Digital Real Estate Investing

Mushfiqur Sarker

There are many opportunities for making money online through smart investing, but the term “digital real estate” catches a lot of attention. The comparison to real estate makes sense as online websites, domains, and other digital items are considered assets.

Investors can buy, sell, improve, and make money off of these assets which only exist online. In many ways, the comparison to real estate is really easy to see.

What exactly is considered digital real estate? What should investors look at before jumping in? Is it worth the risk?

Let’s dive in and answer all these questions and more!


What Is Digital Real Estate? 

Digital real estate is a term used to refer to several different types of online assets. While this definition might change over time with the introduction of things like the Metaverse or potential virtual reality/AI advancements, right now three major things are currently commonly referred to as digital real estate.

Why would a website be considered real estate?

The three main digital asset types we’re looking at are:

  1. Websites
  2. Domain names
  3. NFTs

These are digital assets that derive their value from their online presence or space. They exist online and need the Internet for value. 

In some cases, the value can be hundreds of thousands or even millions in some rare cases. While those are on the high end, there are many tens of thousands of digital properties that are worth five figures.

This makes digital real estate potentially very lucrative, but it’s important to understand these investments and the pros/cons of each before jumping in.


3 Digital Asset Types

While there are many ways to make money online, when talking about digital real estate there are three digital asset types to keep a close eye on.

Those three are websites, domain names, and NFTs.

1. Websites

Websites are one of the most popular forms of digital real estate, and they come with a lot of potential benefits. The process of building a successful site, getting traffic, and increasing revenues can be copied and repeated.

Websites also have the unique benefit of being able to pay off in two ways: with passive income or a big one-time payout.

One of the reasons I love website flipping is because it involves both. Monthly payouts start when I buy a site, continue to grow as revenues increase, and then the big payout comes when the final sale happens, currently at 30x to 40x monthly earnings on average.

Good websites create their own cash flow.

Pros

  • The skillset is repeatable, meaning you have the power to grow your own digital real estate portfolio of sites
  • Provides passive income, big one-time payments, or both
  • Heavy control over the value of your investment
  • There’s always a demand for revenue-generating websites
  • The ROI can be insane. It’s possible to spend less than $300 on two years of a domain name and hosting and build a site that sells for six figures.

Cons

  • Depends on ad providers and affiliate programs, meaning revenues can tank if those providers change their terms
  • You are at the mercy of the Google algorithm
  • Requires a lot of time and work, or a lot of money to outsource

2. Domain Names

Brandable domain names get harder to find as more websites than ever are built. Even beyond the news-catching stories of domains selling for millions, there are thousands of domains bought for $10-20 and then sold for a few hundred.

Finding good marketable domain names that have flown under the radar can lead to a pretty pay-off down the road. 

Pros

  • The most valuable domain names can be worth millions
  • Relatively little work is required to buy and sell domains
  • The ROI can be amazing

Cons

  • Finding “true gems” among domain names without sites built is harder than ever
  • Requires patience to be able to hold a name and find the right buyer
  • Numbers game: meaning some degree of investment and many hours are needed to make it work

3. NFTs

NFT stands for non-fungible token which means a digital asset that is one of a kind. So a graphic NFT like art is made via blockchain and there is only one of that NFT. This is a very new area of digital real estate.

This means there’s some incredible potential for profit as some NFTs have sold for insane amounts.  

There’s also a lot of confusion about the long-term viability of NFTs and whether this is a fad or the beginning gold rush of a new type of online asset. There’s huge potential but be aware that there’s higher risk here than with other digital assets. 

Pros

  • Huge potential with multi-million dollar sales
  • Anyone can create NFTs with a little training
  • Time to get in at the beginning of a potentially new “big thing” in online investments

Cons

  • The NFT must exist on a server. If that server goes down, that NFT potentially disappears
  • Very new which means it could last or could turn out to be a fad
  • Not a lot of in-depth understanding about where the future of NFTs actually lays even among NFT fans

Digital Real Estate vs Other Type of Investments

Why invest in digital real estate instead of stocks, cryptocurrency, or actual real estate? There are many options for investing, but digital real estate options often get overlooked.

