Equity Loan Information
Which is better: buying a home first, or buying a business first?
Or does it even matter? I wish to buy a local small business. I'd also like to buy a home. If I owned a business I could potentially earn more money than I currently earn. I was thinking it might be better to go into debt to buy the business first, because it is something that can increase my earning potential, and with increased income I could buy a decent home. On the other hand, I've heard it could be hard to obtain a business loan without having collateral (i.e., a home), but it's not like I'd have any equity built up by the time I tried to buy a business anyway, so I don't know if that is entirely accurate. Also I don't know if having a home mortgage would count against me when I try to get a business loan. What do you think?
Public Comments
- business first,money coming from the business to pay off the house
- There are two items in economics....Assets and liabilities. Assets are those things which bring money to you and liabilities are those which take money from you. A home is therefore a liability. Unless you are looking at the home as something to generate cash such as flipping it quick and generating more cash from it then it is sucking out of you. Also when you own a home you have to do all maintanence and anything needed for that home along with taxes and insurance and such like that. Renting many times costs about the same as getting a mortgage however you don't have to worry about insurance, or problems. A business can be an asset. However most small business unless they are franchises fail in one year and 90% fail within 5 years. The question is why is the business that you are looking to aquire selling? And if it is a marketable business the going rate for it is 8-10 times the gross profit for the year. It is true that it is hard to obtain a business loan with no collateral. Which is why it might be a prudent decision to go and look at forclosed homes in your area which are in the final stages of forclosure. Many times you can pick these up for around 1,000-5,000. This gives you a place to live while you fix it up. When it is said and done you have collateral in your home, a place to live and can use that collateral to then aquire a business loan. This way you minimize your liabilities while maximizing your assets.
- There is no debate A house sucks money out of your pocket A business puts it in your pocket
- Brian, I think you will be forced into one of the situations by default... I'd guess that'll be to buy the house. However, in the hopes that there is no "force" situation, you have got to run the numbers both ways... In running those numbers, you should do a one year projection and extend it up to a 5 year projection in a very conservative manner. It sounds like option 1 is to rent and buy the business. If you can do that, I'd lean towards making that work. Option 2 sounds like buying the house and not buying the business... I'd doubt your investment in the house would generate better money than buying business. Do the math! Good luck.
