10 Characteristics of the Best Growth Stocks (for High Investment Return)

Your investment strategy plays a major role in your profitability, or lack thereof. One of the most popular strategies investors employ is known as the growth investing strategy. The strategy is centered around finding and investing in stocks that have experienced compelling growth in recent history, and tapping into the ongoing growth potential.

But what exactly is a good growth stock?

Characteristics of the Best Growth Stocks

If you’re looking for stocks with incredible growth potential, ultimately hoping to cash in on the upward volatility to generate profits, you’re looking for stocks that display the following characteristics.

1. Stock Price Growth

For a stock to qualify as a growth stock, it has to be experiencing growth in its share price. Without price appreciation, the stock simply doesn’t fall into this category.

So, how do you determine if a stock is on an upward trend?

The easiest way is to take a look at the stock chart.

  • Look at Three-Month and One-Year Stock Charts. It will be clear whether a stock is trending upward when you look at the chart. If the share price has seen relatively consistent upward movement, there’s a strong chance you’re looking at a growth stock. It’s important to look at the chart over the past three months and one year. The three-month chart will tell you whether the trend is currently upward and the one-year chart will tell you whether the growth in the stock has been sustained over a significant period of time.
  • Forgive Dips. Even in bull markets, stocks that are climbing will dip from time to time as investors take profits or digest pieces of news. What you’re looking for is an overall performance in the upward direction, ignoring short-term dips in the data.
  • Compare the Growth to the S&P 500. The S&P 500 index is the primary benchmark of the United States market. By comparing the growth of the stock you’re interested in over the past three months and one year to growth in the S&P 500, you’ll be able to determine whether the company’s stock price has underperformed, performed in line, or outperformed the wider U.S. market. After all, the goal here is to find high-growth stocks that outperform market returns.

After looking at the charts, if you find that the stock has outperformed Wall Street averages over the past three months and one year, chances are you’ve landed on a solid opportunity to beat the market with your investing dollars.

2. Earnings Growth

Sustained gains in the value of a stock will only be possible if the company you’re investing in sustains growth in profitability. Who wants to continue piling money into a company that’s losing it all?

Determining earnings growth is a relatively simple process, thanks to a tool provided by Nasdaq. To access the tool, visit the Nasdaq website and look up the stock ticker you want to research. On the left of any stock’s profile is a link titled Earnings you can click for more details.

The resulting page will have a graph that shows the earnings per share on a quarterly basis over the past year. Look for consistent quarter-over-quarter growth in earnings. Also, pay attention to the earnings surprises. Stocks that have all positive earnings surprises consistently beat analyst expectations — a great sign for a growth stock.

3. Revenue Growth

It’s also important that the stock you invest in has a track record of impressive revenue growth. There are ways to reduce costs to inflating earnings while revenue is either plateauing or falling. These methods will only last so long, and earnings will begin to falter at some point if there isn’t real revenue growth underneath.

So, it’s important to make sure that the stocks you’re interested in are experiencing consistent and compelling growth in revenue.

To determine whether revenue is growing, simply look into the company’s last four quarterly earnings reports. Take note of the revenue reported in each quarter, keeping in mind normal peaks and valleys seen in the sector.

For example, tech companies tend to do best around the holidays, leading to strong fourth quarter revenue. As a result, companies in this space may see a plateau in revenue, or even slight declines, from the fourth quarter to the first quarter, which would be acceptable as long as revenues sequentially rise throughout the rest of the year.

Pro tip: Stock screeners like Trade Ideas and Stock Rover can help you find companies that meet or exceed most of your requirements for things like revenue growth, earnings per share, and other key metrics.

4. Market Growth

You may be noticing a trend here. The key to growth investing is finding a stock with sustained growth across all metrics, but the stock and the company it represents aren’t the only factors you should be paying attention to.

Growth in the addressable market the company you’re interested in targets is also crucially important to its ability to realize sustained gains in revenue, earnings, and ultimately share price.

If a company is beginning to capture the majority of the market it addresses, it may be going through a growth spurt, but that upward movement won’t be sustainable if the market size remains flat. At some point, the company will have saturated the market and will eventually plateau itself.

So, it’s important to look into market data to determine whether the market in which the company operates is growing at a rate capable of supporting continued upward movement in the stock you’re investing in.

To do so, simply go to your favorite search engine and type “(industry) market size” into the search bar and read through the results. In most cases, several statistics companies have performed detailed analyses of the market, determining the current market size and the size the market is expected to achieve over the next several years.

If the company you’re considering is working within a market that’s plateauing, look into how much of the market the company has already penetrated to determine how much more room is left for upward movement.

5. Free Cash Flow Growth

Money flows in and out of businesses like water. Free cash flow represents the net amount of money that flows into a business once all outflows are taken into consideration. This differs from profitability because free cash flow does not measure non-cash expenses such as depreciation.

It’s important to make sure there’s consistent growth in free cash. This can be seen by looking into the company’s balance sheets over the past four consecutive quarters.

6. A Fair Valuation

Growth stocks are notorious for reaching significant overvaluations after big runs higher, resulting in dramatic declines when investors take profits and move on to the next opportunity. While an average valuation is to be expected, risk levels increase when prices fly too high.

One of the best ways to determine if a stock is undervalued, overvalued, or valued fairly is to look at the price-to-earnings ratio, or P/E ratio. A metric commonly used by investors looking for value stocks, the P/E ratio compares the price of the stock to the earnings per share generated by the company over the course of a year.

Every industry will have its own average ratio. By comparing the ratio of the stock you’re interested in to that of the market in which it operates, you’ll be able to determine if the current value of the stock you’re interested in is fair.

7. A Strong Balance Sheet

This has little to do with growth and more to do with general investing due diligence. Any time you buy a stock, you want to make sure that the underlying company has a strong balance sheet.

The balance sheet will clearly outline the value of the assets the company owns as well as the debt it owes, giving you an idea of whether the company is sitting on a strong financial foundation.

8. Clear Competitive Advantages

In order for a company to maintain an upward trajectory, it has to have clear competitive advantages. For example, compare BlackBerry and Apple when it comes to their activities in the smartphone space.

BlackBerry was a clear pioneer, creating some of the first devices classified as smartphones. Over time, competitors came in, taking market share from the company until “BlackBerry” became “Black-What?”

On the other hand, Apple jumped in with a clear competitive advantage. The company consistently innovated new ways to use smartphones, put together an ecosystem including an app store, music service, and more. Apple continues to improve the experience for users of its smartphones to this day, many of whom refuse to switch to other devices despite there being many choices in the smartphone market. As a result, Apple is touted as one of the best growth stocks on the market today.

9. A Solid Management Team

Like a chain, a company’s team is only as strong as its weakest line, and those weak links are sometimes found in management.

When investing in a company, you’re trusting that company with your money, meaning you’re trusting the company’s management team to make moves that will lead to growth.

Why would you trust a team of people you know nothing about?

