There are some vital decisions to make once you’re an adult. You have more autonomy over choices like your preferred career, getting married, having kids, and pursuing your dreams and aspirations.
Eventually, you may face a financial situation that leaves you with the question, “should I buy a house or start a business?” In this blog post, we’ll review the pros and cons of both options to help you make the right decision. Let’s dive in.
Benefits of House Ownership
There are several benefits to owning a home. Here are some of them:
Comfort and Privacy
Having your own home grants you a certain level of comfort you can’t have when you’re living in a rented apartment. You have your own space to do whatever you please whenever you want.
You seldom have to worry about a neighbor making all sorts of noise on the other side of the wall or a couple arguing at the top of their voices in the room adjacent to yours.
Security
Your stability in a rented apartment depends on the landlord’s decision, who could at any time decide they don’t want their property rented out anymore.
At this point, you have no choice but to move out, and moving out can be pretty expensive and life-changing, especially when the decision comes at short notice.
As a homeowner, you feel secure knowing that you’re in charge of the decision-making process of the matters relating to your house, and no one can kick you out of your property.
Control Over Costs
When in a rented apartment, one of the things you’re likely to experience is a rent increase, regardless of how convenient it is for you.
However, you may have different expenses like mortgages and house taxes with your own house, but these do not increase unexpectedly. In some cases, these increments are even under your control.
Rising Home Value
With an overtime increase in your home’s value, you end up having an asset with a substantially higher worth over the years. These additions contribute to building equity. Equity is simply the difference between the value of your house and how much you owe on your mortgage.
Disadvantages of House Ownership
Being a house owner is advantageous, but there are some downsides to consider before choosing between a house or a business. They include:
Maintenance Costs
As a landlord, your property’s maintenance is an unavoidable responsibility. Over time, buildings tend to fall apart or experience slight faults here and there. As a result, maintenance costs come into play. However, sometimes the cost of maintaining a house is on the high side, placing a substantial drain on your finances.
Depreciating Home Value
Having a house with a depreciating value can mean paying more on your mortgage than your house is worth. Furthermore, if the home is up for sale, it means you’ll receive lower offers than you paid for the building.
Non-liquidity of Asset
Because a house is not a liquid asset, it means your money is tied up to a property. As such, putting your home up for sale could prove difficult because it takes significant time to find a buyer for such an asset, especially when you’re in a tight spot that gives you the option of selling a house to pay off debt.
Benefits of Starting a Business
Much like owning a home, choosing to start a business has its advantages. To help aid your decision-making on whether to buy a house or start a business, here are some of the benefits to consider:
You Become Your Own Boss
One of the benefits you enjoy from owning a business is independence. Having the power to make decisions that affect your enterprise and knowing you don’t answer to anybody else but yourself.
This acquired privilege puts you in a position where you are directly accountable for the business activities.
Self-Fulfillment
Besides being your own boss, you get a sense of fulfillment being the owner of a functional enterprise, whether a start-up or an already established business.
Better Financial Benefits
Compared to working as an employee and earning a salary, owning a business puts you in a position that guarantees an increase in your income. This factor is possible because you earn directly from your business and not from an employer who pays you a stipulated amount of salary with few added bonuses.
Moving up from an employee’s status to a business owner offers you a significant increase in your income, and this promotion paves the way for opportunities like buying a house as a business owner.
You Get to Choose Your Workforce
Having a reliable team is critical for an enterprise to function smoothly. As a business owner, you are responsible for screening your entire workforce according to your standards before employment.
You have the power to pick whoever you feel is qualified to perform certain responsibilities to achieve your business goals.
Downsides of Launching a Business
Despite all the benefits of starting your own company, there are considerable drawbacks to consider before deciding whether to buy a house or start a business. Some drawbacks you can experience as a business owner include:
Work Hours Are Long
Unlike being in an employee’s position, a sole proprietor has to handle numerous time-demanding responsibilities that tremendously increase daily working hours.
Chance of Failure
Starting a business comes with a higher chance of failure. In fact, at the beginning – and many times throughout the company’s journey – your business might not be as fruitful as you’ve always planned for it to be.
Worse off, you could end up losing every investment in the firm with zero profit.
Less Money for Personal Use
When running a business, especially at the early stages, you sometimes need to put in funds from your pocket to ensure the company doesn’t fold up.
The money can be used for anything from stocking products and services to payroll and security from dealer services. Very few business owners make a profit with their business in the first year.
Having to invest more of your finances in your business means you have less for personal and family use.
What Influences Your Decision?
Deciding whether to buy a house or start a business requires critical thinking before taking action. And the answer to the question, “should I buy a house first or start my business?” isn’t always straightforward.
That said, a few factors influential to your eventual decision include:
Financial Status
Your financial status is a vital factor that requires thorough consideration before making a decision.
The choice of either buying a house or starting a business requires finances, and you’ll have to bear in mind the kind of house you want to purchase or the nature of the business you desire to kickstart.
Source of Income
Another factor that significantly influences your choice is your current source of income to finance your home purchase or business venture. It is crucial to note that a home’s maintenance requires a steady income stream.
This factor leads us to the question, “can I use my business income to buy a house?” The answer to this question is yes; you can decide to start up a business and buy a house later with the earnings obtained from the business, as long as you don’t suffer any form of loss.
Pressing Needs
Your short and long-term needs should also influence your decision. To avoid regrets, choose an option that will not negatively impact your pressing needs. Remember, it is essential to consider how your decision to prioritize one affects another.
For example, provide possible answers to questions like “can I buy a house with my business functioning?” Or “will buying a house affect my dream to start up a business?” These will further strengthen your resolve when you make a decision.
In most cases, both options end up working together well – especially when running your company from your own residence!
Conclusion
Deciding to either buy a house or start your own business can be difficult, as both options are life-changing and come with their own set of pros and cons. To determine which option is best for you, it’s essential to consider the factors that will affect your choice so you can make an informed decision.
For example, if you want a more stable future but don’t have much cash on hand, buying a home might be right for you; however, if you plan on moving around frequently and need quick access to funds whenever needed, then starting your own business may be better suited for your needs. Which path would work best for you? Let us know in the comments below!