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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 (2,776 Views)
Loki
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peter fraser
18 Aug 2015, 08:40 PM
Turnover is not profit. Plenty of high turnover companies go under.

An old saying - sales for vanity but profits for sanity.
An old property investor saying - I lose money on every property, but I make up for it in volume.


“Talk sense to a fool and he calls you foolish.” - Euripides
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peter fraser
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stubby
18 Aug 2015, 08:23 PM
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.
It depends on your age. If you drop out of Uni as a bright young man and throw caution to the wind then you just might make it, but it will take a mountain of luck. One guy that I saw do that first hand was Eddie Groves, until his luck ran out when he grew beyond his capacity to control the business.

But if you decide to build your own business at a more mature age then you can't afford to fail, and an inability to access credit is one of the two main reasons for business failure, the other being a lack of management ability.

It does depend on the type of business. If you're a songwriter or a rock star you can become very wealthy on your talent alone with little need for capital, but if you are in retail and need to lease premises and buy a lot of stock that that's a completely different ballgame.

As Pauk mentioned above he has apparently become successful in software, but a small developer can get lucky with little need for working capital. However if he decided to sell caravans because that is his passion, then he will need about $1M to stock his yard with the latest grey nomad mansions on wheels. A builder needs a lot of working capital, but a portrait painter doesn't, and nor does a professional tennis player or golfer.

It really depends on the business model followed.
Loki
18 Aug 2015, 08:47 PM
An old property investor saying - I lose money on every property, but I make up for it in volume.
No one ever got rich by avoiding risk unless they won gold lotto.
Edited by peter fraser, 18 Aug 2015, 09:00 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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Not trolling in the slightest.

All I needed was a Computer ($1400 outlay for a new setup), Internet Connection and stable environment to develop a new platform in a niche business area that I could scale if it took off - and take off it did. Only reason I put the startup on the Credit Card was on the advice of the accountant I took in to make financing the startup easier to manage from an accounting point of view and to keep business and personal expenses/income separate.

What you need to look for, like any new business - is a need in the market that you can resolve, effectively, efficiently and something that creates repeat business. (Think subscription based systems they will always work well once you can encourage users in, look after them and solve their problems)

I'm employing, creating wealth, adding to the tax system, paying super and no doubt adding to the housing stock indirectly. I know most of my employees are all stuck on the mortgage wheel which is fine by me if it suits their needs. For an employer it's good news really - like the bank in a way, having them slaving to work to pay off their debts makes them a lot more conscious of staying on track and keeping their heads down. Which in itself helps keep turnover of staff to a minimum :)
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Rastus2
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peter fraser
18 Aug 2015, 08:57 PM
It depends on your age. If you drop out of Uni as a bright young man and throw caution to the wind then you just might make it, but it will take a mountain of luck. One guy that I saw do that first hand was Eddie Groves, until his luck ran out when he grew beyond his capacity to control the business.

But if you decide to build your own business at a more mature age then you can't afford to fail, and an inability to access credit is one of the two main reasons for business failure, the other being a lack of management ability.

It does depend on the type of business. If you're a songwriter or a rock star you can become very wealthy on your talent alone with little need for capital, but if you are in retail and need to lease premises and buy a lot of stock that that's a completely different ballgame.

As Pauk mentioned above he has apparently become successful in software, but a small developer can get lucky with little need for working capital. However if he decided to sell caravans because that is his passion, then he will need about $1M to stock his yard with the latest grey nomad mansions on wheels. A builder needs a lot of working capital, but a portrait painter doesn't, and nor does a professional tennis player or golfer.

It really depends on the business model followed.

No one ever got rich by avoiding risk unless they won gold lotto.
Your right Peter, it would be bloody hard to start a business with minimal capital... but a bit of luck and some help in the form of family / friends support can carry you until the Invoices finally transform into real income.


I went to school with a bunch of people who all took very diff. paths.

Some went to work for 'daddy' and the schooling was always a preamble for that job, some went to uni (because that is what 'smart' people do), and some went straight to the trades... plumbers, sparkies, etc.

It took many years for the Uni guys to catch up to the tradies... a few of the tradies with a good head on their shoulders did so well that none of us will ever catch up to them. They knew how to save, to borrow and to risk with control instead of pure emotion.
They started working for someone and slowly broke away to work for themselves, then employee others... more risk, more reward..

I lament that so many kids will leave school and head straight for uni not knowing that it might not be the smartest move for them...

The one thing that should be in every school is a class on how to budget... it was delivered to us in BP (Business Principles) when I was in high school, but it should start in Primary and continue to high school... without that basic skillset, your screwed regardless of the path you take.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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peter fraser
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Whatever
18 Aug 2015, 09:22 PM
Not trolling in the slightest.

