Life is about making decisions. And a significant percentage of the decisions we make are channeled towards better living standards. Additionally, the decisions you make are progressive, in the sense that they happen after achieving another decision. That is why most people think of an investment after achieving their most basic wants and accumulating some capital.
When it comes to making investment decisions, most people are indifferent between starting a business and buying a new house. However, if you are one of such, your choice of either of the two investments will depend on your financial capabilities, investment goals, and abilities to successfully implement your investment.
Starting a business or buying a house
However, since some of the above factors may favor one investment over the other, it is essential to consider other aspects surrounding both projects to settle on a justified investment decision.
Therefore, here is a detailed guide on both investment options to guide you in your investment decision.
Starting a Business
You can use your hard-earned funds to start a business and take advantage of the sales proceeds, among other benefits. The size of your business can be small or large, depending on your financial capabilities and implementation strategy, among other factors.
To make the most out of it, you should be specific on your goals and be keen on strategizing their achievement.
The Pros of Starting a Business
Starting and running a business is fun and rewarding. Below are some of the benefits you can get from a successful operation of business.
1. You Have Full Discretion Over Your Business
By starting a business, you become your boss. That means you are free from job stress and control from top-level managers.
Additionally, you have the power to decide who should work in your organization and who should not; make investment decisions, and to review the implementation process.
If things are not working well, you have the mandate to change the implementation strategies, merge the business with another one, or even sell the business and shift to another one. In other words, you are responsible for the success and the failure of the organization.
No one will be there to guide you or question your failure. So, you should be keen to concentrate on the positives only.
2. You Have Great Flexibility
Operating your own business gives you the allowance to lead a balanced lifestyle. For instance, as an experienced business person, you will know of the peak business hours. As such, you can use off business hours to execute your household chores or spend the time with your family.
Additionally, you can run the business from a physical store, conduct it virtually, or use both combinations. Essentially, you have full control over your time and decisions. All you need is to use the advantage to make the most in your organization.
3. You Get Financial Freedom
Another advantage of owning a business is the control over the business cash flows. You have the power to plan how profits from the sales would be utilized. However, this may only be possible in the long run when the business has realized the returns on investment.
To hasten the realization of ROI, you need to be consistent in your customer reach out, quality customer service, and maintain discipline in matters relating to the application of business resources.
4. You Hold Retirement Income
If you cannot run your business efficiently due to old age, you can sell the business and use the proceeds to meet your needs at your old age. Alternatively, you can employ a reliable person to manage the business on your behalf and enjoy the profits from the business.
However, the latter may be risky since the manager may decide to run the business to meet their interests.
5. You Fulfill Your Interests
People are created differently and so are their dreams, skills, and experiences. Starting your business will allow you to pursue your dreams and explore your skills using your custom means. You will be satisfied when you will start earning returns from your business.
Also, you will experience the feeling of self-worth to see customers enjoying the use of items that originated from your efforts.
Cons of Starting a Business
Running a personal business has its drawbacks too. Some of such disadvantages include:
1. You Face High Risk of Failure
Implementing a business idea is coupled with a lot of uncertainty. First, there is no guarantee your target customers will like your products. Secondly, you are unsure of the competition and other hurdles that may hinder you from penetrating the market well. Finally, the unpredictable nature of the market converts the whole idea into a risky undertaking.
2. You Work For Long Hours
To maximize your revenue, you will have to operate the business most hours of the day. In essence, you should be the first to enter and the last to leave the business. This will deprive you of the family time and time for attending your other activities.
3. You May Need More Capital
A business is not a one-time investment. Besides the initial capital investment, you need additional capital to cater to major business emergencies that may arise in operating the business.
That implies that you should cut on your living standards to save enough for the business or seek external financing. However, the overreliance on external financing is not healthy as it may leave you with huge debts or even lose control of the business to debtors.
4. You Have To Encounter Stress
Being in charge of everything means dealing with everything, including the business bills, employee salaries, employee behavior, business losses, machine breakdowns, customer complaints, competition, etc. In essence, there is an array of factors that are enough to trigger your stress and anxiety.
Factors to Consider When Starting a Business
Below are considerations you need to focus on when starting a business from scratch
The Market Availability
Before starting a business, you should ensure that there is a sufficient number of customers who are interested in your product. That is where market research becomes comes in handy.
The Level Of Competition
Assessing the competition in your niche helps you know the competitors’ products and marketing strategies to win the competition.
Marketing And Selling Strategies
You need to inform your target audience about your products and convert them to your business. To make the most of your business, you need to move your business online and then use the most effective digital marketing strategies to market your products.
For effectiveness, you can use web metrics to monitor your marketing efforts, conversions, and bounce rates to make relevant adjustments.
