There are some great reasons why you should look at
investing your money in a business rather than property.
There is the potential to make a much higher return on your
money and to spread your financial risk. You also get to
become involved in something you’re passionate about, and to
be part of growing our economy.
With current low
interest rates at just over 2 percent, it has made it cheap
to borrow money. This coupled with residential property
demand out stripping supply, has created an overly-active
property market providing high short-term returns. This
activity is unlikely to be sustainable.
have always had an active interest in property ownership and
renovation, investment and trading. This, unfortunately, has
done very little for our economy, and has added to the fire
and made home ownership less affordable for many. Our
housing has now become a national issue, and the NZ
government has taken steps to slow this down, implementing
tools to tax this activity (recently NZ has removed tax
deductibility on interest costs and an extended bright-line
With bank returns so low, investors are seeking
other options and investing in shares is one of them. More
recently we have seen a shift in accessing shares, with
digital platforms such as “Sharesies” reducing barriers
and making share investment easier and more mainstream.
Another option for investing your money is to buy
a business. This can be a great option and the returns
can be several times that of owning an investment property.
Of course, with greater returns comes greater risk.
“Returns from owning a business can easily outweigh
investments in residential property – however there are
additional risks that must be managed”, says Richard
O’Brien director of the NZ
Business for Sale website nzbizbuysell.co.nz
benefits of owning a business are many. Personal fulfilment
and financial gain are among the very attractive benefits of
owning a business. And when you sell there is no tax on the
intangible asset component. Owning (and potentially running)
a business will take some skill and serious effort. It can
also be hugely rewarding if it’s something you really
believe in and are passionate about.
In a business,
you will need to be involved. If you have a business manager
it’s likely to be a more costly business acquisition and
will still need to have some input. With smaller investments
you are likely to be working in the business, and will be
busy with operations, sales and marketing, and staff. This
then becomes a “job” plus an “investment”. As with
any investment, it is imperative that you do your homework
and purchase a business that will work well for you.
property investment is a more passive option that generally
requires less skill and risk, and provides a lesser return.
A well-run business has more potential – it better supports
the economy, provides employment opportunities – and can
provide investors with pre-tax returns up to several times
higher than property investment.
If you were looking
to invest $750,000, a small business costing $750,000 might
well return $200,000 to $250,000 pa before tax. A similar
residential property could return around $37,500 pa (after
expenses and before tax). A business may also be scalable
and can grow, adding further to the value of your
If you are after higher returns and a more
diverse investment portfolio, buying
a business can be a great investment when compared to
investing in property. Make sure you do your homework,
understand the numbers, and enjoy exploring the