IS BUYING A WEBSITE A GOOD INVESTMENT?

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Gray Frame Corner

With an understanding of SEO and marketing, buying a website can offer a great return and be a great platform to build off of. However, there are many pitfalls that could cause bad outcomes.

I love the concept that buying a website is a great way to get a head start on building an online business. There is also the ability to leverage the trust the website has already earned over time.

What is the Upside?

Sites used to trade at 5-10 months multiple of their net income. Now, 30-60 months seems to be the norm. If this trend continues, simply holding onto a website for a few years could give you an upside return on sale. Plus you will be receiving profit during the months you held it.

What are the Risks?

The operations of websites have more moving parts than some other assets like real estate. Though they are much less complicated than the inner workings of many businesses that people buy stock in.

How Are Income Producing Websites Valued?

Income producing websites are valued with concepts similar to commercial real estate. The income is divided by the cap rate, or discount rate, to determine the value. That is the underlying concept, but no one really talks about it.

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