When you’re researching a side hustle–or main hustle if you’re doing it right–you’ll discover a lot of options to choose from. If you’re considering where to put your capital in order to get the best returns, you’ve probably noticed the growing popularity in both e-commerce businesses and real estate investing. Not sure which to go with? In this article, we talk about the pros and cons of the two to help you choose where to invest your time and money.
E-commerce
E-commerce is, simply put, the buying and selling of goods over the internet. This can be done through pretty much any method from Facebook marketplace to Shopify stores. Here at EcomRanx, we specialize in creating private label brands to sell via Amazon’s storefront. This involves working with a manufacturer to develop a product, which can help you get better margins and relationships than other e-commerce methods. If you’re thinking about e-commerce, check out our Amazon launch packages which can help you get started from absolute zero.
Real Estate
Real estate investing has two main components: rental revenue, and equity. You can purchase a property such as a single-family home, an apartment complex, a condo, etc., and rent it out. That way the renter is paying off your mortgage for you plus you are benefiting from any increased equity the property develops over time. Purchasing one property can help you earn money to purchase another and grow your real estate revenue that way. It’s a popular method of passive income and when done correctly, can be extremely successful.
How to Choose?
Most successful people have multiple revenue streams so saying you can only choose one isn’t really true in the long run, but with limited time and resources, it’s a good idea to start by putting your capital where it’s going to be the most lucrative for you. We have compiled some of the pros and cons of e-commerce vs real estate so you can get a good idea of where you should invest.
Pros of E-commerce
- Control: It doesn’t get much better than e-commerce when it comes to working for yourself. You are completely in control of your schedule. You can do things on your own timeline and your decisions are purely based on what you think is best. Having this type of control over your business can’t be matched by real estate, which has a lot of uncontrollable factors.
- Passion: The great thing about e-commerce is that there are millions of products to choose from. When you work with EcomRanx we give you a product designed to sell well. If you aren’t passionate about the product before we start, you certainly will be once it starts to bring that cash flow into your bank account.
- Lower Investment: Getting started with e-commerce requires significantly less capital than getting started in real estate. For example, you can successfully start an Amazon store with as little as $5k-$10k. This also means there is less risk and less to lose than other investments such as real estate.
- Scalability: The unmatched quality of e-commerce is that there is no limit to your scalability. You can sell internationally, and product stock can theoretically be increased indefinitely. Especially if you can automate the system with strategies like the Amazon Fulfillment Center, this can become an extremely lucrative passive income.
Cons of E-commerce
- The Wim of the Internet: Unfortunately, when you sell online, your business does have to work within the algorithms and rules of whatever platforms you interact with. When the Google algorithm changes, your marketing methods have to change with it. With Amazon, the elusive Buy Button can pose roadblocks. Make sure you know how to work within the rules of your platform.
- What to Sell: Choosing the right product can be difficult, and some people waste a lot of time and money on product testing. You need to find the intersection of high demand and low supply in order to successfully sell with good margins. Find a product that a lot of people like but not a lot of people are selling.
Pros of Real Estate
- Tangible Product: With real estate, your business doesn’t bend to the whims of the internet. Your interactions happen in person with your realtor and then your renters. Your product can’t be crashed by a bug or algorithm change.
- Tax Benefits: One of the most appealing elements of real estate is the tax benefits. By owning property, you can get tons of write-offs and returns that don’t come with other business ventures. Enjoy the favor of the government the more property you own.
- More Passive: While e-commerce is by definition a passive revenue stream, real estate is arguably more passive. Once you own your property and set it up with a property manager, they can handle most of the day-to-day happenings of the properties. You can pretty much go hands-off from there and spend your time finding and purchasing other properties or trying your hand at other ventures.
Cons of Real Estate
- Big Bucks: With real estate, you are handling very large amounts of money. You need a lot more capital to get started. Even with a loan, you still need to be able to come up with cash for earnest money, down payments, repairs, and any other unexpected costs that come with owning physical property. This often isn’t a great starting point if you don’t have a lot of skin to put in the game.
- Long Term: Real estate investment is a long game. You won’t see a return on your investment for a much longer time than with e-commerce. Equity can take years to accumulate and after purchasing and repairing, plus whatever portion of the rental revenue goes to the mortgage, you won’t be seeing large profits for a while.
- Managing Humans: E-commerce can result in unhappy customers, but usually a refund can turn it around. With real estate, you are dealing with humans and their living space. If you have issues with the property, it can cost you a lot of time and money. It’s just a risk you take in real estate.
So, Which One?
When it comes down to choosing your investments and business strategy, analyzing the pros and cons is a great starting place. However, you should really choose what you are most comfortable with. Do you have experience in real estate? Do that! Do you hate interacting with people? Choose e-commerce. Got a lot to invest? Real estate! Want lower risk? E-commerce. As long as you commit, you can be successful in either.
How Can EcomRanx Help?
As you probably noticed, we are partial to e-commerce. Our specialization in Amazon private label brands has taken us, and our clients, a long way. If you have even a slight interest in e-commerce, set up a consultation, and let’s chat about your options. Even if you don’t have a product idea, our specialists can help you choose a product for the current market. Give us a call at 801-769-6277 or schedule a consultation here!