Which is the best investment: Property or Business?

by | Oct 13, 2016 | Income, Strategy

Chatting to my husband the other day we were discussing how different we are in our investment styles, (he is a heavy share investor who also has property and business and I am heavy business, with property and very small share portfolio) and we were discussing what really is the best solution, and it really made me think about my thoughts and beliefs in the past and how they have changed now, AND how the things I have invested in changed too.

It’s amazing, how, although we are all on a quest to improve ourselves, we all have different ideas about how to create the life we want, so out of all f the investment vehicles, which is right, which is wrong, what suits us and how good are they when we want to liquidise our assets and get our money out?

I’m really quite a multi dimensional investor, and have tried a few different strategies along the way, I’m not saying what I’ve done is right or wrong, but it may help others if I share my experiences.

I started my first business (a lettings agency-called Lawsons in Wolverhampton) and bought my first property both at just 18, and like most at that age, I thought I knew everything, that success would be immediate, and this lettings lark would be easy “it’s just a few boards and a tenancy right?”

Quickly I realised, that I was going to have to hold down another job to fund my business (rather than the business fund me) and I worked in a curtain shop for the first year to pay for the stamps and petrol, and had my mother in law in the office doing her sewing and answering the phone in between… I can honestly say it certainly was anything BUT easy…

26 years later, when people assume you were some sort of “overnight success”, and looking back, I realised something about myself, and that was, that my success was really about one thing… The determination, NOT to fail… I refused to quit, I had started, and therefore I would deal with the pain of having no money, living on fresh air, and make this thing work, for which I’m pleased to say it did, and that business is growing year on year, even now after 26 years trade.

As the business grew, it generated some great opportunities and from 5 years in, I was able to start buying properties using the income from the business and the leads it generated of people wanting to sell, I decided to buy a few rental units of my own, and was quickly hooked, in fact during 1997-2002 I was buying, renovating property continuously for myself and my clients too, and during that time bought over 450 units and refurbished over 250 too.

What was it about these two strategies that together worked so well? I believe partly it was because the business gave me validation financially and stability, with a continuous supply of ready cash, plus it generated me the leads for people looking to sell (or buy) plus, from letting literally thousands of properties, I had the experience to buy the right units, that would rent well and more importantly it gave me a property management solution, which meant I never had to get bogged down by dealing with my own tenants and could therefore continue to focus on growth.

So for me when I’m asked, which is best, property or business, my answer has to be “BOTH” I wouldn’t have achieved anywhere near as much as I have without either one of them, they both made it possible.

So where are we now… Well I scaled up my business, to become a franchisor, then started an organisation to train other letting agents called Property Agents Circle and also a marketing arm called Elite Room, and this means that my main asset base now consist of more business assets, with property firmly In second place, by some distance.

But what does this asset base give me, if I wanted to liquidise?

People say what is your “net worth” and if you add mine up today, like many people with property and business portfolios, It would be in the millions, but it’s interesting when you look at how much it “costs” to get your money out of your assets, if you want to liquidise, the difference is HUGE between each of the different investment types.

The problem I have personally with my properties, is that I bought them all before 2002, which means I have owned them for some time, and during that time, they have increased substantially in value, and they are large units, which means the capital gains on the sale would be for me around 28%, which to me, seems to make it too painful to sell, under the current tax regime, (unless you had to) and this certainly isn’t something I considered when I bought them (back then taper relief was in place which made it all a lot more attractive than now) so something to bear in mind with any investment is the effect of tax changes.

Yet currently with the businesses, the tax on sale utilising Entrepreneurs relief is only 10% or if you are to transfer the money made on the sale into another business then you may pay nothing via business rollover relief, certainly an improvement on the 28% from property. Plus business assets are usually un-leveraged and organically grown, therefore carry less debt to value ratio.

But there is also real additional value comes on inheritance and death benefits, my properties, would all be taxed at full inheritance tax rate of xxx leaving a big tax liability on my family, whereas there would be no tax on business assets, so yet again business comes up tops, for me.

My husband too has a mixture of property and business, but has invested also in the markets, and is very successful in that area, somewhere that I haven’t ventured yet, in any large quantity (unless you include badly buying some pizza express and JJB sports Shaw and losing the lot) and this is something I would like to do a lot more of, but it made me wonder…

How many of us blindly follow ONE strategy, because someone told us too, or we went on a course, without looking at the FULL options out there or looking at the exit plan at the end…

With checking the end game, we could all be building sand castles rather than empires, so it’s worth having a look what is your LONG TERM investment plan? (Figures and percentages need checking first)