I remember my first website sale. I made $13,000 Australian dollars selling a website that I had built from scratch myself. That sale was a big windfall for me and a moment I won’t forget because it was the first time I saw the real potential of online property investment.
Since that sale I’ve gone on to sell more than $150,000 USD in websites. Some of the sites I built myself, investing my own time and sometimes money, while others I have purchased and then sold for a profit at a later date.
I’ve never lost money on a website investment, although I have bought some sites that were not big money spinners – I got out with pretty much the same as I went in with. When profits are made though, the worst I have done is double my money.
On the Internet you might call what I do long term investing since most of the sites I bought were sold no earlier than 18 months time. The websites I built myself take as long as five years to reach the point of sale, although I could have sold earlier for less or held on longer for more.
The best return on investment from a flip (a site bought and later sold) was 1,000% – 10 times the money I put in. It took a little over two years to do that. Another trade was a set of sites I purchased 18 months prior that brought in a little over double my initial investment.
In the offline world, returns like that in 18 and 24 months would be considered exceptional and certainly not standard. If a share portfolio or investment in physical property returns 20% a year you are doing well.
The world of the web is different. Everything is changing fast, yet with so many websites and so many people online, the size and potential of the market is tremendous. There are bargains out there all the time and as long as you don’t screw up what you purchase, simply allowing a site to grow organically can result in significant profits, if you are prepared to wait.
I’ve never focused all my energy on buying and selling websites, which is why I haven’t done that many trades. Most of the time I work on whatever my main business projects are at the time, but I keep my eyes on some of the website trading forums to see if bargains come up.
When a site matches my criteria, I act fast with an offer, do some basic due diligence and if all things go well, make a deal. I miss out on more sites than I purchase because other people out-bid me, the site sells before I find it or due diligence convinces me to pass on a particular site.
As a result of buying websites purely as a side project, I’ve focused on a certain type of website and made sure I have people working with me who can help with the activities I don’t have the time to do. You definitely need to be careful if you want website flipping to be a part time job, it can quickly suck all your time, especially if you choose the wrong type of site.
Here’s some advice from what I have learned in the previous years flipping websites part time.
1. It helps if you have money to invest.
As with most forms of investment, you can make more if you have more to spend. When I was younger, I didn’t have money so I built websites with the sweat off my back. Most never amounted to anything financially, but one did – that first five figure sale I mentioned earlier. From there, as my income grew, I was able spend more to make more.
In recent years I’ve barely blinked an eye to invest a few thousand dollars in a website and spent as much as five figures in one deal. At one point I made a bid for a very popular site of $50,000 (I didn’t have that much money at the time – I figured I would find it after the fact), but I was quickly out bid and the site eventually sold for over $100,000.
Sites that cost more have more traffic and usually bring in more revenue. As a result, if you simply hold on to the site, given nothing unexpected happens, it should grow naturally, depending of course on how the traffic is generated (if the traffic is purchased, that’s a different story).
It’s easier to grow something that already has a stable base of traffic. Traffic tends to bring in more traffic, especially if you focus on websites that are community based. Just as businesses stand to gain the most from existing customers, a website has significant leverage within its current audience.
Taking it a step further, if you are well versed in internet marketing and website optimization, you can use your skills (or other people’s) to accelerate growth even more rapidly. This however requires more time or resources, so you need to consider what roles you want to perform and how much money you want to spend hiring other people, if you do decide to pro-actively optimize the sites you purchase.
2. If you don’t have money, start something new or use alternative sources of funds
As usual the relationship between money and time are converse, if you have one you need less of the other. It’s easier and quicker if you have money to begin trading websites, but you can make it work without money, if you have the patience and the follow through to build something yourself.
The great thing about creating a website from the beginning is the learning process. Nearly all of the sites I built during my first few years online would be considered failures, at least financially.
I spent hours and hours building forums that never took off, coding websites that never had more than five readers a day and swapping links to website projects I quickly abandoned due to my constantly changing focus. While I never made money from these sites I learned a TON about how the web works and that foundation of experience laid the path for future successful projects.
Let’s not forget, if just one project takes off you may hit pay dirt big time. Even if you don’t make millions on your first website trade, if you can build a site, flip it for a few thousand dollars, that money can be reinvested into more sites, and so on.
Alternatively, you can use any source of funding to start a website portfolio. You can seek investors, borrow money using traditional means like banks, funnel cashflow from other projects into website purchases, look for partners with cash or even get a job and use that money for online investment.
If you decide to go into debt to invest in websites, make sure you know what you are doing. There are no guarantees and I recommend you ask yourself how it would impact you if you lost the money invested. I ask myself this question every time I make a purchase and I never buy unless I know I could still survive if everything went downhill.
3. Look for sites that grow organically
I’ve talked about my strategies for picking websites in previous articles on website flipping that I will link to at the end of this article. My strategy has always been to find low maintenance sites, however it’s important to also consider the potential for organic growth, especially when investing part time.
