How To Browse Flippa Listings Like They’re Foreclosures
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The economy is not doing well-
we all know that. It may have come back up a bit but it was no where near in 2005. When the banks starting falling, housing prices went down and people started to foreclose on their properties. People needed money and they had to sell whatever they can. Investors swooped up those bargains. That was the real estate market. There’s another market which looks a lot like that- the Internet real estate market. Just like real estate properties, people buy and sell web assets online. It’s not new. Actually, people have been doing this since the late 90′s through Sitepoint’s Marketplace. With Flippa now spun off from Sitepoint, more and more people are seeing the value in buying websites.Eyeballs = Location
Web assets are very much like real estate. Instead of location, location, location for real estate, it’s eyeballs, eyeballs, eyeballs for websites. The more unique visitors it brings in each month, the more valuable it is. Wherever people go, the advertisers follow. Just like real estate, some generate positive cashflow every month, some don’t at all. People flip web assets like some people flip houses. They buy a depressed website, think of new ways to generate traffic, monetize it, and then sell it for 3-5x the original value.
Advantages Of Owning A Web Asset
With web assets, there are no mortgage payments. It’s usually brought with a lump sum. I bet financing can be negotiatied but there hasn’t been many really high value websites that have been sold to warrant that (at least not ones I can afford). There are no renters that you have to find. You will have only one sales contract for a website and that’s it. Outlined in it are what the buyer receives- domain name, all the content, Twitter account, Facebook fan page, subscriber list, and so on. For web sites, it just seems like all the things investors don’t want to touch are not there. They don’t have to worry about finding an attorney if the renter doesn’t pay, or having to show the property. Everything associated with monetizing a website can be done on a computer. And that’s why I like web assets better than real estate assets.
How To Evaluate Websites
So back to the title, why do I browse the Flippa listings like their foreclosures? If you are a fan of Rich Dad Poor Dad, Kiyosaki advises that everyone who’s interested in investing in real estate spend time looking viewing at least 100 properties before buying their first one. Likewise, Donald Trump when he was younger browsed foreclosure listings like someone else would read read the newspaper. They both spent time familiarizing themselves with what looks like a good property on paper and what REALLY is a good property. It’s the same on Flippa. There are a lot of websites being auctioned off. Some are good, and some not so. In order to find the good ones, I need to spend my time looking at web properties. And these are the questions I ask, even if I don’t buy. After a while, you start to notice patterns that evolve that only a person who studied them deeply will see.
- How much traffic is it bringing in- as in unique visitors per month? I usually do not trust websites that have more than a few thousand uniques if it’s only been up for a few months. A lot of that can be brought traffic. A better indicator will be the “time spent on site” that’s on the Google Analytics report.
- How long have the website been up? I stay away from websites that were just created a few months ago. If a website can go up that quickly, how likely will it be that another one pops up right after I buy it?
- How much cashflow is it bringing in? Where is the revenue coming in from? Is it just from AdSense or something else?
- How many Twitter followers does it have? Are most of the followers spammers and bots?
- Does it have a Facebook fanpage?
Ask these questions for every website you are INTERESTED in buying. Here’s what I learned from the few months of browsing Flippa listings:
- Websites are usually sold 8-10x the monthly revenue.
- It’s rude to just ask for the reserve price. Sellers don’t want to say that and have bidders wait until the last day of the auction before putting in that bid. They usually want the auction to go higher than that, and so they offer a “buy it now” price. There is a way to get around that however. You have to be genuine with your questions and interests. First develop a rapport with the seller. That way, they know they at least have someone interested in buying it and so it doesn’t seem so bad to tell them the reserve price.
- There are many what I call “small time” opportunities on Flippa and very little “big time” opportunities. The big opportunities sell for A LOT. Retweet.com sold for $250,000. But with those you know you’re getting legit traffic and legit cashflow right off the bat. Because there are so many small time opportunity websites, it’s hard to find the good ones. But they’re inexpensive relatively speaking. Some sell for less than a 1000 dollars. It’s my opinion that an investment should not be made on small time opportunities.
I’m still doing my homework on many of the sites on Flippa. At some point, I will pull the trigger. But just like in real estate, investors need to keep their emotions in check. Just because a property looks good on the outside does not mean it looks good on the balance sheet. Look through enough listings and the emotions will leave. Only thing left will common sense backed by analytical data. That’s when it’s time to make an investment.
[Image credit: respres]
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Created By: Jack Liu
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