6 questions to ask before selling a house to fund your business
Whether you are starting a business or thinking about expanding, you require a massive influx of cash. While you can find an investor, convincing them to put their faith in your idea is difficult. Not to mention, you have to give up some stake in your venture to receive the cash. Other credit options, like bank loans, often have numerous bottlenecks and high-interest rates that are not worth the hassle.
After reviewing your options, the best idea may be to sell your house to fund the business. However, is putting your home on the market a brilliant idea? Before looking for property cash buyers, here are six questions to consider.
How Much Money Do You Need?
If you are starting the venture from scratch, how much capital do you require? The amount you need will help you decide whether selling your house will pay off. For instance, if you require half a million pounds for expansion and your property can only fetch half the amount, the deficit is enormous. The idea of selling the house is to get enough cash to start the business up and running and hopefully more to cover living expenses. You do not want to fund an idea that may not be profitable and become homeless.
How do you know if your house will fetch sufficient money to keep the business afloat? You need to research the state of the property market and the housing prices to determine your home’s equity. If the prices are comparatively high, you can generate ample revenue from the sale.
How Does Sale Affect Your Life?
Many people focus on the business profits they can generate from expanding the business. However, they forget the impact the sale has on their lives and their families. For instance, you need a place to stay, which means you have to cover rental expenses. Can you afford to relocate? Rental properties require a security deposit and you have to pay for professional movers. Besides, downsizing is a significant decision that will affect your kids’ education and your family’s safety. If you are relocating to a distant location, you have to move your kids to a nearby school. The alternative is to put up with a hectic routine of covering the long distance to their school.
Do You Have a Mortgage?
The amount of debt you owe the bank can make a significant difference. If your mortgage is a burden and you are drowning in debt, putting the house on sale may be the best bet. You can pay off your mortgage with the proceeds and still have enough to find affordable accommodation and keep your business afloat. However, if you have paid off the mortgage, selling means an increase in living expenses since you will have to pay rent. Besides, you may need to purchase another house in future and that means enduring years of paying mortgages. Instead of losing a valuable asset, the best idea would be to take a second mortgage against your home’s equity and fund your business.
How Fast Do You Need the Money?
Unlike any asset like a car, that you can auction off quickly, a property can take months on the market. If the property market slows down, your home can sit on the market for a while. Besides, after finding a buyer, the process of closing the deal can also drag on for weeks. The selling process of a house is not ideal if you need the capital fast. If your business needs a quick cash influx to stay afloat, you need to think of other prospects to get the money.
Is the Business Idea Worth the Risk?
Listing your house is a big undertaking. Besides, investing the proceeds in a business that may fail can cause a significant blow to your financial situation. Therefore, you need to have a solid business idea that is worth the risk. If you are confident the idea can yield great returns, then any risk you take will pay off. Nevertheless, if the business prospect has minimal chance of success, selling the house may not be prudent. Gauge your idea and if it is unique, you can pitch it to investors who will find it hard to resist.
Is the House Market Ready?
Potential buyers are willing to pay a higher price for a move-in ready house. That means you will have more cash to fund your venture. However, renovations and cosmetic repairs do not come cheaply. You have to decide whether to foot the bill for remodeling or adjust your property price. The best option is to carry out minimal repairs that you can recoup with the sale.
Selling your home to finance a business is not a bad idea. You will set up your company without any start-up debts or expand and make more profits. Besides, when the venture catapults to success, you can buy another property.
