BusinessStartups

Assessing The Opportunity Cost of Starting a Business Over Buying a House

3 Mins read

As you get older, you realize there are plenty of decisions you need to make by yourself. Depending on your goals, financial situation, and ability, it will influence whether you need to start a business, buy a house or instead go for both.

Some factors may favor one over the other, but the most important thing you should look into are the pros and cons of each of them. Taking such consideration will help you make a better decision.

starting a business
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But before we dive into the advantages and disadvantages of starting a business and buying a house, you need to remember that at the end of it all, it narrows down to who you are and what you can handle.

Pros and Cons of Starting a Business

Pros

There are plenty of advantages you will enjoy by investing your money in starting a business you like, and of course, one that is lucrative.

Personal Fulfilment

Everyone is unique with a different type of creativity, interests and goals. By starting a business, you will be able to explore your skills and strengths that will lead to personal satisfaction.

You are Your Boss

You will decide how you want to run your business. No one will be around asking you to follow any instructions.

You have Variety of Options

With business, you have options to pick from unlike buying a house. The flexibility with starting a business allows you to choose over a range of alternatives to start small either with a physical shop or go online as you expand.

Financial Freedom

Financial freedom is everyone’s desire in life. To be financially free, you require to have self-discipline, patience and consistency as you begin your new business.

If your business turns out to be thriving, you will acquire a considerable return on investment that can allow you to buy a house too. But bear in mind, you need to work SMART.

Retirement Income

A business allows you to retire when you want. You can choose to sell your business or work with a manager who shall be in charge of running your business as you enjoy the income during retirement.

Cons

Risk of Failure

One thing about business is the risk you take to start something from scratch, whether you are confident or not.

If the worst happens, you will be left with absolutely no returns even after investing heavily.

Long Working Hours

Unlike the 8-5 or the other daily working routines you are used to, having a business will need you to sacrifice most of the other things you were used to do to concentrate on your business operations.

To make profits, you will be required to go an extra mile, which means long working hours.

You May Need More Money

You may need to boost your business from time to time to see growth. Since running a business can be challenging; you may have to minimize your living expenses so that you can inject as much money into your business.

Pros and Cons of Buying a House

Pros

There are several benefits to buying a house. They include;

Investment

Buying a house is an excellent passive investment. You can buy and sell it later at a profit, opt to buy and rent it out or enjoy living in it, thus no rent expenses.

Privacy

Owning a house is everyone’s dream. Having the power to enjoy the peace and serenity that comes along with it. Having to do what you want to do and when you want to do it.

It is Simple Compared to Starting a Business

Buying a house is simple compared to starting a business. It is not as demanding as starting a business. There isn’t much time spent looking for space to rent and employees, among other factors.

Increase in Value

House value increases over the years. Unlike having a business which you have no guarantee about, your house’s equity over time will grow.

No Expertise is required

Unlike starting a business, buying a house doesn’t require any special skills or training. All you need to do is research on the best options based on real estate factors and know where to invest.

Another factor to look into while buying a house is to buy from cash house buyers because of their efficient and straightforward mode of purchase.

Cons

There are also disadvantages to buying a house and they include;

Maintenance is high

Maintaining the value of your home is also quite expensive as it demands several maintenance procedures to keep its value. You may require repairs and renovations from time to time which can drain your finances.

Home Value May Decrease

As much as your house value increases, there are also situations whereby your house value may depreciate, and if you took a mortgage, you would end up owing your bank. Sometimes you might end up paying more than your house is worth.

Liquidity

Since you have invested all your money in buying a house, you may lack quick cash in the future when you most need it. Even if having many cash buyers might help, it will take 3 to 4 days before receiving your cash.

Only You Can Make the Right Decision

Investing in buying a house is a very brilliant idea of a passive income and starting a business is also a profitable way of making money and accumulating wealth. Based on all the discussed pros and cons, you can be sure to make a decision that suits your needs best.

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Ryan Kh is a big data and analytic expert, marketing digital products on Amazon's Envato. He is not just passionate about latest buzz and tech stuff but in fact he's totally into it. Follow Ryan’s daily posts on Catalyst For Business.
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