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Start-Up Entrepreneurs Should Not Buy Property

Start-Up Entrepreneurs Should Not Buy Property

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:

  1. 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.
  2. 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.
  3. 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.
  4. Property taxes. In the UK, homeowners pay council tax on an annual basis which is another financial burden of home-ownership.
  5. 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.
  6. 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.
  7. 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.
  8. 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.

 

Sources of information:

  1. https://www.entrepreneur.com/article/270632
  2. https://www.quora.com/Is-real-estate-a-bad-investment

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