Investing in real estate is a tried-and-true practice that has generated millions of dollars for millions of people. Whether you invest in rental properties for families or business owners, you can create a stream of passive income.
Although this proven method of making money will continue for years and years, there are new ways to invest your money and generate a good return on your investment. With the world changing thanks to technological advancements, the possibilities of earning income online are potentially endless. Not only does a brick-and-mortar setup limit your earning potential but investing in established websites/online businesses reap several benefits compared to real estate.
It is cheaper to start an online blog compared to purchasing a piece of property as well as easier to maintain. Not only is there less risk involved with online companies, but they are more sustainable too. When you invest in established online businesses, you have a much higher income and profitability potential compared to traditional real estate not to mention better buying and selling factors.
1. Cheaper to Start
If you want to get your feet wet in the real estate world, it is likely that a hefty lump sum of cash will be required. Most homes require at least a 10-20 percent down payment right from the beginning, for residential properties, but if you are taking on a buy to let/rental property, you may find yourself raising closer to a 30 percent down payment. With the median asking price for a house in the UK well over £350,000 in some areas ($200,000 in the US), then you can only imagine the type of money you would need upfront. Not to mentioned that the down payment does not include ongoing home insurance, stamp duty/land taxes, maintenance, and more.
Now instead of using that hard-earned £35,000 (or 10% of £350,000) towards real estate, you can invest in an established website or online business.
Did you know that you can purchase a blog and see a return on your investment in just one year? For example, a website that gets anywhere from 80,000 to 100,000 hits each month will generate a stream of income of $800 - $1,200 per month in profit. In 12 months, you can enjoy over $14,000 of return income.
Additionally, there is still the option to sell the website for a much higher price, but we will talk about that later. Just remember, when compared to investing in real estate it is much wiser to put your money into established online businesses.
If you prefer to get a handle on the blogging world before making your first purchase, you can start your own online investment for less than $50 a year. With a basic server, free domain name, and a hosting site, you are well on your way to earning a couple hundred bucks each month for doing practically nothing. The lower startup costs for online income compared to real estate investments make a clear connection as to why average people can earn thousands of dollars in residual income every month.
2. Easier to Maintain
When it comes to purchasing a rental, not only do you need to discover the right building, but it must have an ideal location. Even if you manage to score the perfect property, there will always be things that need to be fixed over time. Repairing a broken wood plank on a deck or fixing a loose door handle can be pretty straightforward. However, what happens when you have to redo the roof or update the plumbing? These are not quick fixes nor are they cheap.
You should assume something will break about every three months depending on the number of property rentals. As the landlord, you need to have a list of quality electricians and plumbers to contact at any given moment. If you do not have an on-site manager, then you are responsible for arranging everything as the landlord including getting a reliable handyman to fix the problem on time at a reasonable cost.
When it comes to online income, you also have to deal with maintenance. However, it is in a much different manner. Rather than being physically available, you just need a little patience. Your blogging platform might need updating because of new plug-ins such as comment spaces, search boxes, and ad widgets, but these features are free and will help you in the long run.
The hosting site might also crash now and then because of the overload of another site’s traffic. If you have ever come across a ‘404 error’ message, it is because something is broken on that site and it requires maintenance. The other issues you might deal with in this category deal come in the form of losing internet connection because of local servers and cable lines. You also have the potential to get hacked online, but this is rare. If you do not know how to overcome these obstacles for online income, then you can always hire a computer professional to monitor your site for viruses, spam, and other related problems.
3. Less Risk
When you invest in real estate, you are taking a considerable risk. Not only do you have to have a substantial amount of money upfront, but you also have to play to the market.
For example, depending on the leverage in the industry, you can make fast money (up to $5 for every dollar) when your property value goes up after making your 20 percent down payment. However, you also have the risk of losing your entire down payment if the rental property declines by that same 20 percent. Whatever you do, try not to purchase a home at the top of the market only to be forced to sell it at the bottom.
Not only do you have to worry about financial risks with real estate, but the concept of concentration risks also occurs in the industry. For example, the average American has up to 80 percent of his or her net worth connected with their properties.
The only real risk associated with blogging is getting your pride in the way and your feelings hurt. You might write an article that relates to people or makes them laugh. On the other hand, you might hear crickets or, even worse, backlash about your opinion. Without thick skin and self-motivation to post content every day, you might not make it in the blogging world.
