To Buy a House or Business

phokati on 24/03/2016 - 17:19

First of thanks to all inputs from users on my previous post.

Ok, So I don't want to be working this 9 to 5 Job for the rest of my life. I have been looking to buy a house in next year or so.
Just wanted to get ideas on how the business investment can turnout compared to buying a house.
Dont have much experience but i think buying a house you will stuck with a responsibility and your 9 to 5 job with no Scalability.
and paying it off for next 20 - 30 years. Jobs are sticky with a very minimum wage rise.

With Business i am not saying a big business, But for example a Dominos Store in a suburb, A Subway, A small Cafe. Something that you own and put your effort into. Its investing in your own, flexible and better than 9 to 5 boring, and if your making good profit you can pay it off much quickly and buy a house in next 5 - 7 years.

I have noticed recently that even very small business makes a good profit of atleast 500- 1000 a day after cutting off all other expenses. Thats is still 20 - 30 K which you cant make in any job.

With the bank loan and stuff even for house you will be borrowing 500K and similar for business.

I have no experience and above is all guess, I hope you people can share your ideas on it, any pro and cons for on each other.

Thanks again.

Financial

Comments

  • mskeggs on 24/03/2016 - 17:35
    +3

    I applaud your idea to look into this, and I think you could easily find a business that meets your income needs, and that will grow and reward extra work you put in.

    However, there are some things to keep in mind:

    • business has a substantial risk of failure, even Dominos or Subway or similar. If you find yourself losing money, you have few options and can lose your initial investment.
    • small business typically requires very long hours. Some friends opened a juice bar. As they have young children, they close early in the afternoon and Sundays so they can have family time. They are successful. Fast forward two years and their lease is due for renewal. The landlord wants substantially more rent. They may have to open Sundays to keep up the income they previously earned from six days. This kind of thing happens all the time for small businesses.
    • you need some money behind you, or you have to substitute that with extra work to grow a brand new business. You can't afford to buy a successful business unless you are already doing well, so you need to start a new business and grow it or buy an unsuccessful business and turn it around.
    • you almost certainly won't be able to borrow much money to finance a new business. Some franchises offer vendor financing, but that also has substantial drawbacks.
    • Banks will loan you 90% of the value of a house, as they see it as a safe form of collateral. This allows property investors to make huge gains from reasonably small market price increases. It is called gearing. Businesses can't get the same level of gearing, at least not until they are very big with many hard assets.
  • the-mal on 24/03/2016 - 17:38
    +7

    Can I just say that anyone who thinks starting a business will leave them working less hours than a 9-5 job would is very misguided.

    Owning any business, including a franchise, will guarantee you work very long hours for a very long time. Could it pay off? Sure, your business may be successful. It could also be one of the 30-40% of small business that fail and leaves you with significant debt.

    Reasons not to start a business:

    • To make quick money
    • To free up time in your life
    • To secure your future

    Reasons to start a business:

    • You have a solid plan, solid financial backing and solid experience in a particular market
    • You've done market analysis and have identified a gap to occupy
    • You can afford to take a calculated risk
    • You have had great financial and legal advice

    and if your making good profit you can pay it off much quickly and buy a house in next 5 - 7 years.

    Go to your local cafe or Dominos store. Ask to speak to the owner (don't worry about what time it is, they'll be working). Ask them whether the business is a goldmine that helped them secure and pay of a house in 5-7 years.

    A house sits there and appreciates value. If you can afford the loan and live in the house then you're probably sitting on a comfortable investment. It won't get you rich quick, but nothing will. There is a reason the saying is "safe as houses".

    Starting a business is one of the riskiest things you can do with your money. If you don't have an exceptional idea or ability, and a hell of a lot of luck to go with it, chances are you'll be working much longer than 9-5 with much higher stress levels and I really doubt it'll be the money spinner you're anticipating.

    Sorry to be "that guy" right before a public holiday. Happy Easter…

  • Flowerbomb on 24/03/2016 - 17:59

    Seriously, the "doughnut time" guy has been opening new stores left right and centre in Sydney. E.g, Newtown, Central Park, Glebe. I bet in the long run he will be losing dough, when the donut craze dies.

  • Mad Max on 24/03/2016 - 19:38
    +1

    To start a business is certainly a risk, but "He who forecasts all perils will never sail the sea".
    Some people can cope with the pressure and if their stars align they will be successful. Sometimes is a matter of "blessed ignorance" other times they really know what they are doing and have experience in the type of business they are starting. And if it fails they take it on the chin and start again.
    Other people prefer the safety of a stable job even if that will never make them rich.
    What category do you fall in?

  • pointless martyr on 24/03/2016 - 23:28
    +1

    Buy a house boat, do river cruises and fishing tours

  • shortgum on 25/03/2016 - 03:37
    -1

    get a wife first maybe. married so can share the risk on house or business

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