If your domain name is associated with a virtual property, than it stands to reason that the value of the property depends on the neighborhood and what the property offers.
Just like you won't want to spend half a million dollars on a run-down one-room shack in Nowhere, Alabama, you don't want to buy domain names that have very little potential to resell or are worthless.
You want names that attract buyers and represent a virtual property that appreciates over time.
Just like in real estate there are multiple ways to make money from a house transaction, there are also multiple ways to make money off a domain name.
In real estate, if you are looking for a home to call your own then you buy it with the hopes of staying with it for more than five years.
Appreciation in the neighborhood and the home eventually end up making your investment worthwhile.
However, there are real estate investors that either buy property to flip them or to rent out to others.
The same thing can be done to domain names, in a manner of speaking.
THREE WAYS TO MAKE MONEY Going back to our real estate analogy, the three most common ways to make money with housing is to flip it, rent it out, or live in it while you build it up.
These three ways are exactly how you make money with domain names.
Flipping Flipping real estate is likely to get you in big trouble these days, but flipping a domain name is much easier.
Flipping is that you buy a domain name for the expressed purpose of turning around and selling it very quickly.
You don't intend to hold it to develop it, nor do you intend to park it and use it to see how much traffic it generates.
You can taste the domain for a period of five day and during that time you can evaluate whether it's worth flipping or not.
If you buy a domain name thinking it's going to be a quick sale, there's no guarantee you will attract a buyer at any time.
There are expenses for putting up on auction and for tasting it now.
So, you will make a very small investment on each domain name when you decide to flip it.
You can recoup it many fold by selling it, but you actually have to do some work first online to flip it.
Now, if you've done some research you can still think up your own.
Or, maybe you have the inside scoop on some very new trend that has something to do with your interests.
This can be a line of investigation that is quite profitable.
The more you are familiar with a specific industry, the more likelihood you will be able to create some domain names that appeal to somebody who wants to buy it.
Most people have some degree of familiarity with commercial ventures.
If you work in a bank, you probably know what the popular finance terms are and what products people are most interested in buying at particular time periods.
This is also important.
You want to create the domain name when it has the strength and fascination to sell.
For instance, right now many people might be more interested in reverse mortgages as the baby boomers retire.
If you were a mortgage loan officer, you probably know all the lingo and what products can appeal to these customers.
By default, they will also be the same terms that appeal to the buyer of a domain name.
So, it doesn't even matter if you are having trouble making ends meet because of the housing collapse story, that reservoir of knowledge you built up can be very valuable in helping you restructure your knowledge base so it still makes you money.
Use what you know and follow the trends.
That's really all there is to it.
Some weeks some types of domains are hot and others are not.
Not every domain name will sell when you auction it, so you have to be persistent.
It's a volume game and you can't get emotionally attached to finding the "perfect" name or trying to make a big kill in one area.
The safest way to make money in domain names is to treat it like a business.
The domain names are not your babies; they are a product used to generate revenue.
So, don't waste too much time trying to be clever and find that big scoring domain name.
Odds are, if it happens, it will hit you like a tripped wire as you innocently make toast or something.