"When comparing the debt-to-cash-flow ratios, it’s clear that an Amazon store offers a more favorable return on investment."

Date: May 15th, 2024

Author: Duffy Young

When it comes to investing, one of the most popular avenues for most is Real Estate. You think about maybe taking out a HELOC on your home to buy your first property and it’s exciting. The reality of investing in real estate is less glamorous and a lot less profitable than you may think.

Let’s dive into real estate for a bit and then we can compare it to investing in an Amazon Store with Profitable Automation.  

Real Estate Investment

Initial Investment and Cash Flow

Imagine you’re looking to invest in an average home valued at $300,000. To get started, you’ll need a down payment of around $60,000. Once you’ve made that investment and rented out the property, there are probably a few costs that you’re not imagining you’d have.

1. Are you managing the property yourself? If not you’re going to be paying at least 10% to a management firm to manage it for you.

2. Did you need to put any money into the property before selling even just to repaint, re-carpet, etc?

3. Do you really know the monthly costs of maintenance with renters who expect you to fix anything and everything that happens in the house?

After considering all of this you’ll see that you’re making more like $1000 a month in cash flow to your family and that’s honestly being VERY optimistic.

Debt-to-Cash-Flow Ratio

To understand how much money you’ll actually make and how much debt it takes to create that money, we look at the debt-to-cash-flow ratio. For real estate, the ratio is calculated as follows:

• Debt: $300,000

• Monthly Cash Flow: $1,000

This gives us a debt-to-cash-flow ratio of 300:1. Essentially, for every $300,000 invested, you generate $1,000 in monthly profit.

Amazon Store Investment

Initial Investment and Cash Flow

Now, let’s consider investing in an Amazon store. To build a successful Amazon store, you’re looking at an initial investment of about $50,000. This amount covers the cost of building the store and stocking it with plenty of inventory (you could put in less if you wanted).

In 18-24 months, you can anticipate generating up to $5,000+ in monthly profit if you invest in inventory as we direct and follow our instructions during that time.

Debt-to-Cash-Flow Ratio

For an Amazon store, the debt-to-cash-flow ratio looks significantly different:

• Debt: $50,000

• Monthly Cash Flow: $5,000

This results in a debt-to-cash-flow ratio of 10:1. For every $50,000 invested, you generate $5,000 in monthly profit.

Comparative Analysis

Investment for Equivalent Cash Flow

To compare these two options on equal footing, let’s look at how much you would need to invest in real estate to achieve the same monthly cash flow as an Amazon store.

If an Amazon store with a $50,000 investment generates $5,000 per month, you would need to invest approximately $1.5 million in real estate to achieve the same $5,000 monthly profit. This is calculated as follows:

• Real Estate Investment Needed: $300,000 (for $1,000 profit) x 5 = $1.5 million (for $5,000 profit)

Conclusion

When comparing the debt-to-cash-flow ratios, it’s clear that an Amazon store offers a more favorable return on investment. With a lower initial investment and higher monthly cash flow, the Amazon store provides a 10:1 ratio compared to real estate’s 300:1 ratio.

Real estate is great if you’re willing to take on a ton of debt to make a low amount of cash flow per property. It’s usually reliable and you can absolutely invest in more and more properties in time.

Amazon stores allow you to make a lot more with less investment, but it takes time to build the business up to that higher cash flow. 

In conclusion, both real estate and Amazon stores have their merits, and the best choice depends on your financial goals, risk tolerance, and investment strategy.

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