Before investing in any stock, you should dig into the management team at the helm of the company. How long have members of the team been with the company, and what have they done since taking on their positions? Where did these team members work before, and did their work with previous companies lead to positive outcomes?

These are questions you should know the answers to before you dive in.

10. Forward-Looking Growth Prospects

Finally, before buying a stock you expect to grow substantially ahead, it’s important to take a look at the company’s growth prospects. What is its story for how it will grow and expand into the future?

For example, Gevo, a company focused on the production of clean fuels, is a hot topic among growth investors at the moment. Investors are excited because the company has signed several agreements that will open the door to expanding revenues in the years ahead. Moreover, the company is working to expand its infrastructure to meet increasing demand. Based on the activities taking place at the company, investors are excited about the expectation of meaningful growth in the value of the stock moving forward.

Any growth stock you invest in should have compelling forward-looking growth prospects, such as a plan to enter a new market, a strategy for making their products or services more widely available, or new products in the pipeline.


Consider Investing in Growth ETFs

Finding and taking advantage of growth opportunities in the market can be a cumbersome process, taking quite a bit of time. If you don’t have the time to dedicate to the process, or the expertise it takes to research each and every investment opportunity before risking your money, you may want to consider investing in exchange-traded funds (ETFs) with a focus on growth strategies instead of picking individual stocks.

Although investing in growth-focused funds will reduce the amount of research required, it’s still important to look into each fund’s historic performance, expense ratio, and dividend yield before diving in.


Final Word

Investing in growth stocks has the potential to be a lucrative business. The potential to produce market-beating returns has made the growth investing strategy one of the most popular among retail and institutional investors alike.

As with any other investing strategy however, research forms the foundation of successful investment decisions. Taking the time to dive in deep and make sure the stocks you invest in display the above characteristics will greatly increase your potential profitability.

Source: moneycrashers.com

Charleston, SC: From Vacation Destination to Home Base

Historic Charleston, SC is not only the second largest and the oldest of cities in South Carolina, but according to World Population Review, it’s one of the fastest growing cities in the United States as well. The reason, aside from the preservation of the historic charm of Charleston, the revitalization of downtown is not only drawing people in but making them want to stay forever. However, it wasn’t always been like that.

A symbol of hospitality, the Pineapple Fountain in Charleston’s Waterfront Park

Joseph P Riley, the longest standing mayor of 40 years in Charleston, was at the helm of revitalizing Charleston. It was taken from a city in despair with a high crime rate, to one that continuously makes the list of top vacation destinations. According to Travel and Leisure, Charleston SC has been ranked their “Top city in the United States” every year since 2013. The revitalization brought new places to eat, new things to do, and most importantly 6 million people each year who come to visit. The growth and expansion also brought additional jobs and according to USA Today, Charleston, SC was ranked #5 in 2018 for rising median income.

The Charleston Harbor and the famed Ravenel Bridge as seen from Pitt Street Bridge

The appeal of a beautiful city, amazing weather, tons of activities, and financial prosperity quickly turned Charleston, SC from vacation destination to a place to call home. As a result, the housing market shows no signs of slowing down compared to other cities across the nation. Due to the demand for housing, there is an increase in home values. With more people wanting to move to Charleston and the surrounding area, the real estate supply is having a hard time keeping up with the demand. My family and I have witnessed this first hand, in the past 6 years since we have lived in the Charleston area, a steady increase in our own home value. The increase in property values, in turn, makes buying a home in Charleston a very smart financial investment. To sweeten the deal, if this is your primary residence, you may qualify for a break in your property taxes. An even greater appeal to families are the amazing schools that rank at the top of the state.

Balcony view of King Street from Belmond Charleston Place Hotel

Not only has Charleston, SC attracted retirees and families over the years, but the appeal to the younger generations has been on the rise as well. With a college campus nestled into the heart of downtown Charleston, many graduates are sticking around after graduation and others are coming from other cities. According to World Population Review, the median age is 34 thanks to the booming social scene, increase in jobs, and overall appeal of Charleston, SC. The year-round ideal temperatures keep this city very active. Within the last couple of years, downtown Charleston has seen an added a bike rental company, for those who want to get around and see the city or another means of transportation. It has also seen an increase in the fitness industry and the array of studios that are popping up. All of which are an appeal to the younger generations.

Joseph P Riley Park, home of the Charleston Riverdogs and named after the mayor who changed the scope of Charleston

While Charleston, SC has been the perfect spot for a family vacation, destination wedding, or even a romantic getaway, it has won the hearts of many. You can’t help but fall in love with the charm, the deep history, and the overall beauty of this city. Couple that with a booming economy and it’s easy to understand why so many people call Charleston, SC home.


Brooke has a lifestyle blog called Cribbs Style and currently lives in Charleston, SC. This wife, mom of two almost tweens, and mom of three fur children enjoys all things DIY and organizing. When she’s not helping others tackle the chaos of life, she’s either working out, at the beach, or just enjoying time with family and friends.

Source: homes.com

Considerations for Communal Living

Owning your own home is part and parcel of the classic American Dream, but it’s a parcel many people struggle to afford. Whether you’re a current student, fresh out of college, or striving to hold down multiple low-paying jobs while getting the rent in, living somewhere decent on a budget on your own can be a massive pain, not to mention the significant financial risk if something goes wrong. But there’s an economy of scale to housing – one two bedroom apartment is cheaper than two one-bedroom apartments, and a three bedroom apartment is even better. Or perhaps you want to seize that dream and get a home with eventual room to grow – but you just can’t guarantee you’ll be able to afford the mortgage.

One classic and increasingly popular solution is communal living. Whether four friends renting a house together during their college days, or apartment-mates in a two-bedroom place, or even a new homeowner filling those empty bedrooms, living in groups can make sense financially. Not only can you split the cost of a house, but you can also split chores and home maintenance – a job that can take an average of 11.3 hours per week for a two adult household according to the Bureau of Labor Statistics. While adding adults will increase some of that load, most of the more time-consuming chores remain fixed, and the more people you can split them among, the better. If you have an unusual situation, such as a productive and complicated home garden, that number can easily increase. But for all the benefits, there are significant considerations to keep in mind before and while moving in with other people.

Who’s On the Hook?

Most people who have tried communal living will agree that it’s generally a good idea (and required by some landlords) that you have only a single person, or married couple, on the lease – unless you’re all renting the rooms separately from a different landlord. You may be thinking, wait a minute, doesn’t that leave one person on the hook and at risk if things go poorly? Yes and no, depending on how the rental contract is worded. Establish a system where everyone else pays rent, with some possibly paying more for the bigger rooms. Consider utilities… If one person is on the lease, perhaps others can be on the utilities, spreading out the risk among roommates. Get a contract in writing that stipulates who is responsible for what, and most importantly the consequences for non-compliance. If Joe loses his job and can’t afford a month’s rent, what are the consequences? How does his share get covered? If Maria moves out with no notice, what options do the others have to fill that vacancy? These are the sort of things you want to discuss before moving in. But having one trusted person on the lease gives oversight to the process and ensures a single point of contact in negotiating with the landlord.

