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Comparing Bitcoin to Real Estate Investing: An Objective Analysis

Hey there fellow millennials! Times are changing and with the vast amount of information readily available, we know more than ever about investment opportunities. And what better way to secure our financial future than by investing smartly? That's why I wanted to share my experiences with two popular investments: Bitcoin and Real Estate. As someone who owns both, I can offer a unique perspective on the pros and cons of each. So, let's dive in and see what the future holds for these investment options!

Bitcoin: The Digital Gold

Bitcoin is a decentralized digital currency that has taken the world by storm in recent years. It operates on a peer-to-peer network, meaning there is no central authority controlling it. Instead, transactions are verified by network nodes through cryptography and recorded in a public ledger called a blockchain.

One of the biggest draws of Bitcoin is its scarcity. There will only ever be 21 million bitcoins in existence, and once they're all mined, that's it. This scarcity has led many to view Bitcoin as a form of digital gold, which is why it has become so popular as an investment.

Pros of Investing in Bitcoin:

  • Scarce and finite supply, making it a potential hedge against inflation.

  • Decentralized and not controlled by any government or central authority.

  • Easy to store and transfer, thanks to the continual advancements in digital wallets and blockchain technology.

Cons of Investing in Bitcoin:

  • Extremely volatile and can experience large price swings in short periods of time.

  • Lack of regulation (or compliance) can lead to security and fraud concerns.

  • Lack of widespread adoption and acceptance as a form of payment (as of now).

"Bitcoin is a swan, it's the black swan of our time. It's not going to be understood, it's not going to be appreciated, it's not going to be adopted by most people, but those that get it early are going to make a fortune." - Michael Saylor, CEO of MicroStrategy

Real Estate: A Tangible Asset

Real estate, on the other hand, is a tangible asset that has been a popular investment option for centuries. It refers to the purchase, ownership, use, development and sale of land and buildings. There are a variety of different types of real estate investments, including rental properties, commercial properties, and even vacation homes.

One of the biggest advantages of real estate is its potential for income through rental properties. This passive income can provide a stable source of revenue and can be a great way to build wealth over time. Additionally, real estate can also appreciate in value, leading to capital gains when the property is sold.

Moreover, investors can benefit from tax advantages such as deductions for mortgage interest and property taxes, the ability to defer capital gains taxes through a 1031 exchange, and depreciation, which allows them to deduct a portion of the property's value over time to offset rental income.

Depreciation is a tax deduction that allows investors to reduce the amount of taxable income they report from their rental property. The IRS allows property owners to deduct the cost of the building over 27.5 years, which can result in significant tax savings.

Pros of Investing in Real Estate:

  • Potential for passive income through rental properties.

  • Potential for appreciation in value.

  • Tangible asset that can provide a sense of security and stability.

Cons of Investing in Real Estate:

  • Can be expensive and requires a significant upfront investment.

  • Can be time-consuming and require a lot of effort to manage rental properties.

  • Can be affected by market conditions and macroeconomic events.

"Real estate is a tangible asset, you can touch it, feel it, and see it. It's a physical representation of your wealth that you can pass down to future generations." - Grant Cardone, real estate investor and author

Where Bitcoin Wins

Real estate investments usually require a significant amount of capital to get started. Buying a property for rental income or long-term appreciation can cost thousands, to hundreds of thousands of dollars or more. Additionally, there are often expenses associated with maintaining and improving the property, such as repairs, renovations, and property management. These costs can add up quickly and can be a barrier to entry for investors who do not have a large amount of capital to work with. Bitcoin offers a different approach to investing, with a lower capital requirement to get started. With the rise of cryptocurrency exchanges, it is now possible to buy and sell Bitcoin with as little as a few dollars, making it an attractive option for investors who want to get started with a relatively small amount of capital.

Where Real Estate Wins

Real estate offers unique characteristics that make it a win verse Bitcoin for some investors. One of the key advantages of real estate is its tangible nature. Unlike Bitcoin, real estate represents a physical asset that can be used or lived in, providing a sense of security and stability that digital assets like Bitcoin cannot offer. Additionally, real estate can provide a reliable source of passive income through rental properties, while Bitcoin does not offer a consistent and safe cash flow at the time of writing this. Moreover, real estate investments can offer tax benefits, including deductions for mortgage interest and property taxes, which can help reduce an investor's tax burden.

So...Real Estate OR Bitcoin?

In my view, having a diversified portfolio that includes both Bitcoin and Real Estate is crucial, as they complement each other. Each investment has unique features that make them valuable. Bitcoin is known for its high potential returns and volatility, while Real Estate provides stability and the tangible aspect of owning a physical property. Together, they can help to balance risk and reward, and offer potential benefits to investors seeking both short-term gains and long-term stability.

If you're drawn to one, you'll likely appreciate the other too, as both Bitcoin and Real Estate offer similar benefits to investors. One of the most valuable characteristics shared by these investments is their scarcity, which makes them highly sought-after. Bitcoin's finite supply of 21 million coins and the limited amount of land and property in the world give both assets their intrinsic value. This scarcity makes them valuable assets in a world where resources are constantly being depleted, and as demand for them increases, their value also rises.

Together, these aspects make Bitcoin and Real Estate solid choices for long-term investment portfolios. By investing in both Bitcoin and Real Estate, individuals can reap the benefits of having a diverse portfolio that balances volatility over the long term, yet takes advantage of investing in scarce assets, making them a great combination for those looking to secure their financial future.

As a millennial investor, I firmly believe that having a balanced portfolio of both Bitcoin and Real Estate can offer a diverse range of benefits. So, don't just settle for one, aim for both and watch your portfolio grow! Invest smart and always consult with a professional, the future is bright for those who take the opportunity.

By Eric Johnson, Full Time Investor & Co-Founder of Elevation Equities

Please note that the information provided in this blog should not be taken as financial advice. It is simply the personal opinions and experiences of the author and is not a substitute for professional financial advice from a licensed financial advisor. Before making any investment decisions, it is important to conduct thorough research, understand your personal financial goals, and consult with a financial professional.


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