Selling House to Fund Your Startup? 10 Questions to Ask Yourself Before Doing So
It is not easy to get funds for a startup. Selling assets such as a house may seem like an easy option to generate the initial funding. It is, however, a big and risky decision that can have strong effects. Read this article to find out if you really should be selling a valuable asset such as your house.
Selling a home is always hard and can make you question the action. Moreover, if it's for getting funds for your startup then the decision can be especially stressful. However, It may be hard to find investors, and selling your home may seem like the easiest way to gather the funds. Ask yourself these questions below to know if your decision is right.
How Much Money Do You Really Need?
Your business may need a lot of money. Selling your house may seem the easiest solution. But what if your house sells for less than what you need? In this case not only will you fail to get the funds but you'll also be left without an asset.
So it is always better to consult a realtor before selling a home and check how much money you can get for it. If the expected price turns out to be sufficient for your startup, then you can make the hard decision to sell. However, you should not be so eager to sell if the price of your house will not cover the entire investment.
How Fast Do You Need the Money?
Selling a house is not a walk in the park. It can take weeks, even months. The amount of money a real estate can get you and the time required depends largely on the area it is located in.
If you don't live somewhere where the demand for real estate is high, then your house may take a while to be sold.
If you need the money urgently for your startup, then it is better to not rely on a house sale. You may not get the money fast enough.
Have You Tried Other Safer Options?
Selling your home is not the only way you can get funds for a business. You can apply for small business loans, look for investors or liquidate your savings. It is said that smart investors and entrepreneurs never invest their own money. So check out if a bank or external investors would be interested in investing in your business or giving you a loan.
Do You Have Any Other Assets That You Can Sell?
You should check if you have any other assets that can be sold instead of your home. You may have some inheritance that'll never be used or some savings account that can be tapped into. It is better to rely on other options than selling a house especially because real estate is a precious asset that has many short-term as well as long-term benefits.
Can You Afford Moving Somewhere Else?
You're gonna have to move somewhere else if you sell your home. Remember that moving costs a significant amount of money and time. If you're considering renting an apartment or a house, then be sure that you can afford it.
Renting can be costly especially if you're living in the city. It can be risky as well. If you can't keep your business afloat or don't make enough money then you can become homeless.
So it is important that you understand the financial risks and opportunities before making a big decision such as selling your house.
Can You Earn Enough Revenue to Keep Afloat?
Earning enough money is important to keep your business afloat and to pay for your lifestyle. You won't have a place to fall back on if you sell your house and then the business fails. How fast you start making profits also matters.
You may be risking your own and your family's future if the business takes too long to take off. So be sure that you're not rushing into decisions.
Do You Have a Backup Plan?
It's a no-brainer that you should have a backup plan before selling your house. You'll need to pay for your living somehow until your business starts making profits. It may take a long time before you can earn enough money.
It is better to have a backup plan such as an alternative source of income or an affordable place to live. A backup savings account can also become useful in the time of need.
Have You Consulted a Financial Advisor?
Financial advisors can make good assessments of any business. They can let you know about the potential risks and benefits. They can also inform you about the market and how soon you may start generating profits.
Financial advisors can give you an estimate about the size of profit you can get and how long it'll take to earn a significant amount of money. It'll help you plan your investment strategy and decide if selling your house will be helpful.
In addition to financial experts, you should consult legal advisors too as they can tell you whether your business is legally compliant. You won’t be able to make your business a success if you don’t comply with the laws and regulations.
Have You Consulted a Real Estate Agent?
Real estate agents can give you expert advice on how and when to put up your house for sale. The time of the year and market conditions can vary and affect the price of a house significantly. A realtor can help you navigate the murky waters that lead to a successful sale.
However, keep in mind that you have to pay a specific percentage of your selling price to the agent and for the costs of repairing the house.
Are the People Affected by the Move Supporting You?
Lastly, if there are people dependent on you then it's better to take their opinions first before imposing such a big decision on them.
Selling a home requires moving and settling somewhere else. It can uproot your and your family's lives. On top of that, the pressure of starting a new business can cause extra problems.
You wouldn't want to strain your relationship with your family by pressurizing them. So take everyone's opinions into account before deciding to sell your home.
Selling your house is a big decision that should be made with careful planning and consideration. Do not get overconfident about your business idea and make hasty and potentially disastrous decisions.
You should consult realtors, financial advisors, legal experts, and your family before finalizing something. Moreover, if you get answers to all the questions that we brought forward in this article, then you’ll be able to correctly decide whether to sell your house to fund your startup or not.