Bitcoin or Real Estate Investment

Recently, I couldn’t help but ask myself this question. I have always been in favor of diversification when investing. However, I think it is very important to make analyses among them to determine what percentage of investment should be made in which asset. I can’t help but think whether it would be more reasonable to buy bitcoin or invest in real estate without considering various simulations. I think we should ask ourselves these questions before answering this question; When will you invest? What is your potential profit expectation? From a risk & reward perspective, which one is advantageous? Let’s put them all on the table.

Advantages of Bitcoin

1- Mobility

Buying Bitcoin can be possible from anywhere in the world and it has the advantage of being able to sell it anywhere and anytime. You can easily carry your bitcoins with your cold wallet or any wallet app. In fact, as long as you have your seed phrase, you don’t need anything else. It is impossible to move your house from one place to another. When there are situations such as war or natural disasters in the country you live in, your house will be in danger. As an example from recent history, in the 2011 Syrian civil war or the 2022 Russian invasion, many innocent people became refugees what happened to their properties? They were bombed, abandoned, and real estate prices dramatically decreased, or can’t claim the right to the property anymore.

2- Divisibility

You have the chance to sell even $1 worth of bitcoin at any time. It is a great advantage to be able to sell as much as you need without giving up your entire investment. You can also sell your house in pieces, but it is impossible to sell in such small amounts. You will also have extra expenses such as notary fees, and real estate agent fees.

3- Decentralization

This criterion can sometimes be an advantage and sometimes a disadvantage. If you carry your bitcoins in your cold wallets, you have an asset in a decentralized environment. The bitcoins you hold in the exchanges are not yours. Not your proof, not your coins. However, even if you appear to be the owner of the house you bought, you can still lose your house due to the reasons I mentioned in the first item, or decisions can be made about your location by some government officials. Here, I am referring to local governments, in other words, the state is the authority.

4- Limited Supply

Bitcoin’s biggest advantage is that it is designed to be limited. No coin can be produced other than 21 million coins. With 4-year halving cycles, the annual inflation rate is regularly decreasing. However, the number of buildings is increasing. Of course, it is necessary not to forget the limited structure of real estate, but it is possible to reduce the area and build taller buildings with new construction technologies. The world population increase should also take into account.. In terms of the supply-demand relationship, I think bitcoin is a little more advantageous in this regard.

5- No Maintenance Cost

There is no need to do anything extra for the bitcoins you hold. You just have to wait. However, your house will deteriorate, and if you have a tenant, there is also a possibility of them causing problems. Having rental income does not mean there are no expenses. The rent can cover these expenses.

Advantages of Real Estate

1- Oldest Form of Investment

While the world’s first engineering structures are the pyramids of Egypt, the first assets to be invested in are real estate. Bitcoin’s history is 15 years old. Compared to our civilization’s history, the digital age is very new. Assuming that the average human lifespan is 75 years if we ask whether an investor should invest in something that has been traditionally accepted or something new, real estate stands out a bit here. Depending on your risk perception and investment perspective, this may be a variable that can change for you.

2- Regular Predictable Value Appreciation

When it comes to volatility, cryptocurrencies come to mind. Unfortunately, this market, which is subject to very difficult-to-predict rises and falls, sees rare downward trends, while real estate is rarely in a downward trend. Although there is a bear market every 20 years on average, it has proven itself in the long run.

Which One Brings More Wealth?

Different perspectives need to examine it. How will you buy the house? If you are not using a mortgage, it is possible to make different analyses if you are going to rent out the house. The study of Bitcoin will also vary depending on the time frame we look at. For example, we can say that someone who bought real estate 5 years ago has earned more because it is currently at its 4-5 years ago price. However, if we compare it with a Bitcoin purchased in March 2020, Bitcoin is far ahead. It has increased 6 times since then.

So, when we buy is very, very critical. If we buy Bitcoin at the right time, it is impossible for real estate to catch up with it. Can you find the right time? This is where the risk is. A house purchased without a mortgage will most likely lose to Bitcoin. If you buy a house with a 30-year plan and a low-interest mortgage, it may be possible to compare it to buying Bitcoin with the down payment you will give for the house. If you are renting out the house, what you will do with the rental income is a separate issue.

To summarize, one needs to perform 6-7 simulations. Historically, we know that real estate has returned at or slightly above the inflation rate in developed countries. An average return of 6-7% per year is the ideal expectation for real estate investors.

In Conclusion

I wrote my expectations for Bitcoin here. Although I cannot predict which one will earn more, if I were you, I would definitely buy the house I will live in. If you do that your psychology will be much better for other investments. However, when considering an investment, I would think about all the factors. The rental property is probably not worth investing in if you don’t have a chance to reach a mortgage. Therefore, I would go for bitcoin with the rest of the investment cash.