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Real estate or Entrepreneurship ?

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Guest60753

Guest
Hi!

After reading an article (in French for those who wants: Devenir rentier : La stratégie la plus efficace), a question is in my mind.

Although sometimes discussed on this forum, I did not see any topic entirely devoted to.

Here it is:
In my case, and aiming for financial freedom, which strategy do you think is the more effective ?

- real estate investment with leverage of the bank
- Entrepreneurship + investment of the profits


MY SITUATION

- 3rd year Physiotherapist's student
- Owner of a company in the e-commerce field, generating about 5k euros of profits monthly.
- No debt
- Salary envisaged: 2500-3000e / month

So I have several choices available to me:

- Creation of a physiotherapy / health center
This choice is interesting, but due to many constraints imposed on us as physiotherapists in France, I am not sure that it is the best one. I leave it anyway if someone has experience in this sector.

- Job + Real Estate Investment
As a physiotherapist, we can expect a good salary, if practiced in the private sector, to be able to think about real estate investment with credit and use the leverage of banks, to live only from the cashflow.

- The creation of an online business
This choice is also interesting because of the results I currently have. But the world of online entrepreneurship is much less stable than the offline one or real estate one.
On the other hand, rapid growth is achievable, much less restricted than in the world of health.
The skills that this choice brings up are also extremely interesting: The ability to create income from all around the world, quickly and with almost no money.

Also note that working on his business is, in my opinion, much more interesting than the alternative job + real estate, and allows to be free more quickly.


What are your opinions/experiences about it ?

Thank you very much and have a nice day!

Rémi
 

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JScott

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Saying you want to do real estate is like saying you want to be an entrepreneur -- it doesn't really mean much without a specific strategy behind it. Instead of thinking of real estate as a way to get rich/wealthy, I would suggest instead to think about your goals first, and then figure out the right strategies to use to achieve those specific goals.

For example, let's say your goal is to generate $100,000/year in relatively passive cash flow in the next 5 years. To do that, you need to select a type of asset that generates monthly or annual cash flow. That asset could be a business, it could be lending, it could be a dividend-paying equity, it could be rental real estate, etc.

Let's say you choose for your passive cash flow asset vehicle to be rental real estate. And let's say that you think you can generate 10% cash-on-cash return from the real estate you purchase. If you want to earn $100,000/year in cash flow at 10% cash-on-cash returns after 5 years, you would need to have invested $1M in cash.

Next, you need to decide on your active strategy to generate that $1M in cash. Again, you have lots of investment vehicles to choose from. You can start a business, you can become a consultant, you can create intellectual property, you can do active real estate (like flipping houses), etc.

Let's say you choose for your active strategy to be real estate again as well. And you choose to flip houses to generate the income. You've determined that you need to generate $1M in cash over 5 years, or an average of $200,000 per year. Let's say you think you can generate $25,000 per flip (after taxes) -- you need to flip 8 properties per year to generate $200,000 per year, which will generate $1M in five years, which will generate $100,000/year in relatively passive income.

See what we did there? We didn't start with, "Should I do real estate or business?"

We started with, "Where am I trying to get to? And how can I get there?"

In my example, you used real estate for both your active and your passive vehicles. But, you didn't have to. You could have chosen from plenty of non-real estate vehicles as well. Or you could have chosen different real estate vehicles than the ones I mentioned above.

Now, to decide what the vehicles should be, you need to ask yourself these types of questions:

- What am I good at?
- What do I enjoy?
- How much time do I have?
- How much capital do I have?
- What is my level of risk tolerance?
- Where am I willing to live?
- Etc...

Once you consider those things, certain active and/or passive financial vehicles will no longer be a good option (for example, if you hate construction, flipping houses is probably not a good undertaking). And others may start to look like much better options.

But, long story short, figure out where you want to be, figure out the options that will get you there, and then select the options that best fit you, your skills, your interests, your experience, your background, you situation, etc.
 
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G

Guest60753

Guest
Hello Jscott,

Thank you so much for this wonderful answer.

It gives me a lot of food for thoughts.

I'll follow your advices and redefine precisely my goals.

Again, thank you so much.

Have a nice day!

Rémi
 

Envision

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I do all three. Work your job and live off it, build your business and invest the profits back in, and buy real estate.

The business taking up your time is not an excuse.

Build around it.
 
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OP
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Guest60753

Guest
It's very interesting, I also came to the conclusion of doing both.
Real estate investing with leverage of the bank is a way to acquire patrimony for almost free.

Even if entrepreneurship is more risky and leave more people on the table, it has way more potential.

Thank you so much for your answers!
 

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