Would you rather buy a house or a website? This is a question I’ve often asked myself. I personally believe a website is very similar to an investment property. For several years I’ve been comparing those two items and have found websites to be a far better investment than a home could ever be.

It all comes down to traffic and value: real or virtual. If you have 100,000 visitors a month to a website and you’re well ranked in Google, Yahoo and MSN; why is that any different than having a rental property that has a few hundred a month in cash flow for you. From a business perspective, I see the two items completely identical. There are only a few differences that I can find; 1. A house is not going away anytime soon and will go up in value over time with guaranteed certainty. 2. I don’t get to depreciate my websites like I do with real estate. 3. A website is a small investment compared to a rental property. 4. I don’t have to fix the toilet in the middle of the night with a website. 5. I own 100% of a website.

I want to give you a quick example of what I’m talking about. My first real estate website: Arizona Real Estate Guide (MovingtoAZ.com)
This site was built in 2001 to generate real estate leads for the Phoenix market. It’s only gone thru 1 redesign in the early days and it has been very successful in the search engines. It has been on the first page of Google for “Arizona Real Estate” for over 4 years. That website has generated well over 25,000 real estate leads and millions of dollars in real estate commissions since it’s launch. Not bad for a website that cost me nothing other than my time to build it and get it ranked in the search engines. I admit that it’s not a fancy site for today’s standards, but it gets the job done and that’s all that matters.

Now, if I would have bought an average 3 bed, 2 bath home in Phoenix at the same time I built that website, I would have probably paid around $150,000 or $900/month after the down payment. If I rented the home I would have rented it for around $1000/month, making me a whopping $100 each month in cash flow. Nothing to call home about, the real gain is made with appreciation. If I sold that home today, I would probably sell it for around $275 to $300k. That’s a profit of around $150,000; which would be great over a 5 year period. Not a bad investment at all if you’re able to keep renters in the property 95% of the time.

I don’t dispute the benefits of investment properties, I just don’t believe they are for me. Buying an investment property is like having a baby, you usually have to get qualified for the loan, put down a bunch of money, manage the property, take a significant financial risk, deal with renters, etc, etc. All for a unknown amount of money at the end and virtually little cash flow during the whole process. On the other hand, I can build a website for pennies on the dollar, get it ranked in the search engines, build traffic, develop a financial model and begin making thousands every month with comparatively fewer costs and a heck of a lot less risk. In the end, I can turn around and sell that website to the highest bidder and not have to pay a penny to the bank when I sell it. 100% ownership is the road to happiness.

My frustration:
When I talk to any of the accountants I deal with they like to talk about assets and liabilities. At this point, I usually go into a rant about how Yahoo.com is a website and it makes billions and is therefore worth billions and yet somehow my websites aren’t considered assets even though they make millions in real estate commissions every year. I get the impression they would be much happier about my asset situation if I had a rental property with a few hundred a month in cash flow and a $100k in equity. Trying to get an accountant to understand this basic business principle is like teaching a pig to sing. It wastes your time and just annoys the pig.

When are we all going to realize that websites are assets just as much as any house, office building, land, retail space or business that’s out there? Why is it any different because its on the Internet?

For all you bean counters out there here are a few key definitions:
Assets = Any item of economic value owned by an individual or corporation, especially that which could be converted to cash. (A good website)
Liabilities = A liability is a financial obligation, debt, claim, or potential loss. (A bad website)

Enough beating up on the accountants. I simply believe a website with monetized traffic is a far better investment than any property I could ever own. Just because I don’t have to call a plumber in the middle of the night to fix the toilet, doesn’t make it any less of an asset. In fact, it makes it that much better.

As an agent, following this principle has made me far more successful than ever buying that one house back in 2001. I now have over 170 different real estate lead generating websites throughout the country like the Arizona Real Estate Guide. All generating leads and commissions on a daily basis for other agents in those markets. I could have never done that if I would have bought a house instead of building a website.

Put this to use in your own real estate business. If you buy a house, will it generate the monthly revenue you need to survive? If you have a website that generates leads for you every day, will you turn those leads into commissions? Which one is going to make you the money you need to survive and grow your business? It’s a no-brainer for me, you simply need to decide for yourself.

One Response to “Buy a website…not a house.” Fraser Beach Says: I have generated a great deal of traffic from my website too - currently about 2,000 views per day - but most agents get very little activity. March 20th, 2007 at 4:22 pm Leave a Reply Name (required) Mail (will not be published) (required) Website