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If you're not paying off a mortgage, you're much freer to start up your own business; Renting, not buying, is boosting Australia's start-ups
Topic Started: 18 Aug 2015, 03:36 PM (2,775 Views)
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Renting, not buying, is boosting Australia's start-ups

August 18, 2015, Sue Williams

Choosing to rent homes rather than buy them can spark a much greater entrepreneurial spirit in Australia, and provide a major boost to the economy, say an increasing number of small businesses.

Ploughing money into mortgages, especially early in life, can leave people tied down to jobs that mightn't suit them instead of proactively creating opportunities for themselves – and for others.

"I decided to rent a place to live so I could take a risk and go into the enterprise world and build a company of my own from scratch," says Clayton Howes, chief executive and co-founder of digital finance firm, MoneyMe Financial Group.

"Every business needs cash but if your cash is stuck in a house, in a deposit and then in servicing a mortgage, it can be much more difficult to start your own business. I know a number of start-ups now begun by people renting rather than buying so they are able to invest in their businesses instead, which is great for everyone."

"I'm an economist and I've chosen to invest my money in starting up a business rather than buying a house," says Howes, 38, who rents an apartment in Waverton. "Renting has never been considered taboo in, say, the UK, and I think people's attitudes to it are changing here too now. It gives you more flexibility and freedom to invest which is always a good thing."

With the median price for a house in Sydney now hitting $1 million, it could well be that more and more people, who feel unable to get into the property market, are likely to put their money into creating their own start-ups instead.

Guy Lawrence rents a home at Maroubra Beach so he was also able to pour funds into his business, as co-founder 180 Nutrition, a company making pure protein powder.

"Property prices are crazily going higher and higher and I love renting as it keeps me freed up from the market," says Lawrence, 40. "Rents are much more affordable, you can live in a location you might not be able to afford to buy in, and it means you can put more money into your business, and enable it to continue to grow.

In the arts, the story is sometimes the same. Photographer Yve Lavine launched her own full-time business two years ago, knowing that renting an apartment in Randwick would enable her to invest in her work instead.

"I didn't want to be tied down buying a home," says Lavine, 49. "I wanted to be able to use my money for my business instead rather than paying off a mortgage commitment. I think renting for a lot of people enables them to have a more entrepreneurial spirit.

"If you're not trying to save up for a deposit, and then to pay off the mortgage, you're much freer to invest in a start-up instead."

Read more: http://news.domain.com.au/domain/domain-news/latest-news/renting-not-buying-is-boosting-australias-startups-20150817-gj0nke.html
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Butbut
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I thought the Bulls said that the mega mortgage mugs that started new startups?
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peter fraser
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Butbut
18 Aug 2015, 03:40 PM
I thought the Bulls said that the mega mortgage mugs that started new startups?
No, lots of people start mowing runs, small fashion boutiques, hair studios, tanning studios, buy a truck & contract, open coffee shops or other small enterprises with their savings and maybe a small amount of borrowed capital, but unless you have a spare $1Mill or more in your bank account you are not going to fund a serious start up or a substantial business expansion without access to serious capital, and that means you need equity in property or other acceptable securities.

Bank don't lend against what you think your business is worth, although they may advance some funding unsecured, but be in no doubt that it won't be a large amount unless you have a well established highly profitable business with impressive managerial qualities. If you don't have that track record then forget it.

So if you want to be self employed and don't have property, then you need enough to buy a ute, a pair of sandshoes and a reliable motor mower. A letter box drop by the local scouts will cost you a few hundred dollar each drop and that needs to be done a few times to get some clients, so there is another $1,000.

Best of luck with it butbut, because an under funded business goes broke every day of the week.
Edited by peter fraser, 18 Aug 2015, 04:44 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Veritas
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peter fraser
18 Aug 2015, 04:42 PM
No, lots of people start mowing runs, small fashion boutiques, hair studios, tanning studios, buy a truck & contract, open coffee shops or other small enterprises with their savings and maybe a small amount of borrowed capital, but unless you have a spare $1Mill or more in your bank account you are not going to fund a serious start up or a substantial business expansion without access to serious capital, and that means you need equity in property or other acceptable securities.

Bank don't lend against what you think your business is worth, although they may advance some funding unsecured, but be in no doubt that it won't be a large amount unless you have a well established highly profitable business with impressive managerial qualities. If you don't have that track record then forget it.

So if you want to be self employed and don't have property, then you need enough to buy a ute, a pair of sandshoes and a reliable motor mower. A letter box drop by the local scouts will cost you a few hundred dollar each drop and that needs to be done a few times to get some clients, so there is another $1,000.

