In the Internet real estate business, a domain name is the equivalent of land. It’s the location upon which a business is built and where business is conducted.

Real Estate Versus Internet Real Estate: The Power of Leverage

Physical real estate is a long-term, known investment. To purchase $100,000 of land, you might put up $20,000 and borrow the remaining $80,000. If the property doubles in value in a year, then it’s worth $200,000. Your $20,000 just made you approximate $100,000 not including the costs you would have had to pay on the interest for the $80,000. Not a bad return.

Internet real estate doesn’t work the same way . . . yet. Because this is a new, relatively untested, dynamic market, banks and other financial institutions generally don’t loan money against a domain name. Some, however, are starting to do just that – because of the substantial cash flow some Internet real estate properties command.

Andy Bernstein is the undisputed king of finding, owning, financing, managing and operating small, strip-mall shopping centers. His firm, Bernstein Investments (GreatShoppingCenters.com), understands the real estate business extremely well. To Andy, the real challenge isn’t finding investors but finding and creating good deals.

Andy and I enjoy a good debate comparing the commercial real estate business with the Internet-based real estate business. Let’s look at some of the differences:

Location Versus Mindshare

Andy Bernstein buys great locations he believes can appreciate significantly or generate substantial cash flow. Internet-based real estate offers an additional benefit: mindshare. A great domain name gets more traffic to the site associated with it than a hard-to-remember domain name with no relation to the target market. If you wanted cuff links, chances are you’d go to CuffLinks.com. If you wanted Venetian blinds, you’d go to Blinds.com. If you wanted information on mutual funds, you might start researching at MutualFunds.com. An estimated 12–15 percent of those on the Internet type the term into the address field of their browser, hit return and arrive at the site with this URL. That’s called direct navigation, and the mindshare associated with the domain name alone generates customers.

Local Vs. National and International

Andy’s real estate serves a local community. But anyone who has an Internet connection anywhere in the world can access a website. If you have a laptop, PDA or cell phone with an Internet connection, you can access Internet real estate on the move.

One Versus Many

Each piece of physical real estate is unique. No two properties share the exact same qualities. But in Internet real estate, you and 500 others can have the same word in the domain name of your websites as long as each of you has a unique modification – for example, JustBlinds.com, UniqueBlinds.com, MiniBlinds.com and 3DayBlinds.com.

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