The Modern Investment: Website Flipping and Virtual Real Estate For Beginners
“I should invest.”
How many times have you heard someone say that?
Usually when people think of investing their money they think of traditional investments such as: Stock market, real estate, gold, etc.
Retire early, make passive income by putting a bit of cash upfront, and get rich quick. That sounds pretty good, right? Too bad investing is rarely that straightforward.
Most who dabble in investing use the buy low, sell high model. That’s great and all, but what if you wanted to invest in something where you could buy low, maximize profit, AND give yourself two different options: sell for a higher margin or keep earning on a monthly basis?
Welcome to website flipping and virtual real estate.
With website investments there are multiple approaches you can take, whether it’s building a site from scratch or purchasing an already profitable asset.
Let’s take a look at the advantages and disadvantages of both along with the different options you have with either strategy.
1) Building your own website and grow from the ground up until it makes money.
When you build a website from the ground up, you actually have two options:
Let’s say your website eventually starts receiving consistent traffic from Google and it’s making a solid $200/mo.
You could let it sit there without making any changes and you’d make approximately $2,400 every year (assuming there are no major changes in search position and earnings.) It’s nice supplemental income on autopilot with no added work. Or, of course, you can work on it every day and make more cash.
Advantages: You’re able to focus on other projects while making money on the side.
Disadvantages: You’re gambling that your website’s Google rankings will stay consistent on its own.
This is the slower, long-term investment strategy where you’re building websites up until they’re profitable and then flipping them. With this website flipping strategy, you can go through a profitable broker and sell a website netting $200/mo for about $4,000, or 20 months net profit.
Advantages: Quick cash injection, assuming you flip the website for a high multiple through a broker like Empire Flippers or FE International and that your site is making a good amount per month. It’s a repeatable process you can invest in over and over.
Disadvantages: You lose the long-term potential to build it up and make even more if you had just held on to it. Ideally, your buyer will take it to the next level by building the site up to the point where its monthly earnings will eventually make the initial sale price worth it.
2) Buy an already established, profitable website.
If you’re willing to set aside some cash and spend it on a website that’s already making money, you can save time that it would have taken to build a site from scratch. Building a website to where it’s earning enough money can take months or even years, while buying and then improving a site can significantly cut down on time. Your two options are:
Advantages: Assuming you’ve done your due diligence and bought a legitimate website that will be earning every month, you can just sit back and eventually make back more than the initial investment. You also have the option of making more per month by putting more effort into growing it so you make back what you spent at a faster rate.
Disadvantages: The time investment isn’t for everyone and it can be years before you start seeing returns.
Advantages: This is scalable. You can hire a small team (or outsource it) to build the site up and start flipping websites in high volume. You’re also getting your money back plus more in a relatively short amount of time.
Disadvantages: Ideally, you want to sell for a high multiple. Finding the right buyer would be a challenge if you go through an auction site like Flippa, which is why I’d recommend going through a broker that will almost guarantee you a high multiple. Also, if you’re actively working to grow the site it’s no longer an autopilot investment.
Buying vs. building
If I were a beginner trying to break into online website investing, I’d personally buy a website through a trusted broker that vets every website that lists with them and learn the basics to growing a website that way.
Why? You’d be dealing with a website that is already profitable and you’re minimizing the dangers of tanking the website. Brokers do the heavy lifting and thoroughly check to make sure the website won’t lose traffic through from search engine penalties.
Of course, there are no guarantees, but your odds of finding a quality site with a trusted seller is higher with a broker than if you were to shop by yourself on an auction-style site like Flippa. If you go through them, you’d have to weed through sites yourself and perform your own due diligence.
Many people use Flippa and it is without a doubt the most well-known place to go, but investors and brokers alike agree that Flippa isn’t a great resource when it comes to trustworthy sites. The sheer volume that goes through the site makes it impossible to maintain top quality and so you will spend a lot of time sifting through less desirable sales.
As for whether it’s better to buy or build websites, there’s a great debate arguing both sides.
Spencer Haws from Nichepursuits.com argues that building websites is better by pointing out one of the pros of building sites:
“Low Investment. I am going to make the assumption that most people reading this don’t have stacks of cash hidden in their basement. Building a website from the ground up is actually very inexpensive…especially if you write the content yourself.
In fact, even if you hire someone to write content for you, design a custom logo, and buy a premium theme; the investment may still only be a few hundred dollars.
When you compare a few hundred dollars that a website might cost with a few hundred THOUSAND dollars that people spend to start a “real” business like a restaurant, the investment is extremely low.”
Chris Guthrie, founder of EntrepreneurBoost.com, argues in favor of buying websites:
“Buying websites is a way to bypass all of the tedious work that website builders have to spend working on a project just to get it profitable. Instead as a buyer you are able to make an offer based on the amount of money the website earns each month.”
Now that you’ve the arguments from both sides it’s up to you to decide which website flipping path you want to take. Below are resources for both building and buying websites.
Resources for building websites
Here are some resources you can use to learn how to build websites from the ground up and follow other people who are actually doing it:
Niche Pursuits – Run by the founder of LongTailPro, Spencer Haws.
Authority Website Income – Jon Haver says he teaches people “how to create and promote an authority site in a stupidly competitive niche.”
Side Income Blogging – Larry Deane covers Google AdSense, affiliate marketing, private ads and product creation and sales.
Dumb Passive Income – Documents his journey on creating a passive income while working his full-time job.
Cloud Living – Of course, the blog you’re reading right now helps “new online entrepreneurs make $1000 a month in less than 90 days building amazon affiliate websites.”
Resources for buying websites
Here’s a list of brokers who perform due diligence on their websites before listing:
Empire Flippers – In 2014, they’re focusing on selling sites in the $10K-100K range, but they still regularly list sites much cheaper than $10K. Empire Flippers sells websites for 20x monthly net profit.
FE International – Previously known as Flipping Enterprises, FE International regularly lists sites that are on the higher-end. Their sites range from $50K-$2MM.
QuietLight Brokerage – These guys operate in the very high-end. Look at their listing page and you’ll see sites in the six and seven-figure ranges. Definitely not for beginners, but they are an option.
There really is no right answer as to which is better, building or buying. Although buying is definitely my preference, you can be wildly successful with either method.
You can, of course, try a mix of both. Build some sites on your own and buy others. The former will be more work as you’re starting from nothing and the latter will give you an already profitable platform to start with, but both are worth exploring.
What do you think? Do you side more with the website buying crowd or the building from scratch group?