusive apartments with roof top terraces. I acquired two garages in the building as part of the deal as well. I paid around $260k to acquire the property. Redevelopment will take about 9 months and will cost around another $320k. So total cost around $580k. Then I plan roughly another 6-12 months for the apartments to sell for around $1.3 million. This kind of ROI suddenly makes sense to me, so I might do some more of this stuff in thefuture…

I harvest domains predominantly for their PPC revenue. Recently I’ve noticed an interesting thing with the CCTLD portfolios I create by new registrations – suddenly sales are bringing in a “noticeable” part of the portfolio’s revenue. When it comes to the cctld portfolios, this sales element is about 15% of the revenue (the remaining 85% coming from PPC). With my .com portfolios this is probably only about 3%. Interesting, can’t really find a reason to why.

Otherwise when it comes to ccltds I’ve been much more active with them recently. Since I’ve sort of overharvested the .com universe and ROI has been worsening there, I’ve been looking for other TLDs where ROI is better. So last year I did a lot in .nl, .se., .de, .co.uk, .it, .be, .com.mx, .ca, .com.br, .pl etc. Recently I’ve gone so exotic as to play around with .jp or .co.nz. Now I have around 50k CCTLDs but I think I’ve depleted them quite a bit as well

A lot of people involved in buying and selling names got burnt by buying domains in 2007-08 peak valuations that still to this day cannot be liquidated for the price they were bought for. The interesting thing to me is that most people have a preference to sit on the paper loss until it eventually turns around (they hope) and they will be able to sell without making a loss. I.e selling for under the buying price is taboo for them. I think this is an error that is actually producing more losses for them.

I’ll support my thinking with an example. Say you bought a domain for $100k in 2008. In today’s market the maximum you can get for it is $80k, so you decide to wait. In 2012 you will get to sell the domain for $120k and make 20% on your investment over a course of 4 years. That is a pretty bad ROI. Instead, if you were willing to take a loss and sell the domain in 2009 for $80k, you would initially incur a 20% loss but you could put that $80k you got to work. Say buying and selling more domains, investing in a portfolio etc. From 2009 to 2012 a skilled domain flipper could probably turn that $80k easily into $300k in three years time. So if you would have taked the liquidity route, you could have got a much better ROI on your $100k investment. Pause for thought.