All I needed was a Computer ($1400 outlay for a new setup), Internet Connection and stable environment to develop a new platform in a niche business area that I could scale if it took off - and take off it did. Only reason I put the startup on the Credit Card was on the advice of the accountant I took in to make financing the startup easier to manage from an accounting point of view and to keep business and personal expenses/income separate.

What you need to look for, like any new business - is a need in the market that you can resolve, effectively, efficiently and something that creates repeat business. (Think subscription based systems they will always work well once you can encourage users in, look after them and solve their problems)

I'm employing, creating wealth, adding to the tax system, paying super and no doubt adding to the housing stock indirectly. I know most of my employees are all stuck on the mortgage wheel which is fine by me if it suits their needs. For an employer it's good news really - like the bank in a way, having them slaving to work to pay off their debts makes them a lot more conscious of staying on track and keeping their heads down. Which in itself helps keep turnover of staff to a minimum :)
Yes but that is a very low cost startup, it really wouldn't matter whether you had a house or not. Most people I know with a house can stump up $2000 dollars for startup costs, in fact anyone with a job can do that. A house is not an impediment in your scenario.

Try starting a manufacturing business with $2000.

You are being very naïve because of your limited experience. I could also say that I used very little capital to begin my current business, but the world doesn't need a few million mortgage brokers or software developers, it needs a full spectrum of goods and service providers. Some of those will be low cost startups, but most will require a higher financial commitment than that.
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, 05:47 PM

Quote:
 
You are looking at a single metric.


I am looking at the composition of the bank's loan books.

Over 60% of their lending is to bricks and mortar.They have morphed into one trick ponies.

What metrci are you looking at?

Quote:
 
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.


If you are suggesting that this is a post GFC thing you are totally wrong.

It started over a decade before.
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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Elastic
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peter fraser
18 Aug 2015, 10:29 PM
Yes but that is a very low cost startup, it really wouldn't matter whether you had a house or not. Most people I know with a house can stump up $2000 dollars for startup costs, in fact anyone with a job can do that. A house is not an impediment in your scenario.

Try starting a manufacturing business with $2000.

You are being very naïve because of your limited experience. I could also say that I used very little capital to begin my current business, but the world doesn't need a few million mortgage brokers or software developers, it needs a full spectrum of goods and service providers. Some of those will be low cost startups, but most will require a higher financial commitment than that.
It's not necessarily the financial commitment of the business but the time commitment of the full time job required to pay for the mortgage.
When you're having to work full time to pay the mortgage, it can be difficult to find the time to devote to your business.
Only a rat can win a rat race.

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Whatever
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Elastic
18 Aug 2015, 10:44 PM
It's not necessarily the financial commitment of the business but the time commitment of the full time job required to pay for the mortgage.
When you're having to work full time to pay the mortgage, it can be difficult to find the time to devote to your business.
Looks like elastic beat me to it to simplify things for you Peter! Without the bank weighing down on you in the early days you have a lot more freedom to move and believe it or not you can still access credit!

Open your eyes to more than residential lending and you too can grow your business!
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peter fraser
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Whatever
18 Aug 2015, 10:49 PM
Looks like elastic beat me to it to simplify things for you Peter! Without the bank weighing down on you in the early days you have a lot more freedom to move and believe it or not you can still access credit!

Open your eyes to more than residential lending and you too can grow your business!
I do business finance. The job thing is bullshit. Anyone wanting to go into business has to be confident enough to just do it and presume they will make enough to pay the mortgage. If they didn't have a mortgage it would be rent. there isn't much difference. If you don't have kahunas big enough for that then don't go into business.

there is no such thing as a part time business - we call that a hobby.
Veritas
18 Aug 2015, 10:39 PM



I am looking at the composition of the bank's loan books.

Over 60% of their lending is to bricks and mortar.They have morphed into one trick ponies.

What metrci are you looking at?




If you are suggesting that this is a post GFC thing you are totally wrong.

It started over a decade before.
Banking hasn't changed, but the environment for business has.

It's easier to get a business loan now than it was when I worked as a senior loans officer several decades ago. There are more lenders, more products, and so much easier lending policies, and interest rates are so much better because there is far less spread between business loans and commercial facilities.

No bank ever came to me and said they don't want to write business loans - never. They will write anything that looks good, but it does have to look good, not rubbish.
Edited by peter fraser, 18 Aug 2015, 11:24 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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A Lurker
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I started a business in 2012. The initial working capital came from a personal advance by me personally to the company I set up using my redraw facility on my home loan.

I would expect that would be reasonably common way that businesses set-up. The business won't have appeared on any stats or reports as ever having had a business loan.

Fortunately things went ok and the company repaid the loan by 2013 and hasn't required any external funding since.
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