How to Invest in Digital Real Estate in 2020

How to Invest in Digital Real Estate in 2020

When it comes to investing, digital real estate might not be at the top of your list. But that doesn’t alter the fact that it’s a unique investment opportunity that, as recent trends show, can be profitable and exciting. Done right, digital real estate investments can generate ongoing passive income and can be an essential part of your retirement planning. By allocating some portion of your portfolio to digital properties, you can create an income stream that’s less affected by market crashes and volatility. So how do you start? In this article, you’ll learn everything you need to know to invest in digital real estate and make money on the investment. 

What Is Digital Real Estate?

Digital real estate is any digital asset that you can buy and sell for profit. This digital asset can be a website, a domain name, a social media account, or another online asset with resale value. What’s different about digital real estate is that the assets aren’t tangible and, in some cases, you can’t even see them. But these assets are very real, and for some of them, you can get hundreds of thousands of dollars in net income. For example, the average sale price of an ecommerce website is 10-24x its monthly profit, and it’s not uncommon to see websites fetching millions of dollars in sales.

digital real estate

Beyond the high ROI potential, digital real estate has a low barrier to entry. For a beginner looking to invest in digital properties, some website knowledge and business basics are enough to start your first digital asset. It’s also easy to compare and access digital real estate since everything is present on the internet. What’s more, digital real estate is something you can invest in with as little as $14. With this amount, you can buy a domain name that you can later resell for a profit. If you’re interested in websites, you can launch a portfolio with as little as $100, though investing in profitable websites (which naturally cost more) would get you a much higher return.

The Liquidity of Digital Real Estate

Liquidity is the ease with which you can convert an investment into cash. Digital real estate offers more liquidity than many traditional investments as you can buy and sell online assets with relative ease. Generally speaking, you’ll start receiving relevant offers within a week of listing your asset on a marketplace like Exchange. With digital real estate, the asset is also available for immediate viewing, and you can answer any questions buyers may have through email or messaging. 

Other things that make digital real estate more liquid include:

It’s also worth mentioning that the global demand for digital assets is on the rise and shows no signs of slowing down. According to Internet Live Stats, around 4.6 billion people worldwide are active internet users. These individuals rely on websites and digital properties for their research, shopping needs, and infotainment. The increase in online media consumption indicates that the future of digital real estate is bright. 

global internet users 4.6 billion

How to Invest in Digital Real Estate

When starting out in digital real estate, you essentially have to choose between: 

1) Building an asset from scratch

2) Buying the assets of an existing business

Each option comes with its own set of perks and shortcomings.

For example, creating a digital asset – let’s say a website – from scratch requires little investment but more work to start. You’ll need to get in the grind and learn from the daily challenges of website management if you want to gain traffic and increase the site’s value. In contrast, purchasing an established website means you’ll take over website traffic, email lists, marketing efforts, applications, etc. that you can leverage for growth. 

While there is this argument that it’s better to start at the bottom and work your way up, investing in a running website can make you learn things quickly. The seller may also help you gain first-hand knowledge and experience of how to operate, grow, and promote the business. Purchasing an existing website, rather than building something from scratch, can be a brilliant financial decision. 

A Quick Word on Building a New Website

Creating a new website is no longer a complicated process. All you have to do is purchase a domain name, buy web hosting, and upload content related to your business. Software like Shopify makes it easy to do all of these things. Using software also gives you access to critical elements such as SEO, marketing, and customer service. Even if you’re not tech-savvy, you can develop any website courtesy of the different features present in website creation software. 

Shopify website creation

If you have the money but no experience or skills, find someone who has the time to set up and market the website. In other words, partner up with someone who has experience growing sites. An experienced partner can also evaluate the competition, opportunities, and identify a mix of strategies that make sense according to the investment, objectives, and goals.

But a partnership has its own risks. People in a standard partnership are individually and jointly liable for all the business activities. If the website makes a loss and your partner disappears, you’ll have to cover all the debts. Unless you find someone you can easily trust, it’s better to skip the idea of partnership and go it alone. In this case, buying an established website might be the best way to invest in digital real estate.  

How to Invest in Established Websites

One of the best opportunities in digital real estate investing is buying an established website. Buying a reputable site gives you a head start in terms of existing traffic and revenue. Ideally, you should put money into websites that are earning well but could be doing better. Exchange has an extensive database of sites that are already making a profit and are ripe for investment. The best part of using this website marketplace is that you can find profitable websites in a variety of niches and business fields. 

For example, you can invest in:

Fashion and apparel websites

buy a fashion website

If you have an eye for trending outfits and a love of clothes, investing in fashion and apparel websites may be for you. You can leverage the existing branding of these sites to generate income, or improve their overall structure to make them appealing for other investors. 