Buying Versus Renting

Buying is a lot riskier since you might be financially responsible for the entire investment if all your friends bail or lose their jobs. Have a very solid idea of how reliable everyone is before going in to buy (rent to own, or renting a separate house for a while before buying, might be ideas to consider) or buy a house that you alone could afford. If no one’s having kids, a lot of starter homes have three bedrooms – and are priced to be within reach of a single couple – so might be a better option than something grander, even if more incomes means you could technically afford it. It’s always a good idea to live below your means, even when combining incomes. In renting, you can often have people renting the rooms separately from the landlord, which means minimal risk to the rest of the household, but if you can’t and are instead renting as a unit many of the same considerations apply as with buying.

Chores

Decide on chore divisions for common areas before going in together – and get that in writing, too. Even a simple spreadsheet broken down by chore and day of the week, initialed by all housemates, can significantly help reduce misunderstandings in the future regarding who agreed to what. And again, take the time to discuss what the process will be if chores are left undone. Will you have a built-in grace period of one day to get chores caught up? Three days? What recourse does the group have if one person fails to uphold their share of work? One option is to have everyone chip in for a weekly house cleaning service, to minimize arguments and ensure the common areas are kept clean.

Relationships

Realize this could strain a friendship – think hard about how much you trust someone to be responsible, not just as a friend, but financially and in everyday life. If you’ve lived together with them before, like in a dorm situation, you probably have a better idea of what they’re like domestically than if you haven’t. But again give some thought to the reality that living together creates stress, and what impact that stress might have on your friendship.

Cars

Consider space for cars – or else distance to public transportation. Potentially each person or couple will have their own car, or even two for a couple unless you’re in a big city, and standard two-car driveways might not cut it.

Space

If people are working from home, does everyone have space for that, too, whether an office or a desk in their bedroom?

How many people are going to want to be cooking at the same time? Is the kitchen big enough? What about groceries? Will the cost of food be shared equally or will each roommate need their own space for perishables and dry goods?

What about schedules for going out – is everyone getting ready for work at the same time? How will that change demand for the shower and bathroom vanity? While a posted bathroom schedule might seem over-the-top, it’s a system that some residents of communal homes have come to love to ensure that everyone can get ready for work on time.

Guests

Outline policies on guests – and consider different categories. A guest who stays the night then leaves after breakfast is an entirely different matter than someone’s extended family descending for several days over the holidays. Often roommate agreements will stipulate that the behavior and action of guests is the responsibility of their host. If a guest breaks a window, does everyone understand whose responsibility repairs will be?

While this list of concerns and warnings may seem daunting, I hope that this will not dissuade you from considering all the benefits of living communally. While rent-sharing is one of the biggest advantages, communal living also brings new opportunities. Need to leave for a week for work or to visit family? You’ll have a built-in pet and plant-sitter. A full house can also give you the chance to interact with friends, play video games as a group, share the burden of chores, and enjoy a variety of meals made by many hands. From waking you up if you’ve overslept to letting you back in when you lose your keys, having roommates can be a wonderful addition to your life in many little ways.


Cassandra is a writer with a background in engineering, enjoying the rural life in the Virginian Appalachians. When not working, she enjoys writing fiction, running a blog, camping, working in the garden, and tending to her flock of chickens! In addition to writing, she has a passion for art and graphic design. Her interests include disaster preparedness, homesteading, landscaping, cooking with natural ingredients, history, and animal husbandry.

Source: homes.com

What Are Bonds – Basics of Investing in Corporate vs. Municipal Bonds

When building a balanced investing portfolio, you’ll want to include bonds in your asset allocation. These assets provide safety and stability, offering relatively slow growth and reliable returns.

As you begin to research which bonds to buy, you’ll realize there are several different types of bonds,  with the two most common being corporate bonds and municipal bonds.

What’s the difference, and what are the pros and cons that come along with investing in each type of bond? Let’s review the basics of bonds and then look at the two types side by side to help you choose which is right for you.

What Are Bonds?

Bonds are a form of fixed-income security known for providing a relatively safe store of value that are often used to offset risk in a well-balanced investment portfolio. Bonds are essentially loans given to the issuer by the investor, making them a debt instrument.

Investors make money by investing in bonds in one of two ways:

  • Coupon Rates. The most common return on investment derived from bonds is known as the coupon rate, or the interest rate on the bond. As with many other types of loans, the investor pays the full face value of the bond upon purchase and receives interest payments until the maturity date of the bond, at which point their initial investment is returned to them.
  • Premium. In some cases, bonds can be purchased at a discount to their face value. When the bond matures, the investor receives the full face value of the asset, providing a return on investment. For example, an investor may purchase a $1,000 bond for $950. Once the bond matures, the full $1,000 is repaid, leaving the investor with $50 in profits.

What Are Municipal Bonds?

Municipal bonds are commonly referred to as muni bonds, or simply munis. These bonds are issued by local governments, generally on the state or county level, and should not be confused with Treasury bonds, which are issued on a federal level and backed by the full faith and security of the U.S. federal government.

There are two common types of munis on the market today:

  1. Revenue Bonds. Revenue bonds are bonds issued by a municipality that are backed by the revenue generated from a specific project. For example, local municipal governments often issue water and sewer bonds, which are paid back with the revenue collected by the local government for the provision of clean drinking water and sewage services to residents within the locality.
  2. General Obligation Bonds. General obligation bonds aren’t backed by any project revenue. Instead, they’re backed by the taxing authority of the issuers at hand and paid back with tax dollars paid for local income taxes, sales taxes, property taxes, or any other tax revenue received by the local authorities that issued the muni.

What Are Corporate Bonds?

Rather than being issued by a local, state, or federal government, these bonds are debt instruments issued by corporations; they act as loans made from the bondholder to the corporation that issued the security. There are different categories of corporate bonds, including:

  • Collateral Trust Bonds. Collateral trust bonds use collateral other than real estate to secure the bond. For example, a company may secure bond issues with shares of stock, bonds, or other securities.
  • Debenture Bonds. Debenture bonds are corporate bonds that aren’t secured by any collateral. These bonds are generally issued by corporations with the best credit ratings, because companies with poor credit won’t be able to attract investors to these securities.
  • Convertible Debentures. Convertible bonds give the investor the ability to convert the bond into a specified number of shares at a specified time. For example, a company may sell a convertible bond that may be converted into 25 shares of its common stock after two years. Because these bonds can be converted into common stock, they are generally more attractive to investors, but it’s a tradeoff. These types of bonds generally come with low coupon rates.
  • Guaranteed Bonds. Guaranteed bonds are guaranteed not only by the corporation that issues them, but also by a second company. This greatly reduces the level of risk because another company guarantees to step in and fulfill the obligations of repaying the bond if the original borrower defaults.
  • High-Yield Bonds. High-yield bonds, also known as junk bonds, are bonds that have been rated by rating agencies to be below investment grade. These companies generally have significantly high credit risk and must offer higher yields in order to attract investors.

