Guess What I Just Found Out? You Have to Spend Money to Make Money

Jul 27 2010

We all want to own a premium domain and sell it for tens or hundreds of thousands of dollars but guess what?  You’re going to have to spend money to get it BEFORE you flip it.  The stories like camroulette are once in a lifetime stories in this day and age,  and if you’re waiting for a company like Groupon to come and pay you $250,000 for your $500 domain , you are kidding yourself. As a former trader I learned that if you want big money you’re going to need a few things, cash, risk, luck, and time.  Some have the cash, some have the stomach, but very few have both.

There is absolutely nothing wrong with buying names for $10 and selling them for $50.  Do that a bunch of times and you’ll make some money.  But it will never be big money and most likely the names you sell won’t pay for the names you sit on.  The positives in this scenario is the fact you won’t lose a lot of money.  Start buying the big names and you could be sitting on your money for many years.  Names are not liquid.  Buying and selling $XX,XXX is a big boys game and involves a ton of risk.  You are incorrect in thinking that the early domain buyers got names real cheap.  Certainly they were cheap as compared to today’s prices.  Would you have paid $25,000 for a two letter dot com back in 1995.  Did you HAVE $25K to spend in 1995?  The answer is probably no.

It took big kahunas to lay out that kind of money on something that may not even be around in 5 years.  The Internet and the fact that we would always use domain names was not a given back in those days and all the money spent on domain names could have easily gone up in smoke and quickly.  In fact, buying names in 2010 involve less risk than 1995 because we’re pretty sure that this whole Internet thing and the way we navigate. is going to be around a while.  The one thing that hasn’t changed since 95 is the fact that if you want to make good money, you are going to have to lay out good money.

Ask any domain flipper and they will tell you that the money and risk necessary to make a living in this business is tremendous.  Most have turned to development of their domain names to provide the cash flow to buy others.  They’ve gone the traditional route of monetizing one section of the business to propel the establishment of the next division ie another domain name.  It’s how most businesses work.  It’s the safer bet.  They are building up cash to make more cash.

You hear me talking constantly of my 5L domains and how I think they have a great risk to return.  I realize that it’s only good for $5 to 10,000 a year.  I couldn’t live on that but fortunately I don’t have to so I can afford to play around with it.  What I have done is taken the $500 domain and worked my way up to buying $10,000 domains.   I started with a 5 letter name and sold it.  Paid $500 and sold it for $800.  Then I bought another name for $1000 and flipped it for $2200.  Then I bought a name for $5000 a few weeks ago and flipped it for a little under $9K.   Luck and chance?  Maybe,  but by carefully choosing a name and concentrating on the sale I’ve been able to take $500 and turn it into almost $10K this year.  I am now on the prowl for a $10,000 domain to flip

I’m starting to see the light and it certainly is shining on generic domains.  I realize I can not flip brandables.  The only brandables I can flip easily are CVCV, the rest is just luck (with a little bit of skill in picking the name).  In order to make big money you have to buy solid generic terms.  The best deals seem to be private deals, inquiries to non domainers that hold the domain and are excited to get $10K for a $50K name.  Or $50K for a $100K name.  The problem is that most of these names have already been hunted by domainers and the domain owners have received numerous offers and finding a domain name that hasn’t been contacted is very hard to find.  In short, the big boys with big money have already done their due dillegence but you can still play the game.

In 2006 I joined  investment club.  I had joined an investment club because I didn’t have a ton of extra money but I figured if we could get a bunch of people together we could pool our money and not get killed with transaction costs.  We did fine but I got tired of going to meetings and quit the club.  My original $1000 investment was now $2000.  Two thousand dollars is a lot of money but then again it isn’t.  I figured I would play risky with the money and put it back in the market.  I put it in stock options because that is what I used to trade and what I felt most comfortable trading.  As a trader that used to trade a million dollars a day, $2000 was almost impossible to trade with using the old way I used to trade.  So I put it all in one risky option and hoped.  It was a very stupid move but I made $10 grand the first week and had my bankroll.   I took out the $2K and kept 8K in the market.  I made $20K that first month.  Took out $10K and kept in the other 10.   I took that $10K and made it into $100K that year (It was at $260,000 at one point but lost $150K on one trade in 1 day but that’s another story for another day).  How did I make that money?  I am convinced it was because I lost the fear that I would lose money.  I had already withdrawn $12K.  I was guaranteed 600 percent gain.  I bought and sold options based on what I thought would do well despite the risk.  I would have never purchased some of them if I needed the money to survive or hadn’t already banked the initial money.  This is proving the same for me in domaining.

I don’t need the money to survive and I’ve already made $10K this month.  Now I can put that money to use.  I can use good money to make good money.  I still have to make good decisions but I don’t have to worry.  You can’t make good decisions if your decision determines if you can make the house payment.  Instinct will tell you to be safe.  In domaining there is no such thing as safe.

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Outsmarting the Dumb, Outworking the Smart

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  1. Adam

    This kind of post is why you’re seeing a steady increase in visitors… you’re smart, funny, and have unique perspective on domain investing. At least that’s why I keep coming back 🙂

    I hope you turn that $10K into $100K so I can read all about it in a few weeks.

    Keep it up Shane.

  2. Tia Wood

    “Guess What I Just Found Out? You Have to Spend Money to Make Money”

    I just wish I discovered this back in 1995. I was 14 years old back then. If you invent a time machine let me know. 😉

  3. Tim Smith

    Excellent point and reminder. Many of us may not have the ability to make that big money yet but with a systemic approach, a little patience, and some hard work we’ll be there.

    One step at a time!

  4. PK


    Good post but I am cringing as I can only imagine the number of newbie domainers you have now turned onto options trading. In all fairness, people need to realize that this type of streak is few and far in-between for MOST EVERYBODY. It is important to highlight the following line in your first paragraph;

    ‘As a former trader I learned that if you want big money you’re going to need a few things, cash, risk, LUCK, and time.”

    Emphasizing the world LUCK. Particullarly when trading (as I am sure you Shane can attest to) you can analyze the trade perfectly but you still need some luck, so many variables come into play; do you get filled on your bid, does an unexpected report come out that blows you out of your trade, etc. etc. I just worry that allot of people just focus on how much you made on that string of trades as opposed to how much you lost on the way down. Luckily you were prudent enough to be pulling profits out each time, most aren’t so prudent.

    Turn this back to domaining where there is virtually NO LIQUIDITY, and how many times will you find that $1K name that you can turn around and sell for 3K, 5K, 10K in one to three months? Not very often, does it happen? Yes. But you better be willing to hold the bag for awhile.

  5. Pingback: How I Lost $1500 Domaining in 30 Minutes | Domain Shane

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