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Imagine it’s 2023, you’re younger than 25, and you live in the USA. The world is yours — in theory, anyway. There is only a slight problem. The cost of living is skyrocketing and buying your own home takes 3.59 times longer than in 1959.
Real estate or bitcoin? I recently had a conversation with someone who was born in 1998, and she turns 25 this year. She has a great job at a large corporate firm and is looking to relocate to a different city in the U.S.
I asked her what she thinks about bitcoin. She said that as an investment, she thinks it’s risky because its value depends on how many people buy into it. Instead, she keeps her money with the bank and earns 4% interest.
Her plan is to buy a multi-family home in a major city. The idea is to rent out two of three apartments in order to contribute to her living expenses, and to keep the mortgage costs at a minimum.
Her current rent is over 2,400 USD per month, which eats up most of her income. Solving that problem with a real estate investment seems like a good idea.
Special tax brackets provide a further incentive to become a real estate owner. Robert Kiyosaki would be proud.
Many people don’t even think that far and or have the means or income to put such a plan into action. But is it smart?
Bitcoin or real estate? Our perception is distorted
What my recent acquaintance doesn’t know is that the rising rents she’s experiencing is unnatural. The real problem is the ongoing debasement of the currency and asset price inflation. If (when?) the market corrects, that same debasement might as well kill the investment case for real estate. Understanding the connection between easy money and price inflation, and researching bitcoin’s long-term thesis could change her view forever.
I didn’t have enough time to lay out for her why real estate could potentially become a big problem. But I got the idea for this article. What are the missing links someone born 1998 or later needs to understand? A number of important essays and research pieces came to mind that I wish anyone in the same position would regard:
From Bricks to Bits Unmasking Real Estate Investment in the Bitcoin Era
Vijay Boyapati – The bullish case for Bitcoin
Lyn Alden – Bitcoin: Addressing the Ponzi Scheme Characterization
Hard Money Show – Bitcoin vs Real Estate
Nakamoto Institute – Hyperbitcoinization
Parker Lewis – Gradually, Then Suddenly
Allen Farrington – Bitcoin is Gravity
Real Estate or Bitcoin – or Both?
My goal is not to convince you to buy real estate or bitcoin. My goal is to provide a new perspective by providing information that could be an important link to improve the decision-making process.
Considering new information might lead someone to look into Bitcoin more seriously. It could mean to postpone the real estate investment and instead use one’s savings to accumulate bitcoin.
It could also be the case that the freed-up cash flow from a (hopefully) profitable real estate business is used to DCA bitcoin.
Or it could lead to a small bitcoin balance now, just to get an initial exposure. Or perhaps it won’t change a thing.
Conclusion
Personally, I think owning a home is a good thing. But studying and owning Bitcoin should be your top priority before going into real estate professionally.
If asset price inflation continues, those owning property are certainly better off than those who don’t. On the other hand, if we see a major shift in the economy, the real estate market could see a dramatic correction. We already see early signs of a correction.
Owning real estate causes your cost for repair and maintenance. You might also need to deal with bad tenants and unfavorable regulation. Bitcoin in comparison requires much less ‘maintenance’.
After all, everyone is responsible for their own investments and life plans — and everyone gets into bitcoin at the price he or she deserve (and I don’t have time to convince you, sorry).
There is no right or wrong but there is knowing and not knowing. Real estate or Bitcoin, how would you decide?
Do you currently consider making a first step into real estate? How do you measure the benefits and downsides, and how do you compare them to bitcoin?
I would like hear how you see the situation and would appreciate your comment on the tweet below or on this tweet on my personal page.