Pro tip: Have you considered hiring a financial advisor but don’t want to pay the high fees? Enter Vanguard Personal Advisor Services. When you sign up you’ll work closely with an advisor to create a custom investment plan that can help you meet your financial goals.


Key Factors to Consider

There are several factors you should take into account when making a decision to buy either corporate or municipal bonds. Some of the most important of these factors include the quality of the entity issuing the bond, the tax implications, yield, liquidity, and how the money raised through the issuance of the bond will be used.

Here’s how corporate and municipal bonds compare:

Quality of Issuer

One of the first details you should look into before purchasing a bond or any other debt instrument is the quality of the issuer. Bond issuers will have different credit ratings, meaning that when you invest in the securities they’ve made available, you’ll be taking on credit risk.

There are two agencies that provide bond issuer credit ratings: Moody’s and Standard & Poor’s. Moody’s rating scale ranges from C to AAA, with AAA being the best possible rating. Standard & Poor’s follows a scale ranging from D to AAA, with AAA also being the best possible rating.

Higher ratings mean the bond is generally at lower risk of the issuer defaulting. After all, if the entity that issues the security fails to meet its obligations, those who invest in it stand to lose.

Corporate Bonds Come With Higher Default Rates

Corporate bonds are issued by corporations, and every corporation is different. Some make more money than others, some are managed by better management teams, and some will fulfill their obligations consistently while others fail.

Compared to municipal bonds, instruments issued by corporations come with a higher default risk, making it especially important to pay attention to how rating agencies rate the bond in question before you invest.

The good news is that even corporations rarely default. According to the Corporate Finance Institute, only about 0.13% of corporations that issue a bond will default.

Municipal Bonds Come With Lower Default Risk

Municipal bonds are generally an even safer bet than corporate bonds. According to ETF.com, only about 0.08% of munis end up in default. Because these bonds are issued by local governments, entities known for top-notch credit quality, and generally rated AAA by S&P Global, investors can rest assured that they will be paid as agreed in the vast majority of cases.

Tax Implications

Any time you make money — whether from a side hustle, income from your day job, or investment returns — you typically have to pay taxes. However, not all income is taxed equally. Here are the tax implications you’ll need to consider when deciding whether to invest in corporate or municipal bonds.

How Corporate Bonds Are Taxed

Bonds issued by corporations are often called taxable bonds because earnings generated through these investments will be susceptible to both federal income tax and state income tax at the general income tax rate. The exact rate you’ll pay on your returns depends on your tax bracket.

How Municipal Bonds Are Taxed

Gains generated through investments in municipal bonds are always tax exempt on the federal level and are often tax free on the state level as well. The tax exemption is essentially a “thank you” from both federal and local governments for using your investment dollars to invest in projects that support your community.

While in the vast majority of instances, munis are exempt from state and local taxes, there are some cases in which this is not true. For example, if you purchase a municipal bond offered by a municipality other than the one in which you reside, your local authorities may choose to tax returns on that bond at the standard local income tax rate.

For example, if you live in New York City and you invest in a municipal bond issued by a government body in Florida New York City may charge you its normal local tax rate on the returns generated through that investment.

Yields

Returns on bonds are known as yields, and they vary wildly from one to another depending on the credit of the issuing entity, the maturity date of the bond, and other factors.

Generally speaking, here’s how yields compare between corporate and municipal bonds:

Corporate Bonds Generally Have Higher Yields

Local governments are highly trusted entities that are known for maintaining excellent credit. On the other hand, corporations will vary wildly in financial strength and creditworthiness.

Because corporations are usually less creditworthy than governments, bonds issued by corporations generally offer higher interest rates. After all, if the yields on corporate bonds were the same as the yields on government bonds, nobody would lend to riskier corporations. Who would want to buy a bond from a corporation when the same returns can be generated by investing in lower-risk munis?

Munis Provide Small Gains

Bonds issued by the government come with a lower default risk and therefore are the safer option for investors. However, when investing, safer options generally provide lower returns, and municipal bonds are no exception.

The extremely low default risk is considered in the pricing of these bonds, resulting in lower interest rates, smaller interest payments, and lower overall returns.

That is, until you account for taxes. For example, a high income earner may find that investing in municipal bonds is a better fit because they are exempt from state and federal taxes. By contrast, much of the returns on corporate bonds would be erased by taxes for an investor in the highest tax bracket.

Liquidity

Liquidity should always be a consideration for investors, whether they’re investing in bonds or any other asset. Liquidity refers to the ease or difficulty of converting an investment back into cash if desired.

Investors will find it difficult to convert bonds with low levels of liquidity into cash prior to their maturity dates, while bonds with high levels of liquidity are easy to offload and turn into spendable money on demand.

Corporate Bonds Are Often Less Liquid

While any form of bond can be sold on a secondary market, for a bond to be sold, there must be a buyer. In some cases, investments in high-risk bonds and other bonds issued by corporations may become illiquid if no other investors are interested in purchasing them.

Moreover, bond liquidity decreases in general in times of economic and market positivity. During bull markets, investors tend not to want their money tied up in fixed-income assets, instead focusing on the larger potential for returns offered by stocks.

Municipal Bonds Are Highly Liquid

The municipal bond market is very active, with these bonds often being easier to offload than bonds issued by corporations. That’s because muni bonds are issued by entities that are all but guaranteed to cover their obligations while providing tax benefits, making them attractive investments for high income earners.

How Funds Are Used

Investors are becoming increasingly concerned with the way in which their investments are spent. In fact, there’s an entire movement surrounding social impact investing, or investing in assets that use your funds to make an impact for causes you care about.

So, how exactly is your money spent when you invest in these two different types of bonds?

How Corporations Use Money Raised Through Bond Sales

Corporations may be looking to raise money for a wide variety of reasons. Some of the most common are:

  • Working Capital. It costs money to make money, and running a business can be a very expensive endeavor. In some cases, corporations will have their money tied up in inventory, new equipment, and other assets necessary to keep it moving in the right direction and need working capital for general purposes. Companies can issue bonds as a way to raise cash for their operational needs today by promising to repay investors in the future.
  • Acquisitions. Companies often acquire one another, merging two companies into one in transactions where the sum of all parts has a greater value than the original assets. However, acquisitions are expensive business, and corporations often need additional funding to execute merger and acquisition agreements.
  • Research. Research and development are major expenses for just about every publicly traded company on the market today. In some cases, corporations will issue bonds in order to fund this research.

How Municipalities Use Money Raised Through Bond Sales

The vast majority of bonds issued by government agencies are issued to fund public projects.

For example, when a major thoroughfare is riddled with potholes or your county’s library is in need of repair, governments often issue bonds in order to cover the costs associated with these projects. Governments can repay investors either through revenue generated by the project they fund or through tax revenues.


The Verdict: Should You Choose Corporate or Municipal Bonds?

