Today my partner in JointVentures.com, Danny Welsh, wants to explore the parallel of commercial real estate property valuation and income as it relates to the absolute best of the best MOST VALUABLE domain name properties, AKA “internet real estate”, and how he sees things being from the Physical Real Estate world.
This series of posts Danny will be making will crystalize what I see and he does a much better job explaining it than I do. I’ll let him take it away. What I can promise you, neither of us will waste a minute of your time. We hope you will see exactly what we see and exactly how it plays out into the future and why selling your unique assets without a residual could be the single biggest mistake a domainer can make going forward.
By Danny Welsh
Let’s follow the thread from that oft-told story about a $24 purchase of the entire Manhattan Island to a world of today where we see a $2000 per square FOOT cost to buy a “luxury” 2000 square ft home in Manhattan…
I want to follow the thread even further than a residential use of prime land to the small niche of the “highest and best use” of the most valuable properties in the physical real estate world….
I’m talking about a small niche where numbers of $1.00+ per square INCH per MONTH just to LEASE— not buy— the most premier retail properties on Manhattan’s Fifth Avenue or Times Square is now the norm….
Those numbers are not “made up” like 77.2% of all statistics you see on the internet…
Those numbers are taken straight from my notebook of notes from real phone calls made to real residential and commercial real estate brokers in New York City while I was up there for the Macy’s Day Parade just a few weeks ago. Of course, they didn’t exactly tell me the price per inch. I had to do the math and reduce the prices to the extreme absurd of “per inch” to get the numbers I wanted to make the analogy I knew would be possible...and powerful…when applied to domain name properties.
The point is that the difference between a 2013 PRICE of $1.00+ per square INCH per MONTH just to LEASE— not buy— in the same area where HUNDREDS OF BILLIONS of square inches once had a TOTAL PRICE of $24….that difference has NOTHING to do with the PRICE of those square inches then, and everything to do with their VALUE now and in the future.
Price and value are NOT the same, are they?
Let’s continue to follow that thread from a PRICE of a premium keyword category domain such as Property.com (or one YOU may own), for what you bought it for in 1993…through its VALUE in 2013, all the way to its PRICE if you were to sell it in 2033.
A hundred bucks to the new norm in 20 years:
Is that a LINEAR progression by any definition of the word?
Or does it parallel Manhattan’s real estate prices?
A + B = Conclusion: The biggest profitable upside for top valued domains will not happen in my lifetime or the lifetime of anyone reading this in 2013, and this parallel proves it.
In my inaugural guest post on RicksBlog I said I’d be posting in the future to answer this question:
What are the past historical asset parallels to domain names that give me confidence in stating that my prediction that one or more "pure" domain name investors— (i.e. pure NOT referring to those owners of domain names that developed a business on it themselves— will be profiled in the future as members of the Forbes List of Billionaires must and will come true?
There are many historical parallels that show us the path of value increasing for top domain names, and Rick Schwartz has talked about a number of the best most relevant ones on this blog...as I see it, evangelizing domain names to an audience mostly of other evangelists…and from time to time an end user businessman comes along and finds a gem of value too.
Just like I did.
The premium domain valuation parallel that struck me as most powerful reading thru RicksBlog.com is the topic of “highest and best use” development of any given property in any given area in the world of physical real estate.
Vacant land in a prime area sold as land or developed. When and if developed, something small vs. a shopping center or skyscraper. Same land underneath, same potential advantages. Most squandered with anything NOT “highest and best use”, and in domains only a FEW of the top-value landowners seemed to see any of that future money— Rick himself chief among them with Candy.com style deals.
Is it because he’s Rick Schwartz, nice guy?
It’s because he looks and filters for just ONE buyer for his best properties.
It’s because he looks at a domain name as vacant land in a prime area, and judges inquiries through a lens of “highest and best use” of that property.
I also see that the real estate parallel has maybe the best possibility of making inroads in showing NON-domain investors in the commercial world the power of the “category domain names” in THEIR niche industry, and that the true VALUE of the very best dot com domains in 2013 and 2033 and beyond has NOTHING to do with the PRICE of domains in 1993…a persuasive argument domain investors have been making for almost 2 decades to “end users” in business, with varying success.
You see, I’ve had my successes in physical real estate and so I think along those lines.
Because I see the best dot com domain names in the world as a vacant plot of land, waiting for a skyscraper or a shopping mall, and I see it as inevitable that those will be built in my lifetime so I may as well help make it happen and earn a lot of money.
For those of you among “the 500” who own the very best internet real estate, Rick Schwartz believes (and I totally concur) that doing NOTHING with the few in your portfolio that meet that criteria in 2013-2015 is much better than selling for cash only.
Confucius say: “Sometimes, wisdom knows that doing nothing is better than doing the wrong thing for the wrong reasons at the wrong time.”
When you KNOW your property is right for a skyscraper or shopping mall, don’t settle for less
and don’t accept not having a piece of the developed “highest and best use” of your land.
That’s what the vision for JointVentures.com is all about.
So go ahead, and sell any of your ‘good’ properties like Rick’s recent 3 word domain for $150,000 that I don’t even think has even been publicly reported. Most good domain names have a “magic number” that might be on the low end if you had complete future vision but there’s nothing wrong with taking the money and doing that straight-cash sale deal when you have better properties for your “hold” strategy anyway.
But if you believe you have one or more Property.com-value domain names, Rick’s advice I believe too is to hold onto those BEST internet real estate properties for the BEST long-term deal…or kick yourself in a few years when deals like Rick’s Candy.com get negotiated more and more frequently…deals that create cash now, cash ongoing, and cash for generations to the smart domain investor who kept the Golden Goose until it was the right time to sell anything but the Golden Eggs.
In coming posts— with Rick’s blessing— I’d like to answer more of the who/what/when/where/why/how much questions I posed in my inaugural guest post...and go more in-depth on our ever-evolving but already proven formula to attract and execute a deal with that ONE right 3rd party end user company who will see the VALUE in a long-term domain lease arrangement or even a full-blown Candy.com style sale-with-royalties joint venture deal as a WIN-WIN to get their hands on that very best of your very best domain names they covet at a PRICE that far exceeds the domain owner’s current income, with nothing but more upside and mitigated risks for all parties involved down the road.