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Real Estate Or Small Business? Which One Should You Invest in?


We often get asked as small business accountants whether it's wise to invest in real estate or even shares before going into business. Of course there can be a range of answers depending on the situation. So which is better and what should you consider?

Here are some tips when deciding to make the plunge one way or the other.

 small business accountants sydney

Figure 1: Don't jump into property too soon if it's going to affect your business or it may become like the house on the haunted hill.

1. What Do Wish To Have At The End Of The Day?

Depending on your stage of life, what is it that you want to have at the end of the day? If it's a nice house, how much will you need to get started and how quickly do you want your ultimate dream home? How many kids would you like and what do you want for their education? What are your financial goals and lifestyle plans and how much will they cost?

2. Is Your Current Situation Likely To Get You What You Want?

Will your current job allow you to get a place and are there prospects for you to go up either in the current company you work for or in your industry? Have you looked at some research such as IbisWorld to work out what the projections are for the coming years and the challenges the industry faces? 

3. If It's A Business You Want Do You Understand What's Involved?

If you've decided that you want to go into business and make a small fortune, you need to understand what is involved. It will usually require:

  • many hours a week until it gets well established;
  • thorough researching as to what type, where and for how long;
  • capital;
  • advice from a solicitor and small business accountant prior and afterwards;
  • an appetite for risk;
  • a solid business plan and cash flow projections best via a three way budget.

4. Buy A Business Or Start From Scratch?

This is always a difficult one. However, buying a business or starting from scratch will mean looking at:

  • businesses for sale that are cheap and can be ramped up with some planning;
  • getting assistance from business valuers Sydney;
  • numbers over time starting from scratch compared to buying a business (be very conservative with new businesses as opposed to established ones as they don't have a track record such as financials and can often take years to get going to where you want them to be);
  • cost to create as opposed to buying;
  • available finance;


Figure 2: A business might generate some dollars but you need to do research and surround yourself with good people.

5. Buying Property After You've Started A Business

You can certainly look at buying property after you've started a business but what you need to be careful of is trying to pay it back too quickly or borrowing too much which will cause stress on the business. Consider:

  • What repayments can be made that won't hurt the ability of the business to have access to working capital?;
  • Could a self managed superfund be used to borrow the property (pros and cons)?;
  • Will the property be tax deductible (this can increase affordability by the amount of tax paid compared to a non-income producing residential property/non-tax deductible at the same price);
  • doing the sums with your small business accountants Sydney & Dubbo to run the above scenarios through.



 Property can be a very good thing financially and may even bank roll your foray into business or a new business venture. If you want either or even both, follow some of the above considerations and you may be closer to making the right decision.

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