Bidding on some websites

With my stocks cashed in (probably just in time for a huge market rally) I started looking for other investments. The idea of buying websites was something I considered years ago but just never took action on. Now that I have some cash in the bank I’m ready to make some aquisitions.

One of the first finance books I read talked about the important re-frame of buying a cash-flow producing asset before buying a liability. That way the asset pays for the liability and once it’s paid for you still own the asset. The book dealt with real estate investing but the same thing applies.

If you had $10,000 to buy a car there are a number of options available to you:

  1. You could buy a used car for $10,000 and have no debt-  just gas/insurance/maintenance costs
  2. You could use the $10,000 as a down payment for financing a nicer car – adds a debt payment to your monthly expenses
  3. You could use the $10,000 as a down payment on a $100,000 mortgage, buy a house and a car with the money, rent out the house for the cost of the mortgage + house upkeep & taxes.  Now both your house and car are being paid for by someone else.  By the time the mortgage is paid off you will own a $100,000+ property and had good use of the car – and it only cost you $10,000 initial investment.

The math for buying a website is similar to buying a rental property except that the prices are better.  There’s no need for the leverage of a mortgage.

If you look for it you’ll find a website making $1000/month profit that costs $10,000 and requires minimal work to keep it running.  That will pay for the financing on a nice car and all the expenses!  Surprisingly that is actually how the numbers work out.  You can buy a $40,000 car for $10,000.

This is the approach I’m taking with getting a motorcycle now.  I’m in the process of buying a couple of established websites that will add $500/month to my income and I will use that to get a new bike from the dealership.