Owning a Business Vs Real Estate | What I Learned from Each

weighing pros and cons | owning a business vs real estate

Every day more investors are using alternative strategies to generate income since the income from bonds is still relatively low.

Small business and real estate are among the most popular alternative investments now given the opportunities and ease of entry for each.

There are many types of small businesses and many types of real estate investments. Since low capital online businesses are the often focus for individuals establishing a small business nowadays, and one where I have the most experience, that will be the focus of this post, as opposed to high capital local brick and mortar businesses, or startups that require funding. Likewise, real estate rental properties are popular for the income they provide so we’ll focus on real rentals for comparison to business ownership in this post.

How does owning a business vs. real estate compare? Internet based small businesses require little capital to start while real estate requires higher capital, even if it is obtained from financing. Owning a business can have faster growth opportunities since real estate values tend to increase slowly over time. Owning a small business usually demands more time to establish and manage than real estate ownership. Small business ownership, however, has greater upside potential than real estate given a comparable time frame. 

In this post, I’ll share the pros and cons of owning a business vs. real estate. This information is based on what I’ve learned after buying my first rental property in my 20’s, and starting and running small online businesses over the past 15 years after deciding to create alternative income streams later in life. As you’ll see, lessons from my own experience are woven throughout this post.

Define Your Goals for Owning a Business Vs Real Estate

First, define your financial goal for an investment in business or real estate. Spend a few minutes defining why you’re even considering owning a business vs real estate. Are your goals for income generation, wealth building, or both from this investment? (I consider small business an investment even if there is no capital required since it demands your time.)

Then, define how much capital you want to allocate toward the endeavor.

Next, clarify the amount of time you can and want to spend on this investment.

After you have done this, you’ll find this article much more helpful in deciding whether owning a business vs real estate will be a better fit for you personally. Otherwise, you could end up owning a business or real estate properties that don’t support your desired lifestyle or financial goals.

Next, let’s explore the various similarities and differences between owning a business vs real estate. 


Owning a Business Vs Real Estate

Factor Owning A Business Owning Real Estate
Capital Low Medium to High
Time to Manage High to Low Low
Wealth Building Potential High Good Over Time
Risks Manageable Manageable
Tax Benefits Benefits
Availability Very High Limited
Knowledge Required High Low


Capital Required for Owning a Business Vs Real Estate

Available capital is one of the first factors to explore in choosing alternative investments since it will quickly eliminate some strategies and bring others to the forefront.

Due to leverage, both owning a business and real estate require lower capital than traditional income investments, such as dividend stocks and bonds. This is a big advantage for alternative investors. Even so, there is a big difference in capital required for small business ownership and real estate.

Capital Needed for Real Estate

The amount of capital needed to buy real estate will depend on your personal financial situation, investment goals, lending environment, credit score, and the financials of the deal.

Many investors want to make smaller down payments so they can own more properties. Other investors have a lot of cash stored in a money market account earning a minimal amount. In this case, they may want to avoid financing, thereby increasing cash flow.

Most people leverage their real estate investments, however, so let’s assume you buy a $300,000 property with a 25% down payment.

This equates to $75,000 capital needed to control a $300,000 rental property in this case.

In my Ultimate RISE Wealth Plan, I explain the importance of using financing (or not) to accomplish your primary goal of income generation and wealth building.

wealth plan


Regardless of whether financing is used or not, owning a small online business has more choices for low capital investments than real estate. This is especially true if a small business is started from scratch, as you’ll see next.

Capital Needed for Owning a Business

The capital required for owning a business varies based on the type of business.

As addressed earlier, a brick and mortar business can have a similar structure to the real estate loan example above, but the lender will need more collateral since small businesses are high risk investments and there are often few if any business assets to secure the loan.

We found that when we considered buying an existing profitable brick and mortar business in Austin, most of our stock and bond investments were needed as collateral.

This was far too risky for us at our age, so we decided to test out starting a low capital online business based on our backgrounds instead of buying an existing business, fortunately. 

Zero Capital Needed for an Online Business

Starting an online business requires little to no capital. You can literally start an online business for under $25 if you build a simple website yourself. (This is not hard nowadays. I built this site, for example, and I am not naturally a techie!)

You can also, however, buy an existing online business that is already profitable from a few thousand to millions of dollars.

The decision on whether to start a business or buy a business circles back to your goals and the amount of time and capital you want to invest.

For example, we have initially started online businesses for between about $150 and $2,500.

The Amazon store I began was the higher $2,500 investment since inventory was required for the products I had manufactured, imported and branded.

As you can see, the capital required to own a business vs real estate is much less if you’re considering an online business.

It would be hard to generate meaningful income from buying real estate with prices less than $300,000, for example. While leverage through financing can be an advantage that reduces the cost of capital out of the investor’s pocket, the investor is still on the line for the funds used to buy the property, plus the cost of financing.

On the other hand, starting a small business with less than $1,000 of capital has unlimited potential, even though the outcome may be less certain than it is with real estate.

This is why starting a business later in life, such as in or near retirement can provide a low risk income stream for those with insufficient retirement savings

Time Required in Owning a Business Vs. Real Estate

The time required for owning a business vs. real estate will vary based on the business model and the owner’s desire and ability to outsource the management of either.

Time Required in Real Estate

The fourplex real estate rentals we own now require, on average, anywhere from 15 minutes to a very rare three hours a month. There are a few exceptions.

For example, recently I put a rock flower bed on our property with my sons, so I spent longer that particular month. But this didn’t have to be done, at least not by me. I enjoyed it and I like to involve my sons in our businesses.

Since turnover is low, and I have a reliable team including a handyman, plumber, and such, the real estate rentals usually take little time vs our online businesses. It requires little time to own and manage our real estate, as it does for many real estate investors. 

Time Required in Owning a Business

An online business can generate almost completely passive income or it can be like full time employment requiring 40 or more hours a week or more. The time required to manage a business depends on the model chosen.

The management of many online business models can be delegated while other tasks cannot be delegated.

For example, while we have a team to do most of the back end work, my husband and I are both very involved in our online financial education businesses. This is because we share information based on our own experiences.

So, our core content creation can’t be outsourced. This is more time consuming, but it is also very fulfilling. Content creation has become my art. I like writing on my blog, creating videos, and providing investment education.

Many other information type business models, however, hire writers to create all the content because they are either publishing models with a variety of experts submitting articles, or they hire writers to research and create content.

While I created and initially ran my Amazon store, it became almost completely passive since my assistant could manage it.

If you want to delegate the management of your business, however, you’ll need capital to do so unless you generate income to pay for employees or contractors.

The time you need to spend on an online business endeavor all goes back to available capital and your financial goals which you outlined at the beginning of this post.

Learning Time for Owning Business Vs Real Estate

Regardless of whether you choose to own a business or buy real estate, learning how to choose and manage each is essential. There is no way around this. Based on my experience, buying real estate takes less time than starting or owning a business.

Real estate agents provide a lot of guidance in buying property. Leasing agents and property managers can all be had, albeit at a cost. The transactions, management, and math with owning real estate is fairly straightforward.

On the other hand, deciding the type of business to start can be monumental since every online business coach promotes their own model, and their model may no longer even work.

Having written that, I’ll share that online business is also an ever changing industry that is still in the pioneering days. With that, however, comes exceptional opportunities for those willing to venture into the territory.

With both owning a business and real estate, investors must learn to become business owners. This is very different from working for someone else. It entails matters like entity structures, legal issues, accounting, taxes, organization, delegating, and managing others.  There’s a lot to learn.

In general, however, real estate is easier than owning a business when it comes to learning time. 

Wealth Building Potential for Owning a Business Vs Real Estate

You can own a business or buy real estate with the main goal of income investing, initially, while building an asset with capital gains potential later.

In other words, income and appreciation are not mutually exclusive with either of these income generating assets. In fact, we discovered that having both goals (income and growth) is an ideal way to build wealth gradually while also increasing income along the way.

There are marketplaces to sell online busineses, and eager buyers so the potential for wealth building with small business is certainly there. 

Wealth Building Potential from Real Estate

Real estate rentals are commonly thought of as income investments. We learned, however, that real estate has very good potential to build wealth, too.

If building wealth is your main goal, however, it’s important to consider the current trend and economic environment before investing in real estate, especially the older you are.

This is true for all investments based on my experience through several severe stock and real estate market declines over the decades.

The ability to build wealth from real estate is based on the time frame and the purchase price. Both of these factors are heavily influenced by the current trend and the economy.

Sometimes, however, there are anomalies that override the trend. Real estate rentals can be powerful Quadruple or even Quintuple Wealth Builders, as explained more in my Ultimate RISE Wealth Plan.

wealth plan


Wealth Building Potential from Online Business

In the past, I thought that real estate had wealth building potential but online businesses really didn’t, but I’ve since learned differently.

Here is what told me that I had been mistaken about the income vs capital gain (appreciation) potential of online businesses. A few years ago I noticed that a very small online business started and run by a former school librarian named Jocelyn Sams sold for over a million dollars.

This got my attention.

Then I noticed more bloggers selling websites for seven figures.

Since then I’ve learned that online businesses are assets that usually sell between three and four times annual net income.

The more passive the income is, the higher the earnings multiple for which the businesses sell. Online businesses in certain sectors sell for more money than others, too.

This is a rising trend; the buying and selling of blogs and tiny online businesses.

Many think it is too late to start an online business but I think over the next decade or two buying and selling online businesses will continue to evolve and become more mainstream as consolidation happens on the internet. Along with this, the earnings multiples for which online businesses are sold will increase.

This presents an excellent opportunity for individuals who start very small online businesses and take them to profitability.

While it may seem like the internet is a crowded market, I still believe online businesses are an incredible opportunity given the low capital and the still fairly early entry into a rapidly expanding evolution.

Leverage for Owning a Business Vs Real Estate

Leverage can expedite wealth creation through both time and money for smart but cautious investors and entrepreneurs. Both owning a business and real estate have leverage potential.

Click here to read my post Wealth Building After 50 with more on this.

How Do You Leverage Real Estate Rentals? 

As addressed above, by making a partial down payment, a real estate investor can control a significant amount of real estate worth far more than the down payment.

And since every task related to real estate ownership can be delegated beyond the learning stage, time can be leveraged, too, with real estate investing. This is important since we can increase the amount of money we have but we all have only 24 hours in a day. 

How Do You Leverage an Online Business?

An online business can be leveraged using both time and money, too, in the following ways. 

1. It’s no longer difficult to hire an outsourced team to manage the various elements of owning an online business. We use a team of several outsourcers, for example. That same team can be also leveraged across multiple online businesses.

2. A website also has leverage by being able to easily add additional products and services.

3. Like real estate, online businesses can be bought with financing. And like real estate, too, the financing can be paid through income from the online property.

Online businesses, however, have a powerful type of leverage that real estate doesn’t have.

4. Online small businesses leverage the internet to reach a global market for less than $25. 

Think of the magnitude of this opportunity.

Expansion Opportunities for Business Vs Real Estate

Expansion opportunities exist for both real estate and small business ownership.

How to Expand Real Estate Rental Investments

Here is an example of real estate expansion for a small investor like us. Our fourplex has room for us to build an additional door or two or add a tiny house.

We have not done this yet because we have been focused on online businesses, to be honest:)

Also, shortly after we bought this property, we sold an easement to an unsolicited buyer, so this was an expected form of expansion.

While we have not yet done this, many real estate investors have successfully expanded into short term rentals with AirBnb.

These are real estate expansion opportunity examples that are very doable for smaller investors like us, and maybe like you if you’re here.

How to Expand An Online Business 

Online business expansion opportunities are many based on our experience. Some examples for us have been joint ventures, unexpected B to B (Business to Business) opportunities, and proprietary software.

When you own an online business, you’re visible to the world and opportunities find you.

If this concerns you, don’t worry; you can choose to be personally hidden as the owner. Since I wrote a book and my husband, Larry, teaches low risk option strategies based on his 30 year career as a professional trader, we haven’t been anonymous except for one small online business.

Risks from Owning a Business Vs Real Estate

From investing for almost 40 years now, I have come to really appreciate the impact which factors beyond my control can have on our investments. This includes stock market crashes, real estate crashes, interest rates, and political changes. 

By having fewer factors beyond my control, I can lower risk and thus increase the probability for successful wealth building plus more predictable income. Both real estate and small business ownership have factors beyond our control.  Let’s look at them.

Is It Risky to Own Real Estate Rental Properties?

The most common factors beyond the control of real estate investors are the national economy, local economy, commodity pricing, liabilities, weather, competition, and less common governmental initiatives. Any one of these can ruin an otherwise smart real estate investment.

Here are some examples of real estate risks.

  1. An economic slowdown can lower rents.
  2. Lower commodity prices can hurt real estate prices and the number of renters in a given market.
  3. Hurricanes, tornadoes, and floods can destroy properties.
  4. A nearby shiny new apartment building with all the bells and whistles can lure away tenants.
  5. Governments can expand highways that encroach on properties and land can be seized.
  6. Industry centers can be relocated.

Fortunately, most of these risks can be managed through various initiatives.

Is It Risky to Start a Small Online Business? 

In owning a business, regulation, competition, liabilities, cybersecurity, technology changes, and politics are major factors beyond our control that pose risks.

Here are 7 common risks from starting an online business.

  1. The mention of banned words on your website which has no relevance to the actual topic being addressed can cause irreparable damage.
  2. Major technology players can change business policies or models and your own business model stops working.
  3. Regulatory changes are a constant fact of life and a threat to online businesses.
  4. Competition is an ongoing threat.
  5. Websites can be hacked.
  6. Technological advancements occur
  7. Obsolescence. 

Just like with real estate risks, most of the risks of owning a business can be minimized if not eliminated. Managing risk is so important it is the first step in my Ultimate RISE Wealth Plan.

The Availability of Business Vs Real Estate

There is a big difference between being able to find or start an online business vs finding real estate that meets your investment criteria.

How to Find Online Businesses

Again, online businesses can be started for very little money. While the market size and competition will guide you to the right online business to start, there are thousands of possibilities for owning an online business vs real estate.

In addition to many different online business models, there are many different potential small business income streams.

While, realistically, it can take months or years to reach profitability from some of these business models, there are plenty of them. (We have experienced both fast and slow profitability from our online businesses, another big lesson!)

If you choose to buy an online business instead of starting one, there are marketplaces that facilitate finding and buying websites based on strict criteria.

Income can be immediate when you buy a profitable online business as I did in 2022 with a website I bought through Motion Invest. 

How to Find Real Estate Rentals

Smart real estate investors have very strict criteria, too.  Finding real estate that meets your criteria can take months if not years to find.

Speaking from experience, looking at properties takes a lot of time. While there are easy ways to invest in real estate online, we have had success buying real estate near our back door as opposed to investing in real estate in other areas that we don’t know well.

We learned that by knowing the local market, our risk was reduced.

Of course, after a major real estate price correction, rental properties that cash flow are easy to find almost everywhere.

Overall low valuations from real estate corrections only come along every few years, or decade, however, or so this doesn’t help an investor ready to purchase property now.

Other Considerations for Owning a Business Vs Real Estate

If you’re weighing owning a business vs real estate, there are two other considerations I’ll share based on my experiences.


Both owning a business and real estate have tax benefits that don’t exist for the employee income model.

Since taxes are the single largest expense for many people, having either small business, real estate investments or both can have a big impact on the ability to build wealth.


Diversification reduces risk. There are many ways investors can diversify; having both investment diversification and income diversification lowers financial risk even more.

Diversification from owning both a small business and real estate can make sense especially for those who are able to delegate tasks and manage a small team. If you want to own both a business and real estate, I would focus on one strategy at a time.

For example, we bought our rental properties years before we started online businesses. While we have considered selling our real estate rentals, we have kept them because we like the diversification and the inflation hedge they provide. They generate a small amount of passive income while paying for themselves for the most part.

For us, it worked well to begin with real estate rental investments since they generate passive income. This freed our time to work on our online businesses later. We also liked that by focusing on diversified income generating assets, we would be able to delay or possibly avoid retirement withdrawals following the popular 4% rule.

I believe, however, this diversification issue is almost always overridden by which investment (real estate vs. owning a business) offers the best value based on current cycles and the economy.

In other words, it can be risky to invest heavily in any asset when the price is near the top of the market based on long term valuations. On the other hand, it is easy to invest in undervalued assets when everyone hates them. 

A core principle at Retire Certain is pursuing opportunities that present themselves based on changing market conditions, which is considered tactical investing.  

Summary of Owning a Business Vs Real Estate

As you can see, there are many considerations for owning a business vs real estate rentals to generate income while building wealth.

When you start with a clear picture of your available capital, desired lifestyle, and financial goals, you’ll be led to the right choice for you personally. There are no cookie cutter solutions at Retire Certain, only what works for you based on your unique skills, interests, goals, assets and financial goals. 



Click here to read my related post How Much Money Do You Need to Live Off investments?

The information on this website is for education only and is not to be construed as personal financial advice.