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Why Lease Domain Names Through Branded.App
How Domain Name Leasing Works
Leasing a domain is just like leasing commercial real estate. Just as businesses wouldn't buy the building they're located in, why shell out the cash for prime real estate on the web? Today, most businesses are either forced to settle for subpar internet real estate or acquire a new domain once they can afford the large lump sum. Domain name leasing allows businesses to get access to top online real estate, with an affordable monthly payment, and take control of their destiny with world-class marketing, name recognition and off-the-charts SEO.
While renters are protected by state laws when leasing physical real estate, there are no such protections in domain leasing. This makes renting directly from domain owners risky. That's where Branded.app comes in. When using our platform, you are protected by our strong, legally binding agreements. When you lease a domain through Branded.app, you are guaranteed use of the domain as long as you make payments and observe the law, and you can cancel anytime. We hold the domain in our registrar account, so you don't have to worry about the domain being sold to someone else or deactivated.
Domain lease prices are calculated just like physical real estate is priced. A capitalization rate (or, "cap rate," which is the expected rate of return on an investment based on the income the asset is expected to generate), is used to calculate a monthly payment based on the value of the underlying asset. For example, a $1 million office space with an annual cap rate of 10% would be priced at $8,333 / month ($1M x 10% ÷ 12 months).
The moving parts that matter, are the domain valuation and the cap rate, and again, we turn to commercial real estate as a benchmark.
Two physical real estate approaches that work well for valuing online real estate are (1) the income method, and (2) the comparables method. The Income Method is based on the earning potential of the domain, and includes factors such as search traffic, search term competition, cost per click (CPC) for advertising against keyword, industry size and profitability (e.g. insurance vs. yardwork), and many more.
The Comparables Method looks at comparable domain name sales (with adjustments for ). Comparisons can be made using various factors, including keyword(s), number of words in domain name, number of letters in domain name, etc. Adjustments up or down are then made based on differences in timing, keywords, TLD, etc.
There are many valuation tools and resources available to help with domain pricing but ultimately, valuation is more of an art than a science. In the end, the market prices when buyer/seller or lessee/lessor agree on a price.
Determining a cap rate is more straightforward. With physical real estate this an "expected return" to compensate the investor and is based on the potential of the property. Typical physical commercial real estate cap rates typically range from 4-10% and higher.
To make things easy, we've chosen a cap rate at the bottom end of the range: a flat 4%. This is barely above the average rate of inflation in the U.S., which is 3%.