This Empire Flippers Capital Review reflects the latest (and hopefully greatest) investing opportunity on our radar. As investors, we are always looking for opportunities to grow our portfolio, increase our returns and better our net worth. This is a good one.
With a focus on diversification, you’ve already invested in the stock market and bonds and are looking to go broader. You probably have direct ownership in Real Estate or maybe indirect ownership via Fundrise (read our Fundrise Review) or Peerstreet. After those big three you should consider an asset class that may have the best returns for your portfolio: owning your own business or side hustle. Empire Flippers Capital gives you an option to add a small business to your portfolio in an easy way.
But what if you already have a job, run a business, manage a household, juggle virtual school, or just simply don’t have the time / knowledge / interest to run a business? Well, owning a side business doesn’t have to be an all consuming endeavor. You don’t need to quit your day job. You don’t necessarily need to be an expert in the business. You don’t even have to start the business from scratch. Instead you can buy one that already exists from sites like Empire Flippers, FE International, Micro Acquire and others.
When you buy a business, you eliminate a lot of the startup risks of creating a new business from scratch. For example, you already know how much effort is needed to run the business and how much money the business makes. The business already has a customer base, an email list and a following. Despite this substantial head start you will, of course, still have to dedicate some of your time to the operation of the business. Don’t have time for that either? Enter, Empire Flippers Capital.
Why Do I Recommend Adding a Side Business to Your Investment Portfolio?
Before diving into our Empire Flippers Capital review, lets first dig into why owning a business as part of your investment portfolio is wise:
- Further diversify your portfolio
- Your returns can be higher than most other asset classes
- Take advance of tax benefits
Let’s take a deeper look into each of the benefits.
Depending on the side business you choose to own, you can be completely uncorrelated to the market. For example, taking a quick look at the current inventory of businesses for sale on Empire Flippers, I found a site that sells school art supplies on Amazon and directly on their own site. Another site creates unique content in the gaming space that generates revenues from ads. These sorts of businesses don’t follow the stock market and can help you diversify your portfolio further.
Returns from Owning a Business
Owning a side business can earn returns in two ways. Firstly, monthly profits that you can cash in regularly. Secondly, as revenues grow, the value of the company grows too.
Let’s put this theory to the test by looking at a few example of sites available for sale on Empire Flippers right now. I found a site that is currently listed for $431k that generates $13.5k in profit per month. The site is listed at a 32x multiple. $13.5k per month is equivalent to $162k per year in returns. If we take a conservative growth rate for the business and say you will only grow at a 5% rate year over year and you decide to sell the business in 5 years, here is what your cash flow and return look like:
Purchase: – $431k
Year 1 return: $162k
Year 2 return: $170k
Year 3 return: $178k
Year 4 return: $187k
Year 5 return: $196k
Exit: $196/12 * 32 = $522k
Your IRR will be a stunning 41.99%!
There are not many asset classes that will give you this sort of return.
Tax Benefits of Owning a Business
Importantly, owning a business gives you access to the ability to write off expenses! As long as you use the items that you spend money on for your business, you can write it off. For example, if you need a new MacBook Pro to run your business, you can write it off. If you use a specific section of your home to run the business, you can take a home office deduction. There are hundreds of available tax deductions that you will be able to take advantage of once you own a business.
Of course owning a business is not without risk and not without needing to do some work. As you explore business opportunities, ask the current owner questions to truly understand the risks related to the business. For example, how much effort does it take to run the business? What will you be expected to do every week? Then ask yourself, are you able to do those activities? Will you need to hire a VA to help run the business? Make sure you factor in that cost in your return calculations.
Empire Flippers Capital Review
What is Empire Flippers Capital?
Empire Flippers Capital is a new investment service offered by Empire Flippers that allows you to invest into an SPV (special purpose vehicle) that is operated by a successful business operator with the ultimate goal of growing and then reselling the business.
Note: this investment opportunity is open to Accredited Investors only.
How Does Empire Flippers Capital Work?
The first batch of deals are currently live on the deals page. At the time of writing this Empire Flippers Capital review, there were 6 deals available. You can read about each operator (the person managing the business) by opening the details page of each deal. When you find the deal you want to invest in, click on Invest. You will then be redirected to Glassboard by Assure to sign the paperwork and transfer your funds.
Once your investment is live and the operator completes the purchase of the businesses, you will start earning quarterly returns and once the business is sold you will earn a portion of the profits from the sale.
What Information is Available?
Every deal is different. Consequently, every business operator is different and the strategies outlined for the deal are unique to the opportunity. When you open a deals page, read through the details to decide which investments you want to participate in. There is a recorded interview with each operator on their deal page. I highly recommend that you listen to the interview as it’s give you a lot of insights and info.
The details page includes:
- an executive summary (investment summary) that gives a quick overview of the operator and the strategy to be followed
- background on the operator and their track record
- recorded interview with the operator
- business strategy to be followed
- acquisition criteria for the business the operator will look to purchase
- summary of risks
- management and growth strategy the operator plans to follow
Available Investment Options?
There are currently 6 deals on the platform: 2 Amazon FBA deals, 2 Amazon Associates, and 2 Affiliates. The deals range from $1M to $2M. At the time of this writing most of these deals have raised between 25% and 75% of their goal.
The minimum investment on all deals is $10k. However, this limit is going up to $50k on March 10th.
Once you invest, it will take around 6 – 9 months before you start seeing returns. This timeframe accounts for the operator concluding their investment round, finding and purchasing a deal, receiving their first payment from Amazon or Ad Networks which are usually at a 30, 60 or 90 day payment terms.
Once payments start, you should expect to receive a quarterly distribution of profits from that point forward. The quarterly profits will be split as:
- 60% to investors
- 30% to operator
- 10% to Empire Flipper
Return of Capital
The operator has to maintain the business for a minimum of one year and then is free to sell it as they see fit. Empire Flippers expects that most businesses will be sold in 2 – 4 years.
Once the business is sold you will get a proportion of the business value up to the purchase price back. If the business is sold for more than the purchase price then the profits will be distributed as:
- 60% to investors
- 30% to operator
- 10% to Empire Flipper
Empire Flippers is currently projecting that the average annual return will be between 20 – 25%. They recommend a portfolio approach to investing in order to diversify your risk further. They expect that:
- 20% of deals will fail (you may lose part of your capital)
- 20% of deals will increase by 50% (you will profit from a capital increase and quarterly returns)
- 60% of deals will remain unchanged (capital will be returned with our appreciation but you still get quarterly returns from profits)
How Do I Choose a Deal to Invest in?
I chose operators that were planning on investing in multiple sites instead of just one. This helps reduce risk by diversifying into multiple properties.
I chose strategies that were not 100% reliant on Amazon. Most web strategies rely on Amazon in one way or another but I wanted something that had another source just in case. The whole “don’t put all your eggs in the same basket” idea.
Finally, since I am putting in only $10k on this first deal, I wanted to stick with deals that were at the $1M mark so my $10k would go further.
I listened to the interviews and finally choose the operators I was most confident in.
Empire Flippers Capital Review Next Steps
This Empire Flippers Capital Review will be updated as returns start coming in. Since the deal has not closed yet and distribution has not started, I won’t really know what my actual returns will be yet.
Thanks for stoping by and reading our Empire Flippers Capital Review today. If you’ve successfully bought, sold or even flipped a business as an investment strategy, we would love to hear more about it. Leave a comment below or in the Money Minx investor community.