Lots of great questions, and certainly worthy of concerted thought. Here is how we approached these and other questions a few years ago.

To develop our investment strategy, we considered as many different domain plays as we could see happening in the space. Then we whittled that list down to what we thought were the most sensible and manageble plays considering our investment stake vis a vis the most potential for reward. Next we created an investment overview so all partners in our LLC knew what “The Plan” was. The plan used an analogy of “3 buckets” that we were going to pour our money into over time.

The first bucket was for hand-regged geo-domain products/services (CaliforniaPlumbers.com, for example, though we don’t own that one . We would sell these domains outright for the “correct” price, but we would also hold them for a while until better mass-development software (and/or techniques) became available. Eventually we would offer end-users developed websites instead of just a domain.

The second bucket would be comprised of higher quality 1 and 2 word generics that we would develop over time. Each of these domains would cost in the thousands of dollars (at least) to acquire, but we were confident that with the right development plan, they would each be worth many times their acquisition value at some point (2-5 years?) in the future.

The third bucket would be cash – used for future re-registrations and for use in the (hopefully unlikely) event of a UDRP (though we never buy TMd names, and always do a tradename/mark search before buying anything).

All domains would be parked somewhere while the development process continued in the background.

Have we stuck to that plan? Yes, pretty much (although we have also veered off course a few times, buying search phrases in Spanish, for example). And at times we have considered selling certain domains before their time – meaning, before we developed them into sites. Why? Because both making sales to end-users and doing development is very hard work. And if the offers we received were many times what we paid for the names (sometimes 100X what we paid), then we found (and find) it difficult not to consider taking that kind of profit.

However, in general, we have remained more bullish on the idea of adding value to our domains via development and remaining focused on a mid- to long-term investment horizon in order to maximize our return on investment. Can short term profits be tempting, particularly if parking isn’t covering some of your re-registration fees? Yes, it sure can. But we’re trying to be patient, work hard, and stick to the plan as much as possible. Rome wasn’t built in a day (yada yada).

Oh, and except for certain .orgs and .nets that make a lot of sense to us for various reasons, we’re usually only interested in the .com space.

Any new investors in this space should definitely give all your questions a whole lot of thought before diving in.

Thanks for the advice,

Lou