Health and beauty websites

invest in health and beauty website

Do you have good knowledge of health and beauty? If yes, then you might want to invest in an online cosmetics or nutrition store. Consumers in this space like to test and explore new products and brands, so you will get several opportunities to earn money. 

Electronics and gadget websites

buy gadget webstore

From high tech gadgets to advanced gear, the Exchange marketplace also has fully automated, ready-to-go electronics sites with excellent growth potential. You can invest money in improving the various aspects of their digital presence, like branding, design, and SEO. With an improved look and feel, the sites should quickly sell and provide a high return on your investment.

You can also invest in specific business types such as dropshipping businesses, print on demand websites, and retail stores

Things to Evaluate Before Buying a Website

Before purchasing a site, you’ll want to conduct a thorough analysis of its elements to determine whether it’s worth the investment. This analysis is especially important when you’re injecting a large sum of capital into digital real estate. While not exhaustive, the list below highlights some of the main factors to evaluate before buying. 

History

One investment you surely want to avoid is a website with a bad history. There are stories of people using sites for illegal activities and then selling after changing their content. Before you get too attached to a site, make sure its past is clean and consistent with its current information. You can use tools like the Wayback Machine to see snippets of a website’s history. Investigate a little to ensure it has always been the same as it looks now and never used as a spam site. Keep in mind that websites featured on Exchange have been carefully vetted by Shopify employees. However, websites sold outside of Exchange may not undergo the same meticulous vetting process.

Traffic 

Most established websites get a good chunk of traffic from various sources. What you want to do is compare the existing numbers to previous periods and see if there are any visible trends. High potential websites usually have an upward traffic graph. You can check for this by asking the website owner to share their Google Analytics report. On Exchange, it’s even easier to analyze website traffic as all the stats are available on the site’s listing page.

analyze website traffic before purchase

Niche Demand

It’s always smart to check the demand for a niche before seeking opportunities within that area. You can do that by using Keywords Everywhere, a low-cost tool that shows the search volume for different topics, keywords, and niches. Another evaluation technique is to view whether people’s interest in a niche is rising or declining. Google Trends is a great tool for identifying untapped niches. When researching a new niche, make sure to use “2004-present” as your date range to see whether a niche’s popularity is increasing or declining. 

Assets

When buying a website, see if the seller is offering additional assets beyond hosting, traffic, and design. These could be mailing lists, social media profiles, or logo and branding collateral that the site has. Make sure you know exactly what you’re getting. All assets are useful and can help drive sales on your website. For example, many Shopify stores rely on their email lists to boost traffic and revenue. 

Profit and Loss

Perhaps the most important thing to evaluate is the website’s profit and loss history. This evaluation will help you figure out whether the site will continue making profits over the upcoming months. If the website’s operating expenses are on the rise, you should be alarmed and inquire for information regarding why. It’s a big risk to invest in a site with rising costs but stable sales. Ask the seller to provide you with a profit and loss statement to analyze revenue, expenses, and net income of the business.

How to Profit from a Website

A website puts you in a great position to earn money from digital real estate. However, you still need to determine the best ways to profit from your investment. Three popular income streams for a website investor are:

Product sales

If you’re willing to give ecommerce a shot, your first income will likely come from product sales. The rise in digital shopping has brought an uptick in online purchases. To profit, you can open up a general online store and sell items that people commonly buy. If you’re passionate about a specific niche, you can limit your product range to the items that are relevant to that market.

Advertising

Selling free space on your website is also worth a try. You can charge companies for displaying their ads in these spaces. Ads can take the shape of side banners, tiny pop-ups, or a URL at the top of the webpage. You can serve ads by signing up for a third-party network like Google Ads or through your ad server if you have the knowledge to create one. 

Flipping

Depending on your overall costs for the site, you may get a lot more for it if you improve and flip it. Website flipping is where you buy a site, improve it, and then sell it for a profit. Use one of these business valuation methods to get an idea of what your website is worth. Once you’re happy with the sale price, list it on a marketplace like Exchange to cash in on your investment. (that’s right: you can find potential buyers for your website on the same platforms that you used to purchase digital real estate.)

how to profit from digital real estate

Conclusion

Investing in digital real estate can be exciting. The biggest obstacle to adjusting your priorities is not knowing where to start. Fortunately, it’s all become straightforward due to the ease of buying and selling websites. You don’t need to be a technology wiz, have the experience, or a ton of time. You also don’t need to wait for the financial markets to adjust before you buy or sell. Taking that first step and being consistent with your approach will help you get the most out of your investment.

Topics: