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 assets to generate income in retirement for a variety of valid reasons.

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

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 rather than capital intensive brick and mortar businesses, or startups that require funding. Likewise, real estate rental properties are popular for the income they provide so I’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 usually require little to no capital to start while real estate requires a higher capital commitment. 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 and the capital required. 

That’s the summary for owning a business vs. real estate when it comes to capital and potential but there’s a lot more to address with these two alternative assets.

In this post, I’ll share the pros and cons of owning a business vs. real estate in more detail. This information is based on what I’ve learned after buying my first rental property in my 20s, 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 as that is the foundation of my work here on my website and my channel on YouTube

Define Your Goals for Owning a Business Vs Real Estate

First, spend a little time 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? 

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 property that doesn’t ultimately support your desired lifestyle or financial goals.

Now that you’ve gotten clear about your goals for owning either asset, 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

Capital required and your 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 huge advantage for more advanced investors seeking these alternative assets.

Even so, there is a big difference in capital required for small business ownership and real estate. Remember, this post is about owning a small online business vs brick and mortar or startups that are capital intensive.  

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 save capital to buy more properties, or because they have little capital, period.

Other investors have a lot of cash stored in a money market account earning a minimal income. In this case, they may want to avoid financing real estate altogether, 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 the $75,000 capital needed to control a $300,000 rental property in this case.

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 higher risk investments and there are often few if any business assets to secure the loan.

My husband and I found that when we considered buying an existing 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. In hindsight, this was a good decision. 

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 costing less than a thousand to millions of dollars. For example, I bought a profitable online business in 2022 as an investment due to the low earnings multiple relative to stocks

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

For example, we initially started two online businesses. One cost about $150 to start and the other cost about $2,500 to start. The Amazon store I began was the higher $2,500 investment since I had the inventory manufactured.

When compared to real estate, it would be hard to generate meaningful income from buying real estate with a property cost under $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 hook for the funds used to buy the property, plus the cost of financing.

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

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

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

How to reitre when you want

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 with very few exceptions. I usually spend about half an hour a month at the most overseeing our real estate. 

For example, recently I put a rock flower bed on our property with my sons, so I spent longer that particular month. But the rock bed 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, leasing agent, and such, the real estate rentals usually take little time when compared to our online businesses. This is the case for many investors that own both real estate and small businesses online. 

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 of the business.

Some tasks for running an online business 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 coaching businesses. This is because we share information based on our own experiences.

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

Many other information based online 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 right away to pay for employees or contractors.

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 and managing real estate takes less time than learning to run a business of any type.

First, real estate agents provide a lot of guidance in buying property. After you make a real estate purchase, leasing agents and property managers can all be hired, albeit at a cost. The transactions, management, and math of owning real estate are 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. Oftentimes, their model no longer even works. 

Online business is also an ever changing industry that is still in the pioneering days while the principles of owning real estate change little over time. 

With both owning a business and real estate, investors must learn to become business owners, however. 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. 

Upside 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.

Wealth Building Potential from Real Estate

Real estate rental properties are commonly thought of as income investments., and they certainly can be. We learned, however, that real estate has very good potential to build wealth, too, when bought at a good price.

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 if you’re retired or an older investor.

The ability to build wealth from real estate is based on the price you pay for it. The price can be heavily influenced by the current real estate trend, interest rates, 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 and 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 their 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.

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

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. 

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

It is important to note that the online marketplace has slowed over the past year, however, with a more challenging financial environment. 

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.

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 that’s worth far more than the down payment.

And since every task related to real estate ownership beyond the initial learning stage can be delegated, 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 also be leveraged across multiple online businesses.

2. A website also has leverage by being able to easily add additional products, services, and various other revenue sources.

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.

4. Online businesses, however, have a powerful type of leverage that real estate doesn’t have. Online small businesses leverage the internet to reach a global market, and this can be done for less than $25 if you do the work yourself. 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 duplex, 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 rental property, we sold an easement to an unsolicited buyer, so this was an expected form of expansion.

While we have not done this due to the time required, many real estate investors have successfully expanded into short term rentals with AirBnb or VRBO. 

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, advertising revenue, affiliate revenue, 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 that I also own.

Risks from Owning a Business Vs Real Estate

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

By having fewer factors beyond my control, I can lower risk and thus increase the probability of 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 specific examples of real estate risks.

  1. An economic slowdown can result in 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 of owning 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. I find that diversification of both income sources and asset classes is an excellent way to manage risk.  

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, where inventory is very limited.

It is definitely easier to find businesses to buy than it is to find real estate to buy, especially if you want to purchase in your area. 

How to Find Real Estate Rental Properties

Smart real estate investors have very strict criteria for their purchases.  Finding real estate that meets your criteria can take months if not years.

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 more success buying real estate near our back door as opposed to investing in real estate in other areas that we don’t know well.

Of course, after a major real estate price correction, rental properties that cash flow are easy to find almost everywhere. The amount of real estate properties for sale is a function of the real estate cycle. 

Overall low valuations from real estate corrections only come along every few years, or decades, however, 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 three 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 or for stock investors seeking short term capital gains.

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


Diversification reduces risk. There are many ways investors can diversify; having both asset class 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 also generate more mostly passive income than we could get from a stock and bond portfolio.

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.

It is my opinion, however, this diversification principle is almost always overridden by which investment (real estate vs. owning a business) offers the best value based on the current cycle of an asset class and macroeconomic factors.

In other words, it can be risky to invest heavily in any asset when the price is high relative to 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 economic and market conditions, which is considered tactical investing as explained in my Allocate Smartly Review post.  

Valuations of Small Business Vs Real Estate

In 2009, my husband and I drove around a beautiful waterfront neighborhood in Sarasota, Florida. Streets were littered with For Sale signs. This was the case in most areas. It was a buyer’s market for real estate. 

After over 40 years of investing, I’ve learned that it can be best to buy assets during buyer’s markets vs being committed to owning one asset over another. Both small businesses and real estate go through buyer’s markets and seller’s markets. The buyer’s markets can be pure gold for investors who are patient and invest with logic instead of emotions.   

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 rules at Retire Certain, only what works for you based on your unique situation and in light of the investment opportunities available at any given time.  



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.