Should I buy a house or start a business?

Both options have unique perks, but this is a life-altering choice that will shape your financial future. Here’s what you need to consider.

Updated: September 20, 2023

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If you’re trying to decide which financial goal to prioritize next, you might be asking yourself: should I buy a house or start a business? Both options have unique perks, but this is a life-altering choice that will shape your financial future, your day-to-day life, and your long-term goals. So, what should you do? Here’s what you need to consider.

Starting a business vs buying a home: 8 factors to consider 

Starting a business and buying a home are both decisions that will significantly impact your life, your finances, and your future prospects. Which one should you focus on first? Think about the following before you decide.

1. The market 

First, assess the state of the housing market. Is it a good time to buy a house now? Are interest rates, housing inventory, and local market conditions working in your favor? A strong buyer’s market may make it easier to negotiate a low purchase price, while a seller’s market may put you in a more challenging position.

If you’re leaning toward starting a business, consider the market demand for your product or service.

  • Is there a clear need for what your business offers, and is the market receptive to new entrants?

  • Is there a time-sensitive advantage to launching your business right now? 

  • Is there a trend or emerging niche that your business can capitalize on?

Stay informed about economic trends and market forecasts, too. In the housing market, a strong economy might lead to rising house prices and make home ownership less affordable. In contrast, a robust economy can be good news for entrepreneurs: it often signals an increase in consumer spending. However, a strong economy can also result in higher operational costs. 

2. Your financial situation

Homeownership and business ownership each come with various costs, risks, and potential rewards. Be sure to analyze how each option would fit into your personal finances and consider speaking to a financial advisor. Especially consider the following factors: 

  • Down payment and mortgage: In many cases, down payment and mortgage expenses can be substantial, especially in a competitive real estate market.

  • Startup costs: In some cases, it costs less money to launch your own business than to buy a house first. This may be especially true if you’re launching a small business or an online business. When calculating potential upfront costs, be sure to consider expenses like product development, licensing fees, and marketing costs. 

  • Short-term profitability: Recognize that, in the short term, it may be challenging to turn a profit from a new business. Business ventures often require time to establish a customer base and generate a consistent income. This period of uncertainty can be financially challenging, especially if you haven’t saved up enough money to sustain your lifestyle during the early stages of your business. While it will also take time for your home to appreciate in value, your down payment provides some initial equity in the home.

  • Debt and financing: If you’re considering a mortgage, you’ll likely be taking on a significant amount of debt. Similarly, starting a business might involve loans or financing. Assess your willingness and capacity to manage and pay off debt in either scenario. Which will be greater — a home loan or a business loan, and can you afford the payments?

3. Your financial goals

Becoming a homeowner is a significant milestone for many. However, building significant equity can take several years—if not decades. It’s also difficult to access that equity unless you end up needing to take out a Home Equity Line of Credit (HELOC) or a home equity loan

Assess your long-term personal finance goals. If you want to prioritize long-term stability, buying a home can be a great option. However, if you’re looking for accelerated wealth accumulation and are comfortable with the entrepreneurial risks, a business might better align with your objectives. 

It’s also wise to consider the potential return on investment (ROI) of a business compared to a home. While homes historically appreciate in value over time, the ROI from a business has the potential to be significantly higher. 

Businesses, particularly successful ones, can generate substantial returns, but they also come with greater risks and uncertainties. According to Bureau of Labor Statistics data, 20 percent of small businesses fail within the first year, and by the end of the decade, only 30 percent of those businesses will remain. 

4. Your appetite for risk

Purchasing residential property is generally considered a safe investment. That’s because real estate investing has a history of long-term value growth, and residential properties are tangible and appreciating assets. The housing market is less volatile than many other investment options, which can provide a sense of security if you have lower risk tolerance. 

Starting a business, however, involves higher risks. When you launch a business, you’re essentially gambling on yourself and your entrepreneurial abilities. The success of the business is closely tied to your personal decision-making and the market’s response to your products or services. Your business may experience several years of limited cash flow as you work to get it off the ground. Many entrepreneurs must rely on credit cards or loans to fund new startups. 

5. Your personal goals

Three-quarters of Americans view owning their own home as a higher measure of achievement than having a successful career, raising a family, or earning a college degree. The sense of pride and accomplishment that comes from homeownership is unique and can contribute to your overall happiness. 

In contrast, building a successful business can provide a different kind of fulfillment. The journey of entrepreneurship offers the opportunity to see your ideas come to life and make a meaningful impact. 

Further, owning a business can provide a level of independence that homeownership can’t. As a business owner, you have the autonomy to make strategic decisions, set your own schedule, and pursue your entrepreneurial vision. This independence can be a driving force for individuals who value self-determination and creativity. 

Some individuals seek a balanced life with a comfortable home, while others are driven by the excitement and challenges of business ownership. Assess how each choice contributes to your personal well-being and life satisfaction. 

6. Time you’re willing to commit

Launching and running a successful business demands a substantial time investment. Entrepreneurship is a full-time job. Business owners often work long hours planning, marketing, and managing day-to-day operations. 

In contrast, buying a home typically requires less immediate time commitment. While the home-buying process can be intensive, it’s a one-time endeavor. Once you’ve secured your home, the time commitment is limited to maintenance and property management. 

7. Your lifestyle

Starting and running a business can offer a unique level of independence. As a business owner, you have the autonomy to make critical decisions, shape your company's direction, and create a work environment that aligns with your vision. 

Depending on the type of business, entrepreneurship can provide you with the flexibility to adapt to changing life priorities. Whether you want to spend more time with family, pursue personal interests, or explore new opportunities, owning a business can offer the flexibility to accommodate these shifts. 

On the other hand, homeownership ties you to a specific geographic area. When you purchase a home, you establish roots in a particular community. This could make it difficult to move or travel in the near future. However, it does make sense to lock down a home soon if you have a family or are planning to start one.

8. Your knowledge

Launching a successful business often requires a deep understanding of market dynamics, financial management, marketing, and business operations. If you lack the necessary knowledge, you may face a steep learning curve, which can be time-consuming and challenging. 

While homeownership also comes with responsibilities, the knowledge required is generally more straightforward. Furthermore, it’s often easier to learn about property maintenance, mortgage terms, insurance requirements, and local property regulations on the fly. You can also hire a real estate agent to help you quickly get up to speed. 

Before you make a decision, honestly assess your existing knowledge and your readiness to acquire new skills. 

Compare loans on Navient Marketplace

Owning a home and starting a business can both be fantastic next steps in your financial journey. However, as with all big goals, you may need some additional capital to get started. That’s where Navient Marketplace comes in. With Navient Marketplace, you can compare different lenders for free all in one place. Just enter a few details about yourself and get personalized results from lenders in minutes.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

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