Private Lender or Business
owner: Exploring the pros
and cons of these
investment
types
“When buying a business in general, it is one lump sum payment.”
The business example
Many investors believe buying a business offering amenities to the public, such as gas stations, liquor marts, dry cleaners or restaurants, and working that business, is a great investment.
Many of the above amenities are as follows:
An initial investment of $250,000.00 to $400,000.00 to make a net profit of $7,500.00 a month.
Let’s compare this with the debt consolidation model:
Keep in mind, when buying $250,000.00 to $400,000.00 of discounted debt, it is acquired slowly in small increments. You would never buy a $250,000.00 to $400,000.00 debt contract.
You would be buying many smaller debt contracts over a period of time, but when buying a business in general, it is one lump-sum payment.
“Compare a passive income to buying a business”
Example 1:
If you took $250,000.00 and bought debt at an average of 35% discount, then you would have $337,500.00 of debt portfolio. ($250,000.00 x 1.35)
Interest rate 19% (which will be increased rapidly through discount.
The monthly cash flow would be $7,475.03.
If the average amortization period is four years, the total interest earned is $108,801.00.42.
Therefore, you would receive $446,301.42 from the initial investment of $250,000.00.
Example 2:
If you took $400,000.00 and bought debt at an average of 35% discount, you would have $540,000.00 of debt portfolio. ($400,000.00 x 1.35)
Interest rate of 19% which will be increased rapidly through discount.
The monthly cash flow would be $11,960.05.
If the average amortization period is four years, the total interest earned is $174,082.27.
Therefore, you would receive $714,082.27, from the initial investment of $400,000.00.
Your yield has now rapidly increased well over 19%, since you bought the debt at a discount!
In conclusion:
The above numbers can be compared like so:
Buying a business at a 35% discount or below market value is rare, but buying debt at 35% discount from collectors is easy. You also have to compare a passive income to buying a business, which is not passive. In essence, it is buying yourself a job you will work at for over 40 hours per week, every week.
When offering amenities, we must take your safety into account. Many of these types of businesses are victims of theft and robbery every year.
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