Domain king's rivers of gold
In Rick Schwartz's thriving real-estate business there are no rising interest rates to fret over, no land taxes to deal with and foreclosures are few and far between.
Yet Schwartz rakes in millions of dollars in annual income from his 6000-odd properties and recently sold one for $US750,000 after buying it in 1997 for about $US100.
It sounds too good to be true but Schwartz, the self-appointed "domain king" and full-time trader of internet real estate, says he is shocked more people haven't tapped into the rivers of gold flowing through the domain name trading business.
"I have a great lifestyle because the dollars come in the same whether I work or not," Schwartz said in an email interview after selling the domain iReport.com to CNN for $US750,000 this month.
"So I only work when I see opportunity. My most productive time is in the morning from about 5.30am to 9.30am with a break just for breakfast. Then off to a nice lunch. Then usually some type of leisure activity. Then a couple of hours to relax. Then dinner. Then watch some nightly TV and off to bed."
Trading online real estate sounds cruisy at first: buy a vacant domain, hold it until it becomes valuable and then sell it for an easy profit. And while waiting for a buyer, the owner of the domain can earn a regular stream of income by plastering the site with targeted advertising, or renting it out to someone else.
But Schwartz, a university drop-out who is in his mid-50s and lives in Florida, said the hard part was choosing undervalued names, as most of the obvious web addresses such as sex.com were snapped up years ago and would now cost millions to obtain.
In fact, sex.com is the most expensive web address and sold for more than $US12 million in 2006. The next most valuable name is Porn.com, which sold for $9.5 million last year, while diamond.com went for $US7.5 million in 2006.
Conversely, Schwartz's iReport.com cost little when he bought it a decade ago but became hot property once "iReport" was chosen as the name for CNN's reader-submitted news initiative.
"Domains will continue to go up in value faster than any other commodity ever known to man," he predicted.
Several Australia-related domains have sold at astronomical values in recent months with Perth.com, Melbourne.com and Brisbane.com going under the hammer at US auctions last year for $US200,000, $US700,000 and $US100,000, respectively.
But Perth-based Ed Keay-Smith, who owns about 1000 domains and runs the site OzDomainer.com, said he knew of only a handful of Australians who were heavily involved with domain name trading.
One of the biggest local players is the ASX-listed company Dark Blue Sea, which is based in Brisbane and owns more than 400,000 domain names.
Despite his 6000-strong portfolio, Schwartz says he has sold fewer than 10 domain names so far for a total sales income of about $US3 million. In 2004 he sold Men.com to a magazine company for $US1.3 million.
Schwartz's reluctance to sell is unsurprising given the amount of annual income some names can generate. Porno.com, which includes little more than advertising, is Schwartz's smartest acquisition so far.
"The domain name cost me $US42,000 in 1997 and spits out more than $US1 million annually," said Schwartz, who estimates he has spent $US5 million purchasing domain names so far.
"Property.com and Properties.com may end up being my most valuable as their value can easily exceed $US10 million. Then there is candy.com, cd.com and widgets.com all in the hunt for a multi-million dollar conclusion for me and a historical opportunity for whoever eventually develops them."
Andrew Allemann, operator of the Domain Name Wire blog, cautions that Schwartz's success is partly due to him "getting in early" when values weren't so high. But he said it was "still relatively easy" to buy domains for a couple of thousand dollars and to sell them for five times that.
"Most successful 'domainers' will tell you they worked 20 hours a day to establish their business," said Allemann, whose domain name dabbling earns him a six-figure income.
"It's hard work mixed with a bit of luck."
One of the biggest rags to riches tales in recent times is Frank Schilling, who works from his beach house on the Cayman Islands and in six or seven years has amassed about 300,000 domains. He started buying the web addresses using his credit cards but they now earn him about $US20 million in annual income.
"If you do your research and buy good quality two- or three-word generic domains that are either unregistered or from the domain after market you could sell them later for more than you paid for it to a company that sells a product or service that is related to that name," Keay-Smith said.
He said sedo.com, afternic.com and tdnma.com were some of the best places to buy after-market names.
But stay away from company names and trademarks, Keay-Smith advised, as buying these domains is known as "cyber-squatting" and rights owners can snatch the name back through the courts.
This story was found at: http://www.smh.com.au/articles/2008/01/28/1201369021193.html
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