Best of luck with it butbut, because an under funded business goes broke every day of the week.
And yet the share of loans going to home buyers has increased and the share of loans going to business has decreased.
In facts, based on the composition of their loan books the big four banks are little more than glorified mortgage lenders.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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peter fraser
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Veritas
18 Aug 2015, 05:25 PM
And yet the share of loans going to home buyers has increased and the share of loans going to business has decreased.
In facts, based on the composition of their loan books the big four banks are little more than glorified mortgage lenders.
You are looking at a single metric.

It's hardly surprising that during and in the aftermath of a global recession less people felt inclined to go into business. In addition the hurdles to enter business have increased markedly, in the cost of entry, hours devoted to compliance, and education levels required to start a business in many industries.

I'm only giving you information from a finance POV for entry level business - there are many changes that have impacted almost every business that makes life for new entrants very difficult. In the last two business's that I have been in, starting without accreditation or qualifications is now impossible whilst it was once quite easy.

I think that you need to look further afield than banking for the reasons for the lower interest. Banking is actually the least altered point of resistance although the NCCP regulations have rubbed off a bit on banking, which isn't good, but banks need to have efficient processing systems and they can't afford to duplicate them everywhere with small policy differences.

Small business is being compliance to death and a one man band can't afford the time or the money to do that. Lets face facts.

Edited by peter fraser, 18 Aug 2015, 05:48 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Whatever
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peter fraser
18 Aug 2015, 05:47 PM
You are looking at a single metric.

It's hardly surprising that during and in the aftermath of a global recession less people felt inclined to go into business. In addition the hurdles to enter business have increased markedly, in the cost of entry, hours devoted to compliance, and education levels required to start a business in many industries.

I'm only giving you information from a finance POV for entry level business - there are many changes that have impacted almost every business that makes life for new entrants very difficult. In the last two business's that I have been in, starting without accreditation or qualifications is now impossible whilst it was once quite easy.

I think that you need to look further afield than banking for the reasons for the lower interest. Banking is actually the least altered point of resistance although the NCCP regulations have rubbed off a bit on banking, which isn't good, but banks need to have efficient processing systems and they can't afford to duplicate them everywhere with small policy differences.

Small business is being compliance to death and a one man band can't afford the time or the money to do that. Lets face facts.

I started my business with a $2000 credit card limit and with a lot of hard work five years later my firms turning over $3.2m in sales alone, with a team of 11 (hoping to take on four more before year end)

Do I own a house - hell no! Why not? Because it's not needed or necessary, what is necessary is staying mobile, and at the moment with a healthy portion of rent being paid by declaring space in my house as a work enabled area where's the benefit buying???

I can even claim phone, Internet, mobiles, portion of rent and utilities and still pay less in rent etc than I would to buy. And I can move as I need without having capital tied up into a non productive purchase.

Those that can do and rent, those that can't buy a doghouse and spend their life at the mercy of the bank.

I feel sorry for those up to their eyeballs at the moment, the coming recession will clear more out than you can ever imagine and reading your posts on here peter I can sense you understand what's coming. No amount of denial will change that....
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peter fraser
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Whatever
18 Aug 2015, 07:02 PM

I started my business with a $2000 credit card limit and with a lot of hard work five years later my firms turning over $3.2m in sales alone, with a team of 11 (hoping to take on four more before year end)

Absolute bullshit unless you got lucky. Prove it that anyone can do this.

Anyone can make completely false claims.
Any expressed market opinion is my own and is not to be taken as financial advice
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ThePauk
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peter fraser
18 Aug 2015, 08:07 PM
Absolute bullshit unless you got lucky. Prove it that anyone can do this.

Anyone can make completely false claims.
Well, I am another..... $1.2 million in turnover, investment by Microsoft into my company and no debt.

Peter, is would not be odd that true entrepreneurs would not use a mortgage broker, so you probably have no contact with them, correct?
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stubby
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peter fraser
18 Aug 2015, 08:07 PM
Absolute bullshit unless you got lucky. Prove it that anyone can do this.

Anyone can make completely false claims.
He's undoubtedly just trolling.

But there is a nugget of truth amidst the bombast: the flexibility of renting makes sense for a startup business.
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peter fraser
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ThePauk
18 Aug 2015, 08:15 PM
Well, I am another..... $1.2 million in turnover, investment by Microsoft into my company and no debt.

Peter, is would not be odd that true entrepreneurs would not use a mortgage broker, so you probably have no contact with them, correct?
Turnover is not profit. Plenty of high turnover companies go under.

An old saying - sales for vanity but profits for sanity.
Any expressed market opinion is my own and is not to be taken as financial advice
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