Bitcoin vs Real Estate
Which is the better investment?
I’ve got TONS of people asking me if I would ever “convert my bitcoin investment into real estate” when the value of bitcoin reaches a certain threshold.
This is a rational question to ask, but my answer is that I would ABSOLUTELY NOT sell, and I would continue to hold my bitcoin and buy even more before ever investing in the real estate market.
That might sound shocking to some, but there is a lot of reasons behind why I will likely never invest in the residential or commercial real estate markets. At least, not for the foreseeable future.
I will do my best to explain the bullet points around why I see real estate as a terrible investment compared to bitcoin. I will largely focus on the residential real estate market in this article, but 99% of this applies to commercial.
Let’s start with the downsides of buying, selling, and owning real estate. Then, I will compare that to buying, selling, and owning (hodling) bitcoin.
Real Estate Investment:
A large amount of capital (money) is required
The average home price in America is nearly $400k
The average home price in the UK is £249,633
Most investors will need a loan due to the high capital requirements
Most investors don’t have the capital available to buy a home without going into debt.
Not everyone qualifies for home loans
There are a lot of extra costs (closing costs, etc.) involved with acquiring a loan
Application fees, appraisal fees, credit check fees, origination and/or underwriting fees, title insurance, title search fees, transfer taxes, and other closing costs on a $400,000 home will run you roughly $7,500.
If you rent, you’ll have tenants, which creates counter-party risk
Tenants cause damage, can sue you for injuries that occur on the property, and there is always a risk of tenants squatting.
Geographical problems
Although the real estate market is stable in most regions, there is always a risk that the city you choose to buy in goes through a long-term bear market due to unforeseen circumstances.
Buying and selling is a long process.
The average home buying/selling process takes 60-90 days.
It may be difficult to find a buyer within your desired time frame.
You have to hire someone to sell
Most people will need to hire a real estate agent to list the property and find a buyer. The average commission on a $400,000 home is $12,000.
Homes require maintenance
Roofing, siding, painting, plumbing, and electrical work are just several of the maintenance requirements you need to consider. The average homeowner spends $10,000 in a 5 year period on general maintenance of their home (and most sellers leave hidden secrets for you to discover later once you possess the home).
Property Taxes
Property taxes range greatly in the USA. The average homeowner will pay $3,000 to $4,000 a year in property taxes. Some are MUCH higher!
Subject to eminent domain or confiscation (UK: compulsory purchase)
If your home gets in the way of a new highway, you may be forced to sell your home with little ability to fight back.
In the same vein, confiscation is always possible in certain countries.
Fires, floods, hurricanes, and other acts of god
Because homes are a physical good, they are exposed to risks of being damaged or destroyed by extreme weather and/or earthquakes.
Insurance requirements
Depending on where you live, you may be required to hold insurance for fires, floods, earthquakes, or hurricanes. The average homeowner spends $1,250 a year on home insurance.
Not divisible
A home (or unit) is not divisible. You have to sell the whole home.
Fixed location
Homes are challenging and expensive to relocate.
Bitcoin Investment
You can buy tiny amounts
You can purchase fractions of a bitcoin called satoshis (aka sats)
This always bitcoin to be extremely divisible (There are 100,000,000 sats in each bitcoin)
No loan required to afford bitcoin
You can buy whatever you can afford.
You can get a loan to buy more bitcoin, but it’s unnecessary to get started.
There is no upkeep or maintenance
Bitcoin requires no maintenance costs
Bitcoin doesn’t break down over time, and it’s not consumable
It can be free to store and transport
Bitcoin is 100% free to store when using a hardware wallet
You can transport the hardware wallet anywhere for free
Act of god resistant
Your bitcoin is stored on servers worldwide, so it has no single point of failure from earthquakes, floods, fires, hurricanes, etc.
No geographical downside (it lives all over the entire planet)
Homes can lose value due to rising crime or natural disasters, but they cannot impact bitcoin directly.
Only a small one-time fee to buy
You usually only pay a one-time fee to purchase bitcoin, but the percentage is MUCH lower than most real estate agent's commission.
You can be paid in bitcoin.
You can accept payment for anything, including your services
You can buy and sell bitcoin yourself
You don’t need an agent to help you with BTC transactions, whereas real estate nearly requires that you hire an agent to move the property.
You can buy and sell bitcoin 365 days a year, 7 days a week, 24 hours a day
Bitcoin is extremely liquid, and you can sell it online at the market rate, any day, any time. Homes can take months to sell.
You cant be sued
No one can physically touch bitcoin, which means no one can get hurt by direct contact.
You can travel with it.
Bitcoin is extremely portable. You can travel with your entire wealth on a thumb drive or with a 12-24 word password memorized in your head.
No property taxes
Because it’s not physical, it’s much more difficult to find a reason to tax it. Real estate gets taxed to support the surrounding schools and roads, but bitcoin doesn’t require any government-funded infrastructure.
Resistant to confiscation
There is no need for eminent domain, and even IF a government agency wanted to take it from you, you could make it very difficult for them by memorizing your password (seed phrase). Also, you can hide your wallet or use multi-sig (check out my other article for bitcoin security 101 ).
No Insurance required
Bitcoin cant be damaged, and as long as you are careful, you shouldn’t ever lose access to your funds.
Thank you for reading. I hope you took value out of this piece.
I look forward to writing more about bitcoin in the future.
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-Dennis “Dee” Porter