Startup Investment vs. Property Investments?

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If you are looking for an investment opportunity which will generate consistent revenue and sale value, the perceived wisdom is often to invest in property. While property itself can provide healthy returns, it is in startup investment where even greater profits could be found. Furthermore, alongside outmatching property investment in terms of potential financial gains, startups provide a range of other advantages rarely found when purchasing property.

  • Startup Investment Vs Property Investment: 5 Key Points

  • Robust Investment Portfolio: While property investors only operate within the limited scope of commercial, industrial, and residential assets; a startup investor can add any marketplace, niche, or industry to their business portfolio. A startup investor may invest capital in a tech company, a media producer, or a clothes designer – startups come in all shapes and sizes across all industries. This robustness within an investment portfolio cannot exist to the same degree when operating exclusively within the property sector. When a dip or a housing crash hits the property market it affects every property an investor controls; but when investing in startups, this risk can be avoided. If one industry hits a rough patch then the investor can be protected from losses across all assets by having invested in other unaffected areas.
  • Credit Availability: After the global economic crisis of 2008, banks and other lenders have been much more stringent when offering credit facilities to potential debtors. This has had a significant impact on the property market with people finding it difficult to secure the funds to purchase a home or other property types due to strict criteria. The startup investment market has, however, benefited from this trend. Startup founders have found it difficult to secure financial facilities and so have had to increase their offers to potential investors which includes more input and often an increased portion of the business for a reduced amount.
  • No Financial Hurdles: When investing in property there are a number of financial hoops which must be jumped through. This includes securing a mortgage, paying out exorbitant agent and legal fees, and having to submit to local planning/housing legislation. These issues are substantially reduced or even avoided altogether when investing in a startup. Yes there may be some legal fees during due diligence, but there is no need for extensive arrangements with creditors or other third parties which can make the entire process quicker, cheaper, and less stressful.
  • Adaptable: Recent studies have shown that startups launched during difficult economic times are much more likely to succeed than pre-existing businesses, including property ventures. The key word here is “adaptability”. Startups show a 7% increase in profits during fluctuating markets which makes them a much stabler investment than most other areas, able to adapt to the economic weather more effectively. Furthermore, startup owners tend to be more positive and optimistic about how their projects will perform in the future versus standard business owners. This highlights how much stronger the startup investment market really is, even during more trying times.
  1. Government Incentives: A recent program in Canada reveals the lucrative incentives which are often available for startup investors around the world. Governments want to attract businesses into their economies in order to maintain healthy growth and generate more domestic wealth. One way most countries do this is to offer startups, especially those in the tech industry, huge tax rebates. In the aforementioned program, some startups were able to claim back a massive 80% of their taxes. This gives startups a marked advantage over property investment. Usually the only incentives in the property market are for first time buyers, while the startup industry offers a continual stream of financial sweeteners aimed at attracting investors to their respective economies.
acr30 Expert Answered on September 7, 2015.
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