As you can see above, there are several reasons to invest in both types of bonds, with each having its own list of pros and cons. As with any other investment vehicle, each type of bond will be suitable for different investors with different goals.

You Should Invest In Corporate Bonds If…

Bonds issued by corporations are best suited for bond investors who have a relatively low income tax burden and are looking to generate larger gains out of their safe-haven investments. These bonds are best suited for investors who:

  • Are In a Low Tax Bracket. Returns from bonds issued by corporations are taxed at the standard income tax rate, which varies wildly depending on the amount of money you earn on a regular basis. As your tax rate increases, bonds issued by corporations become less attractive than tax-exempt munis.
  • Are Willing to Accept Higher Levels of Risk. Based on historical default rates, corporations are nearly twice as likely to default on bond obligations than governments. As a result, corporate bond investors should be comfortable with a higher level of risk.
  • Want to Generate Larger Returns. Due to the higher risk associated with bonds issued by publicly traded companies, these bonds come with higher yields than bonds issued by governments.

You Should Invest In Municipal Bonds If…

Municipal bonds are worth considering if you’re an investor with a generally low risk tolerance, you’re a high income earner and tax implications mean quite a bit to you, or you’re interested in funding public projects with your safe-haven investing dollars. These bonds are best suited for you if:

  • You’re In a High Tax Bracket. High-income earners are taxed at a higher rate. Because bonds issued by the government are generally tax-free investments, they are well suited for investors who have a relatively high tax burden, acting not only as safe havens, but also tax havens.
  • You Have a Low Risk Tolerance. Municipal bonds are about as safe as investments come. Most local governments have never defaulted and enjoy a high credit rating; investments in these entities are very unlikely to result in default.
  • You’re Looking For a Store of Value. Investments in bonds issued by the government are a great store of value, which is what makes them so attractive as safe-haven investments. Even in times of economic concern, these bonds are known to generate returns rather than losses.
  • You’re Interested in Funding Public Projects. Government bonds are used to fund public projects that improve conditions for the community around you. Not only are these investments capable of generating returns and stability, there’s a feel-good effect involved in making these investments.

Both Are Great If…

If you aren’t in the uppermost income tax brackets, have a moderate tolerance for risk, and are looking to generate greater diversification across your safe-haven investments, you might invest in a mix of corporate and municipal bonds. This approach offers you a balance of the larger gains from corporate bonds and the tax benefits from munis. Investors who would benefit most from a mix between the two:

  • Want Higher Returns While Minimizing Tax Burden. By investing in both types of bonds, you’ll reduce your tax burden compared to corporate bond investments alone while enjoying higher earnings potential than provided by municipal bond investments alone.
  • Have a Moderate Tolerance for Risk. Bonds in general — with the exception of junk bonds — are relatively safe investments. However, some assets within the class are safer than others. Mixing corporate investments into your portfolio of municipal investments will lead to a slight increase in the overall risk level across your portfolio. As an investor, you’ll have to be comfortable with that added risk in exchange for the greater returns.
  • Want High Levels of Diversification. Diversification helps to reduce risk across investment portfolios. By investing in multiple assets across multiple categories, investors don’t have to fear detrimental declines should one, or even a handful, of these assets experience losses.

Final Word

Deciding between corporate and municipal bonds is a decision that should be based on your comfort with risk and your needs for yield and liquidity from your safe-haven investments

It’s also important to consider your returns from a tax perspective. Compare the yields on bonds issued by corporations to those on available munis to make sure the increased returns aren’t outweighed by the taxes you’d pay on your gains.

As is always the case, investors should take the time to research the bonds they’re investing in, considering historic returns, the issuer of the bond, and where the money they’re investing is going. By doing your research before making your investment, you’ll rest assured that they fall in line with your goals.

Source: moneycrashers.com

Buying a Home in a Historic District

Historical districts vary a lot place to place, but generally, they’re older neighborhoods that are considered architecturally or historically important. Decisions on which districts are historic or aren’t are mostly made at the city or county level, though state and federal designations also exist. An architecturally important district might contain some of the only surviving original examples of a local architectural style, while a historic district may be protected due to its important role in a city’s development or an association with a specific event or persons. For a district to be listed in the National Register of Historic Places, the neighborhood must also be at least 50 years old.

Historic DIstrict SignHistoric DIstrict Sign

There are considerable advantages, disadvantages, and considerations when deciding to move into an existing historic district or in establishing a new district. While the allure of being associated with your city’s history is strong, sacrificing some modern amenities and having more control exerted over your property is certainly not for everyone.

Regulations on how much a historic home has been modified vary, even sometimes on a street-by-street level. Most historic districts require registering any remodeling, so you might be able to find out the house’s history there – but your own remodel will likely need to be approved too. Almost all historic districts ban modifying the façade or street-facing exterior of the home. The types of limits you will face vary; you might need to buy historically appropriate windows, use a specific type of roofing or siding, or even keep the paint the same color. Sometimes decorations are restricted or can even be required if your district is part of a seasonal celebration.

These restrictions may seem oppressive, but if managed well, can actually be a significant benefit in the long run. Historical districts generally retain their cohesiveness and curb appeal, with appreciation rates that typically outperform regular communities. Most buyers are drawn to the neighborhood by its history and have a vested interest in participating in their maintenance and rehabilitation. And while there are very likely to be rules governing exterior renovations, you might be able to renovate for a modern interior – which, depending on your own needs and desires, may be a boon or a bane.

Historic homes, also, are more likely than modern homes to have historic room layouts. How Americans use homes has changed dramatically over the years. Many older homes might place less importance on the kitchen, have smaller rooms, or have fewer bathrooms. Very old homes even had the kitchen in a separate building from the main house for fire safety. The floor plan is more likely to be closed off than on a newly built home and to feature rooms modern houses of the same size might not bother with, like a separate den and formal living room or parlor.

Many historic homes also feature more narrow hallways and steeper stairs than their modern counterparts – an important consideration when it comes to moving furniture, for elderly housemates, or getting around with any kind of mobility impediment.

Finding appropriate materials and artisans to carry out a historically accurate renovation can also be challenging and extremely expensive. Houses built in America between 1930 and 1950 may have used asbestos as insulation, a very dangerous and expensive situation to deal with during renovations. Electrical systems may have been installed after the house was first built, creating some unsightly workarounds and potentially inadequate power supply systems. If moving into an old home, develop an inventory of all the electrical appliances that you are going to want to run with their power requirements, then compare that list to the capacity of your home as determined by an inspection by a licensed electrician.

Victorian HouseVictorian House

Other concerns when considering living in a historic district include:

  • Utilities may be higher as you struggle to heat and cool a less energy efficient home.
  • Taxes – you might get a break for restoration work, but your tax rate may be higher.
  • Home insurance can be difficult to find or more expensive due to the relatively higher replacement costs.
  • Research the history of your district and your specific home. Your house might be on the National Registry for less than favorable historical conditions and while that might not stop you from purchasing the property, it might give future buyers pause when you go to resell down the road.

