The second option is to buy sites to flip them later which is called site flipping. You buy low, can optionally improve the site to increase its traffic or revenue, to sell it for a profit later on.

My intention with the site that I bought for $23,000 last year was to stabilize its earnings, reap in the rewards for a year to sell it for a profit after 12 months. I’d like to post an update on what happened to that site and where it stands now.

Here is the revenue that the site generated in the last months:

• July: $3471.80
• August: $3384.60
• September: $1957.62
• October: $1774.65
• November: $1804.44
• December: $2209.74

The total is $14602.87 for the last six months of operation. Not all of it is profit though, more about that later. You may have noticed that the revenue dropped considerable in September, this can be attributed to the fact that it is a seasonal product that is more popular in spring and early summer.

You need to subtract your expenses from the revenue. With site hosting and the domain name at about $10 per month, and a monthly SEO campaign for $399, total expenses came down to $2454 in that time. The net revenue therefor was $12148.87 in the last six months.

Since I have paid $23,000 for the site, I made more than half of my investment back at the six month mark. If thinks pick up in the coming months, I may make all the money back in the next five months. Everything is profit afterwards.

The site earns 10% from those sales.

My main intention then is to sell the website again for a higher price than I paid. Why a higher price? Because revenue history pays an important role. Buyers pay more for sites with a larger revenue history. If a site’s earnings have been steady for a year, it is more worth than a site who earned money for just one month. It is a risk factor that needs to be part of any calculation.

My intention is to sell the site for 24 times its monthly profit which would be around $50,000 which would all be profit. I may have to use a website broker for that who usually charge you between 10% and 15% for their service. This leaves me with $42,5000 to $45,000 in profit which is not bad for a year and an initial investment of $23,000.

Risks

Investments always come with certain risks, a stock may tank, a bank may file for bankruptcy, a house may be destroyed by an act of god. You face two core risks when it comes to web investments.

• 1. The seller may have not revealed all the information to you. Let me give you a basic example. A seller not mentioning that part of the site’s traffic was paid for, which for obvious reasons should have been included in the site’s evaluation. You may be able to settle this with the seller directly, but more often than not in court.
• 2. Acts of god, or more precisely Google or other traffic sources the site depends on. Algorithm changes, blackhat attacks against the web property or issues with a script the site depends on can turn revenue from normal levels to zero. While you could try to get those issues resolves, it would mean that you had to spend additional money to do so (Unless you are a do-it-yourself webmaster. Even then you’d have to spend your time fixing the site instead of using it for other projects of yours).

Check out 8 Essential Tips For Web Investors for additional tips and information.

Closing Words

Site flipping can be highly profitable, only comparable in revenue to high risk stock market investments. Most of the risks can be mitigated on the other hand with a careful evaluation.

I plan to re-invest the money into one or two web properties after the purchase.

You may also be wondering why I do not keep the site instead and let it earn the $2000 for me every month. The reason is simple: It would have to earn that amount of money for two years to even the sales price. In those two years, I could try and quadruple the money with two new investment cycles instead, provided I find the right web properties to invest in. Instead of having one site earn $2000, I’d end up with sites earning $8000 per month. after two years.

The stock market is different. You need to research stocks a lot before you invest your money. And that’s where the problems start. You could invest into a fund but would need to do research on that fund as well, or hand the money over to your contact at your bank and ask them to invest. If you are lucky, you may get a 20% or even 30% increase over one year. If you are unlucky, you may end with 0 Dollars. The most likely outcome is the +/- 20% range. If you get 20% you end up with 12,000 Dollars after one year, minus taxes and brokerage fees. You may also get a dividend on top of that. Problem is, you do not have the money yet. You need to sell your stock. (Please note that expert traders may have much higher returns, the average Joe on the other hand will usually end up with less money). And you do not get that extra 20% or whatever directly into your bank account.

Investing In Websites

Lets take a look at website investments for a minute. I’d like to share two first hand experiences with you. I bought a site about six months ago for 400 Dollars. It generated a revenue of approximately $40 per month from Adsense and Amazon. I paid another $200 Dollars to get guides and articles updated, and fresh contents on the site, and another $400 so far for SEO.