There are pros/cons to both types of investments, so let’s look at why a mixture of both will make sense for many investors.

Risks

Digital real estate has risks just like stocks, real estate, or other investments. Google algorithm updates can crush traffic numbers. Ad providers or affiliates can change rates. The demand for premium domain names or NFTs could collapse.

Similar risks exist with other forms of investment, so digital real estate isn’t without risk. Many digital assets still have value of some type after a problem, so there’s still likely to be something of value unlike the stock of a company that goes out of business or real-life real estate property nobody wants.

Control

Digital real estate has the benefit of additional control compared to other investment options. 

  • You can market to push up the value of an NFT. 
  • You can add content and get backlinks to improve traffic (and revenues/overall value) of a website.
  • You can pitch premium domain names to startups or put a microsite up to let searchers know the domain is for sale.

This amount of control is rare with other types of investing. While there are factors outside the control of someone investing in digital real estate, generally speaking, the investor has more control over their investment than with stocks, bonds, or other investment options.

Income Potential

The income potential can be huge for digital real estate. The most expensive NFTs have sold for millions (source) already. 

The most expensive domain name sold for $872 million (source) and while golden domains like that don’t hit the open market anymore, there are still plenty of domain sellers making thousands or even hundreds of thousands off individual domain names.

There are tens of thousands of people making a part-time or full-time income from websites. This comes in the form of passive income from monthly revenue or one-time large pay-offs for selling/flipping their sites.

The income potential for digital real estate is huge, especially considering how many ways there are to start with a minimal investment. The ROI can be amazing.

Barrier to Entry

One of the strongest selling points of digital real estate is the barrier to entry: there’s virtually none. 

Consider:

  • Domain names can be bought for $20 or less. 
  • An artist can create their own NFTs and push to get them recognized for a big sale.
  • One year of hosting + domain to build a website can cost as little as $80 a year if you are bootstrapping from nothing.

While the barrier to entry is low, there is a lot to learn. Time investment is important in digital real estate to separate good advice from scams and to build the skill set needed to invest intelligently.

Even if the plan is to be mostly hands-off while outsourcing, it’s crucial to master the necessary skills to know how each digital asset works, what needs to be done to improve its value, and to judge good work from bad work to get the right experts when outsourcing.

Anyone willing to put in the time to learn can enter into digital real estate investment.

Passive Income

This is most specific to websites, but they offer a level of passive income that’s hard to match. If someone wants $3,000 a month to live on, getting that from stock dividends would require $1 million invested with a 3.6% dividend – both pretty hefty numbers.

Getting to $3,000 a month from a website takes time to build up the traffic and monetize, but it’s been done tens of thousands, if not hundreds of thousands, of times. This is not an overly optimistic goal for a website to make.

Get enough consistent traffic and the revenue will keep coming in. Once that initial work is done the income is mostly passive, freeing up your time for vacation, building a second digital real estate asset, or going full-time self-employed: the options are completely up to you.


Why Invest in Digital Real Estate?

There are many good reasons to invest in digital real estate, but three in particular jump out. Those benefits are diversification, self-employment/freedom, and massive income potential.

Time to dive into more detail on each!

Diversification

Having a digital real estate investment is a major diversification compared to most investment portfolios. A website earning income might do better when the economy overall struggles. If local real estate crashes, that doesn’t affect the value of a premium domain name.

Digital real estate offers a high level of diversification, which makes your overall investment portfolio safer in turbulent times.

Huge Income Potential

NFTs are selling for millions. Domain names have sold for insane amounts, and the premium domain market still sees domains selling for thousands of dollars every single day. Small monetary investments in websites can lead to six or seven-figure exits with enough work.

There’s a huge income potential with digital real estate, often with less of a downside than things like Forex or Crypto.

Self-Employment & Freedom

A good digital real estate portfolio can pay enough to allow full-time self-employment and freedom.

