Buying expiring domains to earn money
If someone do not pay to renew their domain the domain expire and becomes available for others to register. There are several sites that special in helping people acquire expiring domains when they become available. Many registrars works with sites like this and make the domains available through an auction before they expire and becomes available to register. Most good domain names that expire are bought during this stage and never becomes available for registration. Through drop catching it is possible to acquire both good keyword domains that for whatever reason has expired and PR domains. If you buy a domain through a drop catcher before it becomes publicly available to register than the domains will usually keep their PR and the power of the links. This allows you to quickly build PR sites and different niches. If you buy a PR domain you should try to get at least an Index page up as soon as possible to show Google that the site still exists.
Buying domains on drops can be very profitable, especially if you are active in niches without very much competition. If you do you might be able to pick up high pr domains with good keywords for a fraction of what the same domain or site would cost if you bought it on the open market. It is true that you will need to build a new site if you buy domains through drops but that is well worth the trouble considering the head start you can get for that site buy buying an existing site.
If you want to try making money from dropping domains you should start by registering accounts at snapnames, namejet and godaddy auctions as these are the main players where most domains are sold. You might also want to get an account with dynadot but they have a lot fewer exclusive domains than the 3 website mentioned earlier. It is important to get account on all 3 sites as they will feature and give first chance on different domains. To get an account is free but you will need to provide credit card information. Payment for any domains you buy will be deducted from that credit card. With a basic account you can only buy basic domains. If you want to buy very expensive domains you will need to verify your accounts. Once you have done that you can buy however expensive domains you want.
If several individuals are interested in a domain that are about to expire than the domain will be entered into a closed auction where only those who showed interest in the domain by making a bid is allowed to take part. Who ever is the highest bidder when the auction ends (Bid time is extended after each bid to avoid snipping) will get the domain. It generally takes a few days after you won to auction before you get the domain in your account. Once you have access to the domain you can flip it for a profit or build a website on it. (or just hold it if you so prefer)
If you want to flip it you will usually get the biggest return if you contact different end users for the domain that might be interested in buying it.
Looking through all the expiring domains to find the gems can be hard since 100 000 to 150 000 domains expire each day. To help you the different drop catchers have search engines that will allow you to search domains that contain certain keywords. It is often good to work within a certain niche as you can keep good track of one or a couple of niches but it is very hard to keep track of all drops.