Cashflow - A good buis or commercial property

Which is better in your opinion ?

A good buisness with good cash flow - more risk

A good commercial property with decent cash flow - less risk

 

1. Very industry dependent. Are you buying or greenfield? What is previous owner now doing? Etc, etc, etc

2. Depends very much on the location, tenant and lease terms.

 

Even a half good business will outstrip a commercial property for returns. But a property may take less time to manage. There are too many variables for a neat answer.

 

Let's base the business on being a Franchise for example Gloria Jeans @ 1.3Mil or equivalent 1.3Mil in Commercial property leased out to a Triple A tenant such as 7/11 , Bp , Woolies or a bank.


What's better?

 

A buisness is generally only as good as the client relationships. These easily come and go.

A commerical property only as good as the tenant and time left on the lease.

If it is passive or you are risk adverse, I'd go commerical property.

Personally I only invest in property as a business is only worth a percentage of it's profit (half the profit over 2-3 years / half the value).

A reasonalbly located commerical property is never likely to half in value.

 

I've got a commercial property in a prime street /area Hawthorn,cash flow positive but last 3 to 4 years little capital growth unless i re-develope it to plans for a 5 story building and re zone it to resi.
So
I'd go for a cash flow business.
What idea what about this.In the UK they have mobile cash transactions machines at venues like concerts and events, people take money out at a fee and intern spend it at the event on drinks,foods,bars merchandise ect.Its a cash cow x2.

 

correct,building I have is long term,in the short term I could cash up and invest and earn 18% plus P/A,but I like to spread my investments,cash,property and shares plus a blue chip home in a prime spot.

 

How does that work in the U.K can you explain more or site?

 

Bunnings 20 x2.
Franchise,issue is running costs/placement and long term leases .
Better of setting up your own.

 

I will try and find out more from a source.

 

The other alternative is buying a none franchise business that is already established but then that's a risk as if the business is making 300k per yr net profit why would anyone let go of it?

 

if you want to do a coffee shop thingy,I know the perfect model,it would boom in a cash friendly area.
what about a Cup cake franchise ,they do coffee as well.

 

That's the dilemma for owners of good businesses. A sale price at even a high multiple of EBIT isn't much good to you if you then put the funds into the bank or property to get much lower returns, or into the share market for OK returns with no control and plenty of downside risk. And this is before CGT enters the picture.

Owners of good businesses are better off finding a way to keep the business than to sell in many cases.

Re franchises - I've heard more sad tales than happy ones. Personally, I can't see the appeal of buying a business and then doing as you are told by people who continue to skim off the cream.

 

years ago an ex business partner before he became a crim and went inside,bought and restored a large Victorian mansion in South Yarra.
Myself and our accountants told him to turn it into a legal brothet,get it up and running with figures and sell it,never happened he went to the can.

 

only people whom make money out of franchises in a big way are the idea owners or people with muliple franchises like the Ferrari owner in melb whom has over 100 stores ie Macas,Red rooster and KFC.

 

I bet there are a few stories to be told there.

 

It's very hard to decide property low return but secure, business good return with a big risk.

 

That's the old story, always has been, you want a high return you have to take some risk. Remember cashflow is king.

 

oh yea cost me millions.and my brabham and my group2 trans/am Mustang.
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My 2 cents worth is that if your heart is not in what the business does/sell then don't do I because to be successful with it you must have a passion for it.

 

Big time Charlie fluff.

 

thats not nice.

 

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I wondered what happened to cousin Fred.

 

You fuick with me and Terry and this happens to horse.