That’s an investment of 1,000 Dollars. The site is now raking in $60 Dollars per month and climbing to new heights ever since. If it sticks with 60 Dollars I will end up with 720 Dollars after one year’s time. That’s a 72% increase in the first year. If I would not have done anything it would probably have returned $480 in its first year, which is a 120% return on the investment.

The second site was more expensive. I paid 23,000 Dollars for it. It earns between $2000 and $3000 Dollars per month. I plan to do light SEO and content generation on that site for about 200 Dollars per month. My first year investment is therefor 23,000 + 2400 = 25,400 Dollars. The money I earn from the investment is conservatively $2000 per month, that times 12 is 24,000 which is almost a 100% return of my investment. Even if all hell breaks lose and the site drops to $1000 per month, I would still earn 12,000 from it which would be more than 40% return.

And that’s money that I get right into my bank account.

Websites rise in value not only if their revenue increases, but also if other factors change. And one of those factors changes without the user’s doing: Age. A track record of constant earnings over a longer period of time will usually result in a higher selling price.

Websites, like stocks, can crash badly. Most websites rely on Google, Bing and other search engines for the majority of traffic. A ban on Google could seriously hurt the earnings of a website. You’d still have opportunities like PPC but that would require another investment and thorough research.

It is still possible to burn all your money on a bad investment. I see offers for new websites with 100 visitors that are supposed to earn 1500 Dollars per month every day. You will encounter black sheeps among the sellers, which you often can get rid of by looking at a website’s track record of traffic and earnings. If the seller is only providing information about the last month or two, you can almost be sure that something fishy is going on. One of the tricks of those sellers is to drive extra traffic to the website in the first month to make it look like it is getting good traffic and earnings. Once you buy the site, the traffic stops and you end up with an almost worthless website. It is possible to spot those if you get access to the stats of a site.

I’m not saying that website investments are the best option for everyone. You need some knowledge in the field, not only when doing your research and evaluation, but also technical knowledge later to move the website and set it up on one of your servers or hosting accounts. I do all that by myself but you could hire someone to do the job. That again costs money.

For me personally, investments in websites are the way to go forward. I have the expertise to evaluate them and the technical know how to maintain them after they have been purchased.

If you do proper research, your websites will return between 40-100% of your investment after one year’s time. Even if it crashes in the search engines, you can still work on it to improve the rankings again.

That’s another difference to the stock market. Once you have made your purchase there, you are a passive bystander hoping for the best. With your website, you can actively promote and optimize it.

Here are two good sites to get you started with web investments: Flippa.com is probably the best known marketplace for web properties. You find many professional buyers and sellers there, and it is rare that you can make a bargain purchase there. It happens, but it is rare and you need to be fast. Despite its quality, you find many lukewarm and some fraudulent offers on that site.

A second place to buy domains is the Digital Point forum. You usually get less stats and information about a website, and more fraudulent or lukewarm offers because of this. Sites here tend to go for a lower price though and you may end up paying less. Some webmasters buy on DP, optimize for a month or so and sell for a premium on Flippa. That’s called site flipping.

You will find other sites where you can buy domains, eBay for instance or Sedo. Good sites there sell for a lot of money.

Where do you invest your money in?

That’s where the website valuation software, or lets say website valuation service, Ebizvaluations comes into play. The service requires data that can only be known to the owner of the website or to a seller who has either seen the information on a website (like the website selling platform Flippa) or who has been in contact with the owner of the property.

Data that has to be entered include the monthly income and expenses, the months the site has been making that income and the type of site. There are additional – but optional – fields that can be filled out including the number of monthly uniques and pageviews, the members, the uniqueness of the content and the skill required to run the website.

All of these information will be taken into account plus the information that can be gathered from public sources including the Google Pagerank, Alexa rank and Compete rank.

The website report will list all computed background information plus an estimated valuation of the website.

The valuation is usually more precise thank those of automatic website valuation tools thanks to the additional data that is entered by the user. The only difficulty that users can experience is the need to acquire the data that needs to be entered. It usually is not a problem to gather the data from website auctions but it could be for websites that are not up for auction.