That Land’s Empty O’er There! Should You Buy or Build Digital Real Estate?
Should you buy or build a website? Here’s my experience in buying or building a niche website, my recommendations & strategies for finding websites to buy.
Once again, I’ve got the itch—The itch to get involved in a new niche. I’m not 100% sure which I’m going to tackle, but I have a pretty good idea.
After my success with Bicycle Touring Guide, I realized it’s important to weigh all your options when beginning a new niche website. By that, I mean once you pick your niche, you must decide whether you want to invest the time and money to start from scratch, or whether you’d prefer to buy an existing website on a domain that you don’t necessarily love, but you have the existing brand and traffic to really help you launch your website and get a quicker ROI.
(Of course, you could always buy that website and transfer it to a new domain, but I wouldn’t recommend that for a number of reasons, none of which I want to delve into now…)
How Buying a Website Is Similar to Buying a Rental Home
In real estate investing, there’s something called cash-on-cash. Your cash-on-cash return is what percentage of your initial investment you will make back every year.
For example, say I buy an investment property with $20,000 down and it’s rented out for $1,000 a month.
After my mortgage, insurance and expenses, I’m profiting $500 a month, or $6,000 per year. In this case, my cash-on-cash return is going to be $6,000 divided by $20,000, which is roughly 30%.
I bought Bicycle Touring Guide for $1,200 and I had a little over 100% return on investment over the full year.
To sum up: I made $3,609.38 in gross revenue and had my total expenses equal $1,766.44. When I take (Gross Revenue/Expenses) * 100, I arrive at a Cash on Cash return of 204%.
Here’s the Question…
Had I started from scratch and hired out all those articles, I would have spent about, I think it’s about $500 or $600 or so on hiring out writers, developing the content, developing the aesthetics etc.
In the end, I might have only made $200-300 that year, with a Cash on Cash Return of roughly 50%.
So you have to look at your options when about to hop into a new website and determine what is the best use of your time and money.
Back to My New Website & Buying a Website vs Starting from Scratch
I found this niche that I’m really interested in tackling. I’m not going to share it just yet, but it’s something that I can relate to incredibly well.
There’s not much competition out there. In fact, there’s only one e-commerce website and one blog that would be my competition. Yet it’s a very exciting and rapidly growing segment of our population that would love to consume this type of content.
So, what I did was I initially went out and looked at my competition, noticed that there wasn’t much, but also that there are a number of abandoned websites on this topic. In other words, foreclosures.
These websites have been started over the years because it’s an interesting topic, but they haven’t flourished and they haven’t written in a long time.
What I’ve done (and what you need to do for your niche) is I went ahead and reached out to them. There are a number of strategies you can employ to find target websites to attempt to purchase in order to kick start your new niche project.
The first is good ol’ Google.
Let’s say this was going to be, for argument’s sake, a blog about coffee. So, I could do searches for best coffee blogs, top coffee bloggers etc. Then, open up all your targets in a new window and delete any websites that have published frequently over the last 3 months. They are not your targets. Those individuals are engaged in their site, they treat their site as their baby, they’re not going to be able to come to a realistic price, and they’re not going to have a realistic expectation in terms of what it’s worth.
I tend to target sites that haven’t produced much content in the last six months or more. Take those URLs, toss them into a spreadsheet and then move on
Next, take those URLs, go to SpyFu.com and plug them in.
Ad scroll down to look at their organic competitors. Those are other sites you can then reach out and target for an acquisition opportunity. And you don’t even need a SpyFu account to do this.
Then, take those new URLs, research them in SpyFu, get their organic competitors, reach out to them etc. Continue to rinse and repeat until you have a list of about 50-100 websites (if possible).
What you then want to do, or what I prefer to do, is import them all into Buzz Stream using the buzz marker. Buzz Stream has this great extension for Chrome and Firefox where you can just click a button and have that URL added to your project without ever leaving your browser.
So, go ahead and add all those sites to a Buzz Stream project that I like to name “Website Buying Inquiries” where I keep track of all the websites that I’ve reached out in an attempt to buy, so I can follow up with them months later, see if they might be interested even if the deal fell through.
Once you have that list, you’re going to use Buzz Stream to mail merge and reach out to all of your contacts simultaneously. Reach out and say, “Hey, my name is Joe (or whatever your name is), and I’m looking to start a blog on coffee and I noticed you haven’t written in a long time. Do you have any desire to sell your website?”
Most of the time, they’ll reply back and say, “No.”
Sometimes they’ll reply back and say, “Yes,” and have an unrealistic expectation.
Then occasionally, you’ll find those gems of individuals who write back and are very interested in selling it and can have a realistic expectation on price.
How to Research if a Website is a Good Deal
What you then want to do is begin your analysis stage. In order to do that, you’re going to need access to their Google analytics, access to any revenue streams or screen shots of their revenue streams, and be able to come up with a realistic expectation of what it would cost you to design the site, produce all that content and get that existing traffic to your site.
The gravy are things like a newsletter list, Facebook, Twitter, etc.
How you come up with that valuation is something that is a little tricky. I understand how much I can roughly make off of a website every month. I prefer to purchase websites that I can see a cash-on-cash every year of close to 100%.
I want to be able to make my money back in about a year because there are just too many algorithmic fluctuations and risks.
In doing your due diligence, there are many more things you have to consider besides just traffic and revenue. Namely, you need to analyze the backlinks.
Hop into Raven Tools, view the backlinks of your target site and see if there are spammy backlinks, if there are lots of forum backlinks, spun articles, and just plain ol’ crappy links. If there are, run for the hills as your investment is put at risk of being hit by Penguin.
What about the content? Is the content written by a robot? Is it written by somebody who clearly doesn’t speak English as their primary language?
Or is it written by somebody who is clearly passionate about the subject?
I only buy sites that have content written by someone who’s passionately engaged in the subject at hand. Otherwise, you’re at risk of a Panda slap. And while you’re always at risk of being hit by Panda, owning a website written by someone who is passionate about the subject greatly reduces your risk.
Will You Buy or Build?
When you’re looking at a niche to get into, ask yourself, “Do I want to invest the time and money to build this website entirely from scratch so I know every single detail that happens? Or would I rather invest in a website (and can I even find a website, that I can invest in for a reasonable amount of money) that will enable me to get my return on investment back faster and have a great platform from which to launch?”
(I know! That’s a long question to ask!).
Me, personally, I’d prefer to buy the website. Here’s why: Even if I lose interest, I still have an income-producing website that will provide another passive income revenue stream for me.
However, as you can see with my snowboarding website, I’ve stopped working on it and it’s not really doing so well. But if I bought a website on snowboarding that had 200-500 visits a day, my time and my money would have been better spent. I’d make my cash back and I’d have added a much more solid passive income revenue stream to my portfolio.
That’s not to say that building a site from scratch is wrong—I still do it and I’m probably going to have to do it with this niche website as well. But in general, I’d recommend you take a look at all of your options and see what’s the best use of your time and money.
If you can find a good deal, your money is going to be better spent on buying a website than building it from scratch.
Sure, you’re going to have to deal with transitioning it over, rebranding it a little bit, maybe crowd sourcing a logo, re-tweaking some of the content etc.
But overall, if you’ve made a wise investment in your digital real estate purchase, you’ll have a good passive income revenue stream that will make you money for years to come… even if you lose interest.