Purchasing a house in an architectural or historical district is a package deal… you are not only hopefully getting a wonderful home that will shelter and nurture your family for years to come, but you are also literally purchasing a slice of your city’s history and story. That linkage can be a wonderful, educational source of pride for your family, or may turn into a grudging obligation depending upon the circumstances of your situation. A knowledgeable Realtor with practical experience buying and selling homes in the immediate area is essential. They will be able to obtain accurate information regarding the history of the home, the neighborhood, and even the process by which a Historical Designation was earned. They can give you valuable insight regarding peculiarities of owning in the neighborhood as well as information regarding potential celebrations and tourism events that you may find yourself drawn into. And as always, take some time to walk the district and talk to your new potential neighbors to get a real feel for what it will take to immerse your family into the history of the region.


Cassandra is a writer with a background in engineering, enjoying the rural life in the Virginian Appalachians. When not working, she enjoys writing fiction, running a blog, camping, working in the garden, and tending to her flock of chickens! In addition to writing, she has a passion for art and graphic design. Her interests include disaster preparedness, homesteading, landscaping, cooking with natural ingredients, history, and animal husbandry.

Source: homes.com

What To Expect in the 2019 Housing Market

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How to Navigate This Year’s Housing Market

There can be little doubt that 2018 was a turbulent year in the housing market. With the Fed raising rates, lack of inventory, and some experts proclaiming that we are at “peak housing,” many sellers and buyers put off major transactions, hoping for a better year in 2019. But will they reap the benefits of a wise decision?

It may be too early to tell. However, that hasn’t stopped several experts from weighing in on what to expect as the 2019 housing market starts to heat up. We may still be in winter’s icy grasp, but it’s not too soon to start dreaming about what the hot season will look like this year, with spring right around the corner. Here’s what to expect from the 2019 housing market.

2019 housing market2019 housing market

Interest Rates for Mortgages

It’s a rare occurrence when nearly everyone in the mortgage industry agrees on something, especially when that something is the future of mortgage rates. So then, 2019 is looking to be a rare year. As reported at the close of last year on The Mortgage Reports, nearly every lending agency in the United States is expecting rates to rise above five percent for the year, with most predicting that rates will be somewhere between 5.1% and 5.3%.

Interestingly, Fannie Mae was the only holdout, predicting rates below five percent (4.8%). So, regardless of which agency you put your faith in, you can still expect to pay north of 5% on any mortgage you can qualify for in the year to come – rates higher than we’ve seen in more than a decade.

Generational Shifting Will Continue to Drive Buying and Selling Patterns

Buying and selling patterns are complex and driven by a great many factors. Over the past few years, one big factor has been the ongoing shift in generations, as two of the biggest demographic groups (by age, anyway) that our country has ever seen, enter and begin to shift out of the housing market.

Baby boomers are downsizing, moving from their big empty nests, or refinancing with reverse mortgages and other lending products, while Millennials are entering the housing market in surprising numbers. This is happening, of course, despite lack of inventory, rising rates, and the fact that they are carrying the heaviest debt burden of any young generation in history. Regardless, these two trends will continue to push both buying and selling patterns.

2019 housing market2019 housing market

Lack of Inventory Will Remain a Factor in Many Markets

The other carryover from 2018 that will continue to affect the housing market in a major way is lack of inventory. Thanks as well to many factors, record numbers of aging Americans are holding onto their homes or downsizing into smaller homes, rather than moving into shared housing situations as their forebears did at similar ages.

This, coupled with the after-effects of the 2008 housing crisis and many other economic factors too complex for a blog post of this kind, has led to a situation where there is far more demand for housing than available inventory can satisfy. And, while this may be great for some sellers, it may also end up having an overall cooling effect (especially when coupled with rising rates) on the market as a whole.

2019 housing market2019 housing market

Buying or Selling This Year? Hold On For a Wild Ride in 2019

2019 may not be the smoothest year that the housing market has ever seen, but there’s more to the year to come than predictions of doom would seem to suggest. While inventory may be an ongoing issue and rates are expected to continue to rise, there are still plenty of people entering and exiting the housing market to make for a great year of selling and buying.

It may be harder for some buyers to find (and afford) exactly what they want, but it won’t be impossible, especially in light of the near constant state of economic growth we’re currently experiencing.


Ben is a real estate agent and freelance writer. He’s lived on the east coast his entire life and is just as “at home” on a snowboard as he is in the office. When not writing about local real estate markets and researching hot new tips for homeowners, he can be found working on his home renovation projects with help from his wife Melissa and their kids, Josh and Cheyenne.

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Source: homes.com

How to Start an Inflatable Bounce House Rental Business

Bounce houses have become synonymous with fun. You see them at birthday parties, school events, carnivals, and more. If you’re like many, you may have even considered renting a bounce house for your child’s birthday party.

Considering their popularity and the general infatuation kids of all ages have with bounce houses, commonly known as moonwalks, it’s not surprising to see that many people are considering launching their own bounce house rental startup.

After all, all you need to do is buy a few bounce houses, place a few ads, and you’ll be in the money, right? Well, not exactly. As with anything else, building a successful bounce house rental company will take a bit of effort, but those who have found success in the space have found the work to be worth the reward.

The Basics of the Bounce House Rental Company

A bounce house rental company is a pretty simple concept. The company purchases bounce houses that are then rented to consumers, making it affordable to have a bounce house at birthday parties and other one-time events.

After renting your bounce houses out enough times, the investment will have paid for itself, and you find your way to profits. Of course, the bounce house business does have some obligations to the customer. These obligations include:

  • Delivery and Pickup. Moonwalks are heavy pieces of party equipment, often weighing hundreds of pounds. As a result, it’s uncommon for the renters to pick up and return the bounce houses they rent. It is up to the rental company to figure out how to get the bounce house to the event address and back into storage upon the completion of the event. Some bounce house rental companies will charge a delivery and pickup fee, while others include this in the cost of the rental.
  • Cleaning. Nobody wants to rent a dirty bounce house. Not only can sticks and leaves cause harm to the bouncy castles and inflatable slides, they can be a hazard to people using the bounce house. Moreover, as the rental company owner, it is your obligation to make sure that there are no viral pathogens that can be contracted by customers, especially considering the recent COVID-19 pandemic. As such, the vast majority of bounce house companies spray their inflatable rentals with sanitizing solutions upon both drop-off and pickup.
  • Education. If not used properly, inflatable bounce houses can be pretty dangerous, leading to serious injury or even death. It is the party-rental business’ responsibility to provide their customers with a detailed explanation of how to properly use their rentals in order to avoid injury.

Think Legal Before Spending Your First Dime

The bounce house business sounds great and you’re ready to dive in head first. Well, you may want to step back a bit and make sure there’s water in the pool. Having your own business is the American dream, and a party-rental business is fun. What could be better and how could it go wrong?