Whether you stay at a job you enjoy, keep just enough sites to have a full-time passive income while flipping the others, or choose to retire; that freedom comes from a good collection of digital real estate assets.


Buying vs Building Digital Real Estate

Should you build digital real estate from scratch or go the buy and improve route? Both are viable options.

The advantages of building from scratch:

  • Lower monetary investment for entry
  • Pick up valuable knowledge and usable skills to keep building your portfolio
  • Better able to manage teams when you know how that digital real estate asset works

Building from scratch will take a much longer time investment. It will take work, especially in the beginning. However, for first-timers this is recommended because the skillset is invaluable and makes outsourcing effectively far easier.

The advantages of buying digital real estate

  • You spend more money but free up hundreds or thousands of hours of time
  • You can buy proven assets that are already producing monthly income
  • Diversification of digital assets can take place faster

Buying can definitely speed things up. If you’re looking for X amount of monthly passive income, buying two sites that provide that (or more) already is a fast way to reach that goal. If you know how to improve revenues on those sites to make even more, even better!

This money investment can be necessary for individuals who have money but no time. 


Where to Buy Digital Real Estate

There are multiple options when it comes to buying digital real estate. Here are four of the most common options.

Marketplaces

There are many marketplaces out there for websites, domains, NFTs, and other online businesses or digital assets. These marketplaces offer a wide array of options when it comes to vetting and buying online businesses.

Flippa is the largest marketplace in the world, and Microacquire is another one that has gained attention from online investors.

Be sure to do your own vetting, but take a look at the marketplaces and what each has to offer.

Website Brokers (Empire Flippers, Motion Invest)

Website brokers focus specifically on selling websites. Website owners use these brokers to connect with buyers.

Empire Flippers and Motion Invest are two examples of trusted brokers that do vetting and have become popular due to good customer service and reliability.

Read the detailed guide on website brokers.

Private Sale (Direct with Seller/Buyer)

No matter what the digital asset type, a private sale is a very common option for getting a deal done. 

Reaching out can be a great way to get a shot at a website, domain name, or NFT that isn’t even publicly listed for sale.

Newsletters/Facebook Groups

There are many newsletters and Facebook groups that focus on specific types of digital assets. Joining or subscribing to several can speed up your online education while also providing more potential deals.


Income Potential of a Digital Asset

The income potential of digital assets is changing all the time. It varies depending on the type of asset being talked about, the current marketplace, and sometimes marketing.

While stories of millions of dollars catch headlines, those are generally outliers. Earning five or six figures from all these digital assets isn’t out of the question at all. In fact, that’s quite common in many cases.

This requires hours of work, self-training, and/or plenty of investment. However, the income potential remains very high as does the ROI.

Many choose to focus on one type of digital asset and this is a good idea, especially in the beginning.


Flipping vs Passive Income Model

There are two main models that come up in digital real estate investing:

  • The passive income model
  • The flipping income model

Both of these models can be excellent ways to make profit, and it’s important to understand both.

Passive income is the model where the website owner keeps the site. They might keep adding new content or they might not. They don’t intend to sell the site but just keep collecting monthly revenue.

The flipping model involves buying a site with potential, increasing traffic and revenue, and then selling it 6 months to a year later for a high one-time payout.

This gets a large infusion of money all at once but then the monthly payments from owning that site are gone.



Main Takeaways

Digital real estate offers some incredible potential when it comes to investing. 

  1. There are multiple digital assets that can be part of a digital real estate investment plan
  2. Digital assets can provide passive income or big one-time payouts
  3. Websites are the most versatile option for digital real estate
  4. NFTs may have the highest upside right now but are the riskiest
  5. Building or buying are both legitimate routes to digital investment

If you’re not already invested in digital real estate, it’s time to take a good long look at what these assets have to offer.



Mushfiqur Sarker

Analyzed by Mushfiq Sarker

Mushfiq has been buying, growing, and selling website assets since 2008. His first exit was in 2010. Since then, he has done 215+ website flips with multiple 6-figure exits. Learn more about Mushfiq.


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