I’m sure the title describes a lot of you guys and it describes my situation back when I started out as well. So let’s leave concepts, paradigms and bs in general aside: seriously, let’s get right down to business and focus on making bank!

Should You Invest in Domains if You’re Low on Cash?

Nope! Why? Because you’d end up buying crap, that’s why. Need some more reasons? Ok, here ya go:

1) You’d be under waaaaaaaaaaay too much pressure and it would cloud your judgment as a seller. You’d have to basically flip your way up the ladder, so to speak, and that’s easier said than done. Let me make myself perfectly clear: there are TONS of better ways to make money when you’re starting out than flipping domains.

2) You’re not (financially) ready to make money through trial and error as an investor. In other words, the “error” part could end up depleting your entire budget. The result? Disappointment! If you don’t have a budget which makes it possible for you to take calculated risks, you’re carrying around a huge burden.

3) Finding decent domains at extremely low prices is so hard that you’d end up spending hours upon hours researching in order to find ONE “flippable” domain. The result? If you factor in the time you’ve spent and your return after selling the domain, you’ll draw the line and realize that you’ve actually made peanuts per hour.

The list could go on and on but I don’t want to waste valuable time, I’m sure you get the picture. Are there exceptions? Are there examples of people who flipped their way up the ladder? Yes, there are always exceptions but that doesn’t make a certain method worth it. People even made money by selling real estate on the moon but that doesn’t mean that you need to buy a telescope and start looking for planets to invest in 😉

OK, Then What SHOULD I Do?

First of all, you need to realistically assess your current situation:

1) What are your goals as a domainer? Do you simply want to generate a bit of side income? Do you want to retire early thanks to domaining?

2) What budget would put you in a good position to take calculated risks?

3) How can YOU secure that budget? Do you have stuff that you can sell (on ebay, via craigslist, through a garage sale… whatever)? Based on the value of those assets, would organizing everything be worth it or would you (just like by flipping cheap-ass domains) end up making peanuts per hour?

4) Ok, maybe you don’t have objects worth selling. No problem, start selling your TIME! How many hours per day are you willing to invest in order to secure a decent budget?

5) What can you do? Are you a great designer or programmer? Are you a great writer?

After you’ve decided what you’re going to do in order to generate cash, start making things happen. If you’ve decided to sell lots of stuff you don’t need, start organizing everything. If you’ve decided to sell your time, let others know by posting a thread on a bunch of webmaster/domaining forums and/or signing up for an account at sites like elance.com.

If you’re willing to work hard and provide value to clients, you’ll start making money right away and before you know it, your paypal account will be in great shape. But don’t forget to keep your eyes on the prize and:

Know When to Stop!

Being a freelancer is not bad but it would be a shame to stop there. Seriously, you need to understand that at a certain point, enough is enough. If you have a budget which allows to take calculated risks, you’re ready to start investing.

Again: if you have enough cash set aside in order to be able to survive for let’s say 6-9 months, you’re probably good to go. What now? Here’s what I’d recommend:

Develop ONE Site and GRADUALLY Add Domains to Your Portfolio

First of all, buy one kick-ass domain. Just one for now! Even more so, buy it with the intention of dominating a niche. On the one hand, the domain should have inherent value (who knows, you might receive an offer you can’t refuse at one point or another and even leaving everything else aside, a great domain always adds quite a bit to any site’s value in the eyes of a potential buyer) but on the other hand, it should be related to a niche you feel comfortable with.

This one site should be something amazing and if you’re not passionate about the niche, dominating it will be extremely hard. Think about it: you are not passionate about what you’re doing but will be competing against LOTS of people who are!

Why Develop and Not Just Invest?

You have to put food on the table, always keep that in mind. If you have to sell domains in order to be able to do that, you simply won’t be in a good position to negotiate. Period. Remember: I’d recommend not getting started unless you have enough money set aside to survive for let’s say 6-9 months (if you think that 6-9 months would not be enough, keep selling time and/or assets until you generate a budget you’re comfortable with). That’ll give you enough time to turn your site into an asset which generates enough money for you to get by at the very least.

Even if you’re not exactly experienced, you’ll still have enough time to learn the ropes and make money while you’re at it. In the meantime, keep your eyes open for great buys. Yeah, you have some cash at your disposal but that doesn’t mean that you have to spend everything within 24 hours. You can’t build a decent portfolio overnight, it’s just not how things work. As a beginner, you have to fight that URGE to buy as many domains as possible asap because otherwise, that urge will cloud your judgment and you’ll end up making costly mistakes.

Investing for a Living?

Sure, investing for a living is definitely possible IF AND ONLY IF you have a huge budget at your disposal. If, 2 years from now, you sell the site you’ve developed along with maybe a handful of domains for let’s say $750,000, you’re in a decent (not great, just decent) position to become a full-time investor.

Without a huge budget, you’ll always be dealing with the pressure of having to sell domains in order to put food on the table and that’s an extremely dangerous weakness. To sum it all up:

Here’s What I’d Recommend

Step 1) Sell a few offline assets and/or your time in order to secure a decent budget

Step 2) Buy one great domain related to a nice you’re passionate about and do your best in order to dominate it

Step 3) In the meantime, gradually buy domains but never let the urge to rush things get the best of you. Trying to build a portfolio overnight is NOT recommended

Step 4) After seeing how things work as both an investor and a developer, you’ll be able to make informed decisions: maybe you’ll focus on development or maybe you’ll end up becoming a full-time investor, time will tell

Step 5) After you have a lot of money in the bank, send 50% my way. The end 😉

Maybe there are other approaches worth considering, there probably are. Based on my experience, this is what I’d recommend if you’re just starting out and are low on cash. If you’re not a complete idiot and are willing to work hard as well as smart, you’ll be just fine. Stop worrying and start making things happen!