Think of this scenario:

Your party-rental business is going well. You drop off an inflatable water slide for a weekend birthday party on Friday. On Saturday, you get a call saying that 9-year-old Timmy broke his arm on your equipment, and not only do you need to pay for the medical bills, but the parents also want $50,000 in damages for his pain and suffering. If you’re only doing one or two rentals a weekend, such a lawsuit could put you out of business.

Thinking ahead will help you avoid the devastation that can come from these types of liabilities. There are two potential ways to avoid these types of issues:

Liability Waivers

Before moving forward with your first rental, you should strongly consider working with a contract attorney to develop a liability waiver for your bounce house rental company. Liability waivers transfer the liability associated with use of the bounce house to the renter.

By signing a liability waiver, the renters take responsibility if little Timmy is hurt on the bounce house, so the party that provided the bounce house won’t be responsible for his medical bills or any pain and suffering associated with the injury. Most contract attorneys charge between $500 and $1,500 to develop these types of liability waivers.

Liability Insurance Policy

Along with a liability waiver, you may want to consider opening a liability insurance policy. Liability insurance policies work just like any other insurance policy. The owner of the party-rental business pays an annual or monthly premium for insurance. If any person or property is harmed as a result of the use of the covered moonwalk, the insurance company picks up the bill, taking the liability off the shoulders of the bounce house rental company owner.

Liability insurance policies are relatively inexpensive in the grand scheme of things, with rates ranging from $2,000 and $3,000 per year for small startup party-rental companies. The most reputable company in the industry is known as Cassio Insurance Agency.

Check Your State Requirements

Liability waivers aren’t worth the paper they’re written on in some states. In other states, the law holds the parties in liability waivers to the agreement they signed. Having insurance is ultimately an option. Although there are no legal requirements surrounding liability insurance, it is an absolute must if your state does not recognize liability waivers.

Keep in mind, as a business owner, if your business doesn’t have the assets to cover its liability, you may be found personally liable for damages. So, a refusal to do your research on this topic could ultimately cost you house and home.


Equipment You Will Need to Start Your Business

As with many businesses, in order to get your party-rental business off the ground, you will need to invest in equipment. Bounce house rental companies will need the following equipment to get started:

Bounce Houses and Other Inflatables

You can’t rent inflatable bounce houses to anyone if you don’t own them. Most startup moonwalk rental companies start with between three and five commercial grade inflatables. Here’s what you need to know when picking them out.

Where to Buy Commercial Grade Inflatables

Finding a quality source for commercial grade bounce houses is relatively simple. Amazon.com is a great place to start. Some other quality sources of commercial grade moonwalks include JumpOrange.com, JungleJumps.com, and BlastZoneCommercial.com.

What Kinds of Inflatables Will You Need?

It’s possible to start your bounce house rental business with a single moonwalk-style bounce house. However, if you want to be competitive, you will want to offer a range of inflatables for all party needs. The most commonly available rental inflatables include:

  • Inflatable Bouncy Castles. Inflatable bouncy castles are your classic moonwalk style bounce house. They generally range in size from 8 feet by 8 feet to 15 feet by 15 feet. Keep in mind that larger inflatable bouncy castles will return higher rental income rates. You’ll be able to find a quality standard bounce castle for around $1,250.
  • Wet/Dry Combos. Wet/Dry combos are a twist on the traditional moonwalk-style bounce house. These generally have a bounce house with a water slide connected to the side of it. Although rentals with water features will not be popular in the winter time, they yield a premium in summer months. Wet/Dry combos generally cost about $2,500.
  • Inflatable Water Slides. Inflatable water slides are tall inflatables that generally feature a single, wide water slide or two slides for racing purposes. Like wet/dry combo inflatables, these will not be popular in winter months but will be hard to hold onto in the summer. You should be able to find a quality inflatable water slide for around $3,500.
  • Inflatable Obstacle Courses. Inflatable obstacle courses are a relatively new trend in the party-rentals industry. They are overwhelmingly popular for all times of the year. Moreover, because they provide far more activities than the traditional moonwalk bounce house, they yield higher rental rates. These are the most expensive inflatables with quality inflatable obstacle courses costing around $4,250, or more.

What to Look for in Quality Commercial Grade Inflatables

Investing in a commercial grade inflatable will cost quite a bit of money. In fact, quality moonwalks will range in price from just over $1,000 to $8,000 or more. When you make that kind of investment, it’s important to make sure that your investing dollars are being spent on quality merchandise.

When shopping for a bounce house, here are a few tips to help you ensure that your investment is one that will yield returns for years rather than months:

  • Material. The type of material used to make the bounce house is one of the most important factors. Most bounce houses are made of either PVC vinyl or heavy-duty nylon. When purchasing a bounce house, look for those made out of PVC vinyl. Not only is this material far lighter and easier to work with, it’s also far stronger than traditional nylon construction.
  • Visibility. Safety is a major concern in the bounce house rental space. So, it’s important to invest in bounce houses that promote safe use. Look for bounce houses that have large mesh areas and provide as few blind spots as possible. When renting your bounce houses, promoting this feature will help your prospective customers choose you over your competition.
  • American Engineering. Some bounce houses are engineered and designed in the United States, and some are designed and engineered in other countries. Moonwalks that are engineered in the United States are generally centered around safety rather than cost-cutting in the build.

Truck or SUV

Bounce houses, inflatable water slides, and obstacle courses are large and extremely heavy. As a result, your customers probably aren’t going to come to your place of business to pick up and return their rental — pickup and delivery will be on you.

However, the average bounce house isn’t going to fit in the average car’s trunk. Moreover, you’ll need to bring a blower, dolly, and the other miscellaneous equipment detailed below when you deliver the bounce house. As a result, you’re going to need a large SUV or a truck to support the delivery and pickup of your rentals.

You can pick up a used truck for around $5,000. Even if you have your own truck or SUV, you’ll want to have a separate vehicle for your business for both insurance purposes as well as wear and tear.

Consider Adding Graphics to Your Vehicle

Having your truck or SUV vinyl wrapped with your logo and fun bounce house graphics can help you market your business and spread awareness of your bounce house rental company. This will serve two purposes:

  • Low-Cost Advertising. Advertising is overwhelmingly important but can get expensive. A vehicle wrap is a relatively low-cost way to promote your business. Every time someone drives by your bounce house truck, you’ll introduce a new potential customer to your brand.
  • Verification. Consumers are on alert around their kids, and may be suspicious of a stranger pulling up to a birthday party in an unmarked van. However, if you show up to drop off a bounce house in a marked business vehicle, it will provide a better user experience for the customer.

