Re: Real estate vs. a business - Posted by Frank Chin
Posted by Frank Chin on August 25, 2011 at 14:42:06:
I done both, and so did my dad. He and I came into it from opposite directions.
People with sucessful retail businesses generally try to buy the property or a location nearby, before the landlord raises the rent to a point where’s he’s out of business. My dad had a business, and in 1963, the onwer died, and the heirs sold it to a group of investors, even though my dad matched their offer Long story, but the heirs thought the investors can close faster.
The property consists of 3 stores, apartments, and several garages. In 1961, it was sold for $23K. The investors thought they can make a quick flip, but couldn’t make enough on it. So after two years, and not satisified with low returns on rents, they sold it in 1963 for $25K.
My dad retired from the business in 1980, died last year, but we still own the place. He put $10K down in 1963. Currently, the property can net nearly $5,000/month in rents, and a few years ago had a market value of $750K, though it’s dropped since.
My dad’s business before 1980 never netted more than $25,000/year. In 1980, his business went down, and he could’ve done just as well renting the store out, with the advantage that he didn’t have to deal with armed robberies that was going on, with a neighboring shopkeeper shot, and he was visited by the same robber an hour before, but left when some customers came in. It was a close call, so I told him maybe it’s time that he be a landlord instead.
Being in a retail business, you have to realize you’re there 10 hours a day, and in his case, 6 days a week. As landlord, it’s a 30 minute job once a month bringing checks to the bank, and he doesn’t have to worry about robbers.
I’m a real estate investor as well, and I gone into several businesses myself. Many people don’t realize in small businesses, success often depends on a good sales personality. I would’ve done better at these businesses had a been a better salesman. But as a real estate investor, I don’t have to be a joke a minute to come up with good real estate deals.
Bottomline is, having done both, I concluded you can do much better with your time and effort at real estate. My dad never had a pension, but he remarked to me one day that with a $10,000 investment, he funded a comfortable retirement, without having to play the stock market.