Buying a Home
If you are not business-oriented, then you can channel your capital into buying a house. Then, depending on the house’s architectural design, you can use it for residential purposes, commercial purposes, or otherwise, as you decide.
Pros of Buying a House
Investing in a house comes with various benefits, including:
1. Offers A Great Source Comfort Of Passive Income
After buying a house, you can customize it with all amenities that bring about comfort. This may include furnishing it with quality furniture, quality paints, window coverings, and lighting to give it a homely touch. If you have another living space, you can rent out your house to third parties and enjoy the rent income.
2. It Appreciates In Value
A house is a sure investment. Once you buy one, its value continues to accumulate, hence promising huge returns in the future. And, there are no uncertainties that are involved with business operation.
However, you should regularly revamp your house with the latest features to maintain or improve its value in the future.
You can use your highly valued house to collateralize a loan or sell it at a profit to cater to your financial needs.
3. Gives A Living Security
When renting a house, you live under constant fear that the landlord may decide to break the tenancy agreement and kick you out of their house at any time.
In addition, the unexpected move to a new house can be stressful and expensive. Buying a house cushions you from such anxiety and gives you a peaceful stay in your space.
4. Allows You To Create Your Own Home
When living in a rented property, you have limited options as far as the house improvement is concerned. In other words, you won’t impress the landlord by trying to furnish your rented space. Buying a house gives you the freedom to convert your space into the paradise you have ever dreamt of.
You can decide to complete your bedroom with a blend of cool hues on three walls and one accent wall with bold shades. Or, paint your sitting room with bright shades without minding what will happen next. In essence, you have the ultimate creative freedom to customize the appearance of your home.
5. Enhances Your Control Over The House Bills
A landlord may decide to abruptly increase the house rent, leaving you to either adjust to the high rent cost or quit their apartments. They may also interfere with other house utilities, leading to cumulatively high house rent.
Buying a house offers the best way to avoid such mistreatments and gain more control over your bills. This comes with the added advantage of enhanced privacy.
6. Involves A Simple Process
When in need of a house, you can get one by just contacting several real estate agencies. Conversely, you have to develop a business idea, assess the market, and the business’s future, among other factors in business. Buying a house saves you time and money resources which is not the case with starting a business.
The Cons of Buying a House
Buying a house is not a streamlined process. It has some flaws, which include:
Involves High Maintenance Cost
Owning a house comes with new responsibilities. For instance, if you are not a DIY expert, you may have to hire a professional to inspect, repair, and replace the flawed systems in your home.
When several elements in the house have to be attended to, they cumulatively add up to huge maintenance costs, given that the repairs must be done regularly.
Its Value May Decrease
The house’s value may depreciate at times, and there is nothing you can do about it. For instance, suppose your house is located in a place with a poor sewer drainage system. The sewers can have a detrimental effect on your property, especially if the system blocks during the rainy season and all the waste spills surrounding.
In that case, No one would wish to buy a property in that area, and if they do, they will buy it at a killer cost due to its location.
Not A Liquid Option
If you have channeled all your cash into buying a house, you may lack the liquid cash to use should you encounter an emergency that calls for immediate cash. And if you decide to use the property to secure a loan, it may take several days or a week before the financial institutions disburse the funds.
Involves Legal Charges
In most states, the law requires the property owners to pay taxes for the rental income earned from that property. Therefore, you will not be an exception after acquiring a house.
What To Consider When Buying A House
Below are the various factors you need to consider when buying a house
A great location can improve the value of your house. This includes a place with good sewer drainage, proximity to social amenities like hospitals, schools, churches, playing ground, etc. Remember, you can convert an ugly house into a palace, but you cannot change a location. So invest time to find a great location.
Another factor that you need to consider is the availability of the basic infrastructure in the area. For example, is there a sufficient water supply in the area? Is there a reliable electricity supply? What about the road networks? The availability of the above infrastructural elements means heaven as far as the comfort of any location is concerned and should be considered first.
Other factors that can help you secure a great house include choosing a place with top security, a great neighborhood, and a quality environment, among other factors.
Start A Business Or Buy A House? Make Your Right Decision
Now that you know the pros and cons of both options, it’s upon you to decide which one to adopt. While starting a business will help you earn profit and accumulate wealth, buying a house will earn you a passive income either directly or indirectly. We have also outlined the major considerations you need to make to make the most in each of the two options.
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Bijay is an entrepreneur and start-up founder having more than 14 years of IT industry experience. He is the co-founder of TSInfo Technologies, a SharePoint development company.
A dedicated professional and very passionate about public speaking and also wrote thousands of technical blogs in various technologies. He also wrote a lots of blogs on entrepreneurship, investment, startup, business, manage money tips, etc.