Bitcoin vs. Real Estate

7 min read by Andre
published 10 months ago

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The world has changed since the days when our parents came of age and were faced with the decision of how they were going to invest their money. Back in the day, it was a right of passage to  buy a house and begin to climb the property ladder. If they were successful enough, buying multiple properties was an achievable way to park hard earned money and watch it grow into the future. 

It’s almost ingrained in us that owning a house or a rental property is a natural way to move up the economic ladder. But with astronomical prices today, inflation, and the government’s ability to print money and raise the price of these assets, we have to question if owning real estate is still the sound economic investment it once was.

Setting the stage

Both real estate and Bitcoin are popular long term investment options with the potential for serious growth and yield. Most of us know how real estate works. You buy property and you live in it or rent it out and its value increases over time. But it also costs a lot of money to maintain. Things break and you’re on the hook to pay for repairs and upkeep, as well as property management fees and annual taxes or property rates. You may face the risk of overcapitalising with any repairs or improvements you make, and sinking money into things that will never increase the property’s value.

There’s also the risk of buying a money pit. Maybe you find out that the foundation is faulty, or its integrity has been compromised by pests. Or maybe you run into troublesome tenants and a dispute arises, leaving you without your income. In the 1986 comedic romp The Money Pit  Walter Fielding (Tom Hanks) and Anna Crowley (Shelley Long) are a young couple conned into buying a dilapidated mansion at a bargain price, and it doesn’t take long for the house to begin falling in around them. While The Money Pit is a dramaticized example of what can go wrong with property ownership, the challenges the protagonists face are relatable in many ways.

Bitcoin is different. It’s a type of savings investment that does not require the same upkeep and management costs as real estate. Bitcoin is a digital store of value — it won’t degrade in the same way that physical property will. Bitcoin is also highly divisible and liquid. You can trade it 24/7, unlike real estate which is time consuming and often a pain in the neck to sell and acquire. Think about this: you want to sell your house? You need to engage a realtor, set up a contract to pay them, stage the house, list the house, negotiate, and on and on. Do you want to buy or sell Bitcoin? Open an app and click a few buttons. 

The Case for Bitcoin 

It’s becoming more and more apparent that Bitcoin is the preferred inflation-hedge savings vehicle for the modern digital age. In the past year alone, Bitcoin became even more environmentally safe and decentralized due to China’s ban of Bitcoin mining. Much of the mining within China’s borders was done with coal. Because of China’s mining ban, the Bitcoin mining network has become even more distributed globally and the race for the most energy-efficient electricity to operate the mining has incentivised true ingenuity. 

Bitcoin miners are using stranded energy and otherwise flared natural gas in areas in the United States and Canada, and other renewable energy sources around the world more broadly, while bolstering the energy grids in these areas in tandem. If cities or towns in these areas need more power during peak hours, these new energy producers can switch their efforts to support the grid and forgo mining as needed. 

Large players on the global stage have begun buying and using Bitcoin. Price volatility has been present but major swings have reverted back to near all-time highs. Because of all this, Bitcoin has once again proven to be an apex predator, indifferent to the whims of centralized control and antifragile in an uncertain world. 

A Chinese ban or negative press around the implementation of Bitcoin in El Salvador has done little to slow its adoption. People will inevitably continue to hold Bitcoin as they have traditionally held other proven stores of value – as a vehicle for storing their wealth. 

You can secure your stake in this new money at any time. Sooner rather than later would be preferable as you can afford more now – for less fiat money invested. If you wait, you will still be able to buy Bitcoin, or SATs (1 Bitcoin = 100,000,000 SATs), yet most likely not as much. Amber offers an easy, secure, automated way to accumulate. Set up a recurring purchase on the app and then go on with your life. 

With some skin in the game, you may be incentivized to learn more and grow your conviction. Steady accumulation now and into the future will likely amount to a very healthy savings in the decades to come.  

Real Estate as an Investment

These days the average person struggles to comfortably purchase a home. Sure, interest rates have been kept low but the housing supply is still limited. Not to mention the prices of these homes have grown astronomically due to inflation in money supply. Salaries and wages have not increased to match. Below is a chart showing the disparity in the trend in Australia up until 2015. This gap has only widened since then. Real estate markets in other developed countries look very similar. (priced in thousands)

Source: Business Insider Australia

Those of us who already own homes or other non-monetary assets have seen the value of our assets rise, but when the cost of everything else rises as well, is our real estate investment really worth more? When you sell your property for an increased price, you’re also spending more on buying a new property, potentially negating any profit from the sale.

Buying a house for your primary residence may still be a good idea. In almost all respects, paying your own mortgage instead of someone else’s while renting, is a good use of your money. In an ideal world, real estate supply would be more evenly distributed, instead of speculated upon and hoarded by large investors. Unfortunately that is not the case today, and the available supply of real estate is low and prices are high because of inherent imbalances. Investors have been forced to speculate on real estate because there are few places to store wealth in an effective way.    

In today’s current economic climate, if faced with the task of deploying additional savings, it may be prudent to consider the risks associated with being stretched between multiple properties, especially if property management or real estate investment is not your profession. Real estate markets historically have gone through boom and bust cycles, and being on the hook for multiple mortgages in a time of an economic downturn can be a recipe for financial disaster.       

Where Investing in Bitcoin Excels

With the introduction of Bitcoin, investors are now able to buy, sell and hold an asset that is uniquely qualified to act as a store of wealth. You can easily manage your Bitcoin investment with apps like Amber. With Bitcoin, you’re in control of your investing and earning potential with options like Dollar Cost Averaging (DCA) and buying the dip – you’re not beholden to real estate market trends or someone wanting or not wanting to rent your property. 

Government policy, regulation and tax code will likely not affect Bitcoin’s long-term price appreciation due to its worldwide decentralization, and the incentive it offers to all participants. People on the lower end of the economic spectrum can hold Bitcoin just as well as the government officials who are tasked to help push innovation and regulation forward. 

Bitcoin is for Everyone

Buying Bitcoin for long-term and stress-free wealth accumulation may prove to be the best bet. Now and in the future, everyday investors will no longer need to hoard physical property to protect their wealth. Digital, secure and scarce property – Bitcoin – will serve that function. This will arguably make the world more equitable in more ways than one. 

Want to learn more about Bitcoin? Check out Amber’s Guide to Investing in Bitcoin, Bitcoin Glossary and newsletters. These are great places to start! 

If you’re ready to dive in, you can make your first Bitcoin purchase in under 90 seconds with Amber.

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Scan the QR to download the Amber iOS or Android app.

Disclaimer: Amber is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how information on our website, in emails we send or in our app, relates to your unique circumstances. Amber is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of our website, our emails or our app.

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