Regarding finances, blogging poses virtually no risks, but you may be out of pocket in terms of the cost of hsting your blog if nobody visits your website. However, if you look on the bright side, you would gained valuable knowledge around social media content, search engine optimization, advertising, marketing, HTML coding, and more.
4. More Sustainable
Although sustainability deals with maintenance, it also takes longevity into account. Real estate, especially homes, can withstand the test of time. Not only that, but houses that are over 100 years old are considered historical. Victorian and Edwardian homes from the late 1800s and early 1900s are beautiful, to say the least. Nevertheless, it can cost a small fortune to update exterior paint on such a large home. Outdated electrical systems, plumbing and other fixtures could set you back tens of thousands to update and modernise.
On the other end of the spectrum, a small rental that is only 1,000 square feet or so won’t cost more than a few thousand every decade. From carpet and interior painting to appliance upgrades are pretty reasonable compared to the potential profit.
When it comes to online businesses, sustainability really depends upon you; not in the sense of having enough money for repairs but maintaining the drive and motivation it takes to run your own website. As mentioned before, you would need to continue producing content or hire an experienced freelance writer to do it for you. If applicable, you also must release new produc/articles and promote them. You must be able to maintain your output and although the journey may be a trial and error experience at first, you will learn from your mistakes and continue to improve your profits. If you work hard, produce valuable goods, and keep writing you should be able to generate sustainable income.
5. A Sense of Happiness
Any time you drive by one of your real estate properties, you probably pat yourself on the back because you are proud to own such an asset. It is a great feeling to have an asset that you can physically see literally working for you. However, as nice as that is, the reality of the situation is a little different. Dealing with the strict rules and regulations that surrounds owning a rental property can be a headache.
Furthermore, dealing with one rude tenant can be enough to make you sell all of your properties and run for the hills. Sometimes, people do not take care of a house that is not really theirs, and that being said, if a renter does not follow the lease, pay their rent, or leave behind a broken, dirty home it can be downright devastating.
Owning an online business gives you an entirely different set of emotions. Although both investments allow you to benefit from entrepreneurial endeavors like making your own hours or working from home, blogging lets you be in charge of your career on another level. It’s almost like a kid on Christmas morning because you can hop online every single day to discover insightful comments on your pictures, how many people shared your posts, and other exciting feedback. This feeling is known as perpetual satisfaction.
Besides that, have you ever worked on a challenging academic research article? Perhaps you put your all into it, and the hard work paid off in the form of a good grade. Well, anytime you see your very own article featured on the internet, it can be an overwhelming accomplishment. When you find people who equally enjoy your work, it gives you a sense of meaning and purpose in the world.
6. Potential Income
Real estate offers a steady income that is generally fixed, you may raise the rates annually to keep up with inflation. Likewise, you may have to lower them in a recession or depending on the trend of the area. This situation is just as bad as keeping the price at a flat rate year after year with no change; you are limiting your potential income. All of these scenarios only work if you have a tenant who is actually paying on time every month.
Furthermore, you must bear in mind that finding suitable tenants may not be as easy as you first anticipated, therefore, you are likely to be losing money each day your property remains vacant.
However, the blogging world is much different when it comes to income; it is much more unpredictable. Even with over a million page views per month, you still might see a volatile fluctuation of 20 percent on either side. Pinpointing the exact reason for the irregular income patterns is hard, and it could be anything from click-through rates and search interests to Google algorithmic changes or seasonality. Although, the correlation can be traced back to the amount of traffic growth.
Before you start doubting yourself about the income upside of blogging, keep this in mind: there are over three billion people that go on the internet. All of them are potential clients that can earn you money simultaneously. When it comes to real estate, you only have one tenant per property. Therefore, regardless of the unpredictable income from blogging, it still creates a much more significant reward.
You will never experience a complete return on your real estate investment unless you fork over the entire price in cash. A house usually comes with a mortgage that is at least 25 years. Combine that with the typical land taxes, maintenance costs, and licensing fees. In addition, it will take a while before you start making a profit on your rental property. It will probably take several years before you hit your break-even point.
Depending on the place, you might even want to live in it so you can fix it up and make a more significant profit in the long run. This plan only works out if you have the resources to flip a house. Being familiar with the area in which you rent will also give you the benefit of knowing the market for that specific neighborhood.