I’ve advocated investing in forums for a long time because they tend to sustain themselves with little work beyond moderation. You don’t have to invest in content creation, marketing or spend money on advertising, If there is already a community in place. You can do all of these things to speed up growth, but generally if you have a base of a few hundred regular forum participants (that’s daily participants – not just registered members), they will create content and bring in new readers without you needing to do anything at all.
Forums are notoriously hard to start from scratch, which is why I don’t recommend choosing a forum as an investment if you intend to build it from the beginning. Buying established forums is great – creating one from nothing is challenging and time consuming.
Blogs can make good investments, especially if you are buying one with an established writer or a team of writers and an established readership. Even if you buy a blog without a writer, it’s not hard to find people who can write the blog for you, just bear in mind there is a big difference between a good blogger and an average one. Blogs live and die based on continuous content and if you don’t find a way to keep the flow of new ideas coming, you might regret the purchase.
On the other hand, sites and blogs using a niche content model, can be a good purchase, depending on the market. Niche sites generally rely on search engine traffic to bring in readers who are then sent off to other sites through Google AdSense ads or other forms of advertising, which is how money is generated. If you find niche sites with a history of stable traffic targeting markets that, given things remain stable, should continue to grow with the natural growth rare of the Internet, then you may have found yourself a good buy.
I’ve stayed away from sites that sell products as their monetization method (like a site that sells an ebook) or sites that depend heavily on paid for traffic like Google AdWords. I like the source of traffic to be organic and sites that sell products tend to require more maintenance (testing the sales page for example) and that you possess an insight into that market. Niche sites that monetize with affiliate products are fine though since you don’t actually manage the products yourself.
There are plenty of other types of websites for sale, from proxy sites, to social media sites, video sites, MP3 sites, to full blown e-commerce sites. Some of these are models I don’t understand or require significant maintenance and participation to keep growing. You however may be very familiar or interested in these formats and I always recommend you gravitate towards projects you have enthusiasm form and understand the model, so don’t follow my lead blindly – make up your own mind.
4. Use a team to make the process as hands-off as possible
There is no website you can buy that doesn’t require work. Right from the moment you make a purchase you have the transfer to handle, including the DNS changes, making sure scripts are working and so on. There may be emails to respond to, moderators to manage and affiliate links or advertising code that needs to be changed.
All of these tasks have to get done. You can do them yourself, taking you away from your main projects, or enlist the help of others. If you truly want to keep website investing a part time occupation then you must have help.
A tech support person is the first role I suggest you fill – and this is not just for investing in websites. I tell Blog Mastermind students this. I tell Membership Site Mastermind (not public yet) students this. I tell everyone the same thing. It’s my number one tip for any person who is not already a tech geek themselves – you need tech help if it is not your strong point and stop trying to do it all yourself – it’s killing your chance of success.
If you have people you trust, who know websites and scripts and web languages, then the technical aspect of maintaining a website is very easy. It also makes it easier to complete changes you want done, for example – website design changes, optimizing the placement of AdSense code and adding new features.
Beyond technical tasks, you can employ help for basic tasks like email support, forum moderation, liaising with advertisers all the way up to more complicated task such as search engine optimization, split testing different advertising methods and seeking new sponsors.
In my case back when I started I did it all myself, which is why it took five years to build a successful website the first time round. Today I’m not afraid to seek help from tech people, designers and website managers. Most of my recent investments require a couple of hours a week of my own time, which usually involved coordinating the people working with me on the sites.
The web has grown tremendously in recent years and will continue to grow. That’s one of the reasons the opportunity right now to invest in web property is so great. Provided you invest in sites that provide value, the size of the market should grow organically as more people go online, which means your investments will grow organically too.
However, let’s not forget that the entire concept of buying and selling websites is becoming more popular and you face more competition when bidding for sites at the popular trading forums. When I first bid for sites at Sitepoint there was little experienced competition (lots of newbies like me at the time). Today, if you don’t act immediately when a quality new site becomes available, you miss it, or the price inflates beyond what you are willing to spend.
That said, flipping sites is still a very unique thing to do and while there is competition, it really is a laughable amount compared to other forms of investment. Let’s not forget most people don’t understand the value of the websites they own and if you use research methods to find sites that avoid the popular trading forums, there are bargains everywhere.
Ed Dale always makes the point that when looking to purchase websites you should consider your existing business model and find sites that can plug straight into it. You can leverage certain sites in ways other people can’t, if you have a unique insight into how a market works or you have an existing process to produce income that the website can leverage off (like a product of your own you can sell to the new audience you get when you buy the site).
I haven’t gone into depth in this article regarding where I find sites or what variables to look for when assessing a purchase because I’ve already covered these topics in previous articles.
If you want to learn more about buying and selling websites and you can’t afford Ed’s course, here are some articles from my archives to start with –
I hope you enjoyed this article and you use it as inspiration to start your own website portfolio as a part time activity.
There’s always risk with any form of investment, but if you take your time, learn the ropes and start off by purchasing sites that you can easily afford, it won’t take long for you to become a web property mogul.
And learn how to build a better blog.