Miscellaneous Equipment

Some of the smaller pieces of equipment you’ll need to run your bounce house rental company include:

  • Blower. Inflatable bounce houses need a blower to inflate them and keep them inflated. Most bounce houses will come with a compatible blower if they are purchased new from the manufacturer. If it does not, you will need to invest in a blower that is compatible with the bounce house you’ve purchased. Commercial inflatable blowers cost about $275.
  • Dolly. Because bounce houses often weigh hundreds of pounds, a dolly will come in handy when it comes time to transport your party equipment. When you buy your dolly, make sure it’s a good one. Small dollies will have a hard time carrying the weight of a commercial grade bounce house. Nonetheless, a high quality dolly will only set you back about $125.
  • Extension Cords. Power cords on bounce house blowers are relatively short. In most cases, you will need to provide a high-quality extension cord to power the blower. Keep in mind, these blowers use quite a bit of electricity, so it’s best to purchase a thick, 10-gauge extension cord with each bounce house. Moreover, your extension cord should be at least 50 feet long. You can get your hands on four of these for about $160.
  • Ratchet Straps. It’s best to ratchet strap your bounce house to your dolly when moving it to ensure that it does not fall off, potentially causing property damage or causing bodily injury. Ratchet straps will cost about $30.
  • Chemical Sprayer. Cleaning your rental party equipment is your responsibility. It’s important to disinfect your equipment before and after each rental. A simple chemical sprayer, like those often used to spray crops, is a great way to quickly coat your moonwalk in a disinfectant solution. This will be your lowest cost supply, at just $25, but will save you plenty of headache.
  • Leaf Blower. A leaf blower will help remove leaves, sticks, and other debris that may harm your bounce house or those using it. Sweeping this debris may cause scratches, so a leaf blower is a must. Moreover, you never want to pack your bounce house up wet. Doing so will lead to mold and mildew, and could lead to issues with material integrity in the long run. So, it’s best to use your leaf blower to dry your equipment off before packing it up after each rental. You can find a quality leaf blower at any home improvement store for about $200.

Total Equipment Investment

Using all of the costs mentioned above, you will need to invest a total of approximately $17,315 into your startup.

Important Note: This total does not include the cost of liability insurance and a vehicle wrap. Considering the average cost of liability insurance is $2,500 per year, and the average cost of a vehicle wrap is about $3,000, if you decide to move forward with these options, your total investment will come to around $22,315.


Bounce House Rental Business Profitability

Profitability in any business only happens once all expenses are paid. However, once the startup investment is paid off, your bounce house rental business has the potential to be quite profitable. The average rental prices for inflatables are as follows:

  • Traditional Moonwalk Inflatable Bouncy Castle (average size of 13 feet by 13 feet): $250 per weekend.
  • Wet/Dry Combo: $350 per weekend.
  • Inflatable Water Slide: $450 per weekend.
  • Inflatable Obstacle Course: $500 per weekend.

On average, you will pay about $75 in labor, fuel, and mileage expenses to drop off and pick up your rentals within 20 miles. Sanitizing solution costs will be about $6 per rental. So you’ll have to factor out these expenses to determine your net rental income.

If you were to rent out 100% of your inventory every weekend, you would generate net revenue of around $1,226 per weekend. At this rate, it would take a total of 14 weeks, or three and a half months, to reach cash flow positivity without liability insurance or vehicle wrap expenses. With these expenses, you would need 19 weeks, or just over four and a half months, to reach cash flow positivity.

However, these numbers are based on renting 100% of your inventory every weekend. In the beginning, this is highly unlikely. To reach this level, you will need to invest some time — and potentially money — into marketing, which is outlined below. Moreover, in the winter, you will be hard pressed to rent any party equipment with water features.

For example purposes, let’s say that you rent 25% of your inventory every weekend. At this rate, it would take 57 weeks — just over a year — to reach cash flow positivity without liability insurance and vehicle wrap expenses, or 80 weeks to reach cash flow positivity with liability insurance (two annual premiums at $2,500 per year) and vehicle wrap expenses.

Once you reach cash flow positivity, the hope will be that your business has grown to rent 100% of your inventory during summer months and 50% during winter months. As such, your net earnings will be between approximately $613 and $1,226 per weekend. At this point, it’s best to reinvest some of this profitability into new bounce houses for larger earning opportunities.


Marketing Your Bounce House Business

You could have the best bounce houses at the lowest rates in your area, but without marketing, it will still be difficult to rent them out. Ultimately, it’s like having a Ferrari with no gas in the tank; you’re not going anywhere. The good news is that you don’t have to spend a fortune on marketing. In fact, most people start with free marketing options and consider paid marketing opportunities only once they reach profitability.

To get the word out about your bounce house rental offerings, consider the following options:

Google My Business

Google My Business gives business owners a way to let their local community know their business exists. Simply click the “Manage Now” button on the homepage. From there, fill out the form letting Google know about your business and verify your business ownership, and when consumers search for bounce house rentals in your area, your company will be in the results.

Social Media

Social media sites have become hubs for marketing local businesses. After all, they’re a way to connect with your community without knocking on every door in the city. Start by building social profiles for your business and inviting your friends to like those profiles.

Take the time to be active within the social community, responding to questions and publishing posts on your bounce house rental company’s social media profiles once in a while.

Reward Word of Mouth

Every time a customer rents a bounce house from you, offer them a small reward to refer their friends. For example, start a program that gives a 10% discount on the next rental for every friend referred, or offer a $10 Starbucks gift card for every friend referred. You’d be surprised at how a small amount of monetary compensation can generate word of mouth buzz.

Mailers

Finally, visit your local post office and ask about marketing mailers. It’s relatively inexpensive to send postcards to potential customers. Moreover, the post office knows its customers. Therefore, you can choose to only send your mailers to homes where children live and where the parents generate specific levels of income. This helps you dial down your audience not only to those who would want to rent a bounce house, but also those with the financial means to do so.


Rental Services May Come With Special Taxes

In most states, rental services are taxed just like the purchase of general products. As a result, on top of the traditional income tax that you’re used to paying, you may be required to charge sales tax on every rental.

The amount of taxes to be charged and when the business must pay those taxes will vary from state to state. If you skip your research and fail to charge and pay the necessary taxes, you may find yourself with a hefty bill from the government down the road.

The United States Internal Revenue Service (IRS) is the largest and most powerful collections agency in the world. They are the only agency that has the power to send you to jail. They have the power to seize your assets, evict you from your home, and take your property. It’s best to stay on their good side.

All business owners should hire an accountant or use one of the various accounting programs to make sure their taxes are being paid correctly. Some of the best programs available include QuickBooks and FreshBooks.


Final Word

The bounce house rental industry is a profitable one. Once initial investments are paid off, the profit margins are like none other. However, like any other business, being successful will take a bit of work.

Moreover, liability is a major factor to consider when thinking about starting a party equipment rental company. Before moving forward with your startup, make sure to dive into local regulations surrounding potential insurance requirements and the enforceability of liability waivers. Moreover, look into tax codes and make sure that you have a process in place to ensure that your taxes are paid.

If you make the right moves in the industry, a small bounce house rental company making $1,000 or so per weekend has the potential to quickly grow to generate a comfortable six-figure income, making it a great choice for a side hustle that could become something more. If you’re looking for a fun business to get into with a relatively minimal initial investment requirement, the bounce house business might be right for you.

Source: moneycrashers.com