An online business is opposite than a real estate venture. While rental property deals with fixed expenses, it benefits from increasing rental prices. Income from websites is a unique way to make enormous profits when compared to your startup and maintenance needs. You can make just as much, or sometimes more. After spending around $100 a year, you can generate $10,000 in profit, which is a 99 percent operating profit margin. You really cannot beat those numbers.
While there is a plethora of ways to profit your niche (health and fitness, beauty and fashion, spouses and parents, etc.), you can write an online book that is linked to your website. All you have to do is post related articles about your book, market it on social media, do local appearances, and put some money into investing and you can increase your sales. Although this might seem like a full-time job, it can be done in part-time hours all on your own schedule. Even if you start out with slow, unpredictable income at first, it can grow into a massive profit.
9. Selling Potential
The best thing you can do is hold onto your real estate rentals for at least ten years to navigate through the ups and downs of the market. When you are ready to sell your property, it might be a rollercoaster ride. It might seem easier to sell a house than a website because of the apparent, stable income stream, but the price you receive for your rental can vary greatly.
Factors such as the location of the property and the economy, in general, can change how many commas are coming your way. You might deal with some potential buyers that turn out to be duds. From short sales to long, drawn out contracts, the entire process takes a lot of patience and good fortune. You have to pay commission to realtors and deal with a significant amount of fees and closing costs.
It may be difficult to sell your website because buying and selling an online website is much less developed than the tried-and-true test of real estate. However, the more our world advances to modern technological advancements, the sooner you will be able to make clear correlations to selling websites for a profit. Besides, if you have a rental property that is doing poorly, you have to figure out your exit strategy. You never really have to get rid of your websites; if you pay for an annual domain and hosting site, but receive no traffic, then you just can leave your website as is and not renew the next year.
There are definite benefits to selling websites compared to real estate. Since you are not locked into a long-term commitment with the internet, it only takes a few months to sell an online business. You are not tied to a 25-year mortgage to the bank, so basically you can come and go as you please, and sell your online investment faster.
10. Buying Potential
After riding the waves of the blogging world, you will become a master at not only your own blog but have the potential to buy established online businesses. Depending on your niche, you can discover the perfect way to become your own boss by having streaming income. Whether you are shopping around for your first reputable website or are an experienced investor, you can browse portfolios of a variety of websites. They are listed for sale just like real estate, but without the neighborhood maps, of course. You would be surprised how many million-dollar investments are just floating around on the internet.
To get an idea of the buying potential when it comes to online income, let’s shed some light on price points about your revenue and profit.
For example, in 2013, a business-to-business (B2B) software provider for the investment services category launched an online website to help financial advisors. The business now services multi-billion-dollar institutions. It generates $12,000 monthly reoccurring revenue (MRR), but the investor only spends part-time hours dealing with marketing and customer support. If you have reliable SaaS metrics, you could purchase this established software provider for around $380,000. It yields yearly revenue of $144,000 and a yearly net profit of $115,000.
You have heard of those online subscriptions that recently became popular over the past decade, right? You sign up for specific products, and they show up at your doorstep. Well, in 2011, a business launched an E-commerce subscription box for vegan products including food and beauty products. Today the company yields $124,000 MRR with over 5,000 customers.
You would oversee standard technical maintenance and team management with a handful of freelancers working remotely. However, this only takes a few hours each day. The asking price is $1.6 million, but compared to real estate, you can earn all of your money back and then some with a yearly revenue of $1.8 million reported in the last 12 months online.
There are a plethora of other established online businesses available for buying. From collectible toys to digital education programs, there is a vast world of investment potential in websites. Who knows, maybe after your blog becomes reputable, you can turn around and sell it? Or, you could keep your established company and invest your funds into more websites.
If you want to start out a little smaller regarding budget, you still have a lower capital required to invest in an affiliate blog compared to real estate, and by a significant margin. Think about it: a reputable website that brings in about $2,000 each month would cost around $50,000. Keep in mind this is a passive stream of income. In all of these cases, you can clearly see a return on investment (ROI) much faster.
In comparison to real estate investments, you would need a couple of rentals to generate that kind of monthly revenue depending on the location. It will cost you an upward of hundreds of thousands in capital to purchase rental properties. Remember, unless you have cash, you will also be stuck in a decade-long mortgage. If you have money like that, consider investing it better in an established online website.