Whether you’re about to begin a start-up company or currently operating a start-up; you cannot afford to waste time or money which is often associated with buying a house. Below are eight reasons why:
- Your cash is gone. You have to put down a deposit for your house which varies from 5% to 25% of the house value. Think of the opportunity cost which may have been better suited as a safety net or monetary fund towards your start-up. Cash is king; you’ll need to have access to cash and be able to pay for expenses as where and when needed.
- Buying (and selling) a house is a time-consuming process. It can take up from 3 months to sell or buy a house; this time period can be much longer if the house is part of a chain involving other houses. As a start-up entrepreneur, you’ll need all the time and energy for your venture.
- Closing costs. Think of surveyors, lawyers, stamp duty land tax (where applicable), moving costs and building insurance. It all adds up (usually 2%-5% of the agreed sold price of the property). Yet again, these extra costs could have been better invested in the start-up business.
- Property taxes. In the UK, homeowners pay council tax on an annual basis which is another financial burden of home-ownership.
- A home requires maintenance. During the lifespan of your house, things will break. You’ll have to fix things, refurbish things and buy things for your home. This costs time and money.
- You’re stuck! Buying a home often involves taking out a mortgage for a duration of between 25 to 40 years. This may not be ideal for a start-up entrepreneur as being fixed in one location may hinder the development of the start-up company. Opportunities can come from anywhere and it is important for an entrepreneur to remain mobile and open to all options.
- A residential home will most likely be a liability. If it takes money out of your pocket every month; it is a liability, not an asset.
- Invest in yourself. Your main focus as a start-up entrepreneur is to maximise your income and to become a better you. Only then when your income is high enough you’ll be able to make real and substantial investments.
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