Real estate has been a solid investment for decades, with historical returns averaging 6-7% annually. However, in recent years real estate as an investment has come under scrutiny as new investors and technology begin to offer new avenues to explore.
Newer alternatives like Bitcoin and altcoins have given investors new ways to diversify their portfolios and find profitable investments.
Which is the better investment: Bitcoin or real estate? Let’s take a look.
Bitcoin: The Asymmetrical Asset
Bitcoin and other cryptocurrencies have been popular investments for several years now because they are unique investment types.
Cryptocurrency isn’t tied to any single company or industry, and the value of each coin is tied purely to the demand for it. That means that the price of a specific coin can be impacted by a large number of factors, which makes for high-risk, high-reward investments.
For example, when Bitcoin first went viral and the price skyrocketed, it was a great investment for those who bought low and sold high.
However, things started to change as the price dropped. The price started to plummet, and it became more of a gamble to hold onto your investment.
Now, as the market has recovered and the price of Bitcoin has once again climbed, it is once again a great investment for those who believe it will continue to rise.
How To Invest In Bitcoin And Cryptocurrencies
There are a few different ways that you can invest in Bitcoin and other cryptocurrencies.
- The first is to simply buy the coins outright, which is something that most people do when the price is at its highest.
- The second is to use a trading platform to buy and sell coins as they fluctuate in price.
- The third option is to mine coins, which essentially means that you are helping to create them.
There is a lot of risk involved with buying and trading cryptocurrencies because there is no guarantee that they will ever increase in value again. However, there is also the potential for huge gains if you choose wisely.
Pros Of Investing In Bitcoin
Very low barrier to entry
The great thing about investing in Bitcoin and other cryptocurrencies is that you don’t need a lot of cash to start. You can get started with as little as $100 by setting up a cryptocurrency wallet. Besides, you can buy Bitcoin with a credit card or even at an ATM machine.
Since Bitcoin and other cryptocurrencies are online payments, you can invest in them from anywhere in the world. There is no need to be in a specific location to purchase coins or to cash them out when you are finished.
Cons of investing in Bitcoin
The biggest issue with investing in Bitcoin and other cryptocurrencies is that their values are extremely volatile. There are several factors that can impact the price of a single coin, and it is nearly impossible to predict what will happen in the near future.
Another downside to investing in Bitcoin and other cryptocurrencies is that they are extremely risky. There is a chance that the price of a specific coin will collapse completely, and investors won’t be able to recover their money.
Real Estate: The Long-Term Investment
Real estate has long been a reliable long-term investment. People have been purchasing and selling properties for hundreds of years, and the concept of owning land and buildings has a track record that goes back thousands of years.
While there are a lot of factors that can impact the value of a specific real estate property, the overall real estate market has shown a consistent rate of return.
Investors have enjoyed average annual returns of 6-7% on their real estate investments because of the long-term nature of the investment. Real estate has also been a great inflation hedge, as rising property values will often outpace the rate of inflation.
While the returns on real estate are long-term, they aren’t guaranteed, which is why investors should be careful about their investment timing. It can take a significant amount of time to find a property, close on it, and then see the results of that investment in the form of cash flow.
How To Invest In Real Estate
Real estate is a very specific investment that potential investors need to understand before diving in headfirst. You can’t just go buy any property that you want and expect to get a return on it.
Investors need to be very careful about the types of properties they choose to buy. The best way to invest in real estate is to create a strategy around the type of property you want to buy.
First, decide on what type of real estate you want to buy. Are you looking to buy an apartment building, a single-family house, or commercial real estates like a shopping mall or office building?
Once you know what type of real estate you want to buy, you need to decide on the location of that property.
Pros Of Investing In Real Estate
Long-term history of positive performance
As we mentioned above, real estate has an excellent track record of positive performance that can be traced back centuries. There have been a few dips in the track record, but for the most part, real estate has proven to be a solid investment over the long term.
While cash flow is important, appreciation is also a factor in determining the overall value of a real estate investment. Real estate can often appreciate at a faster rate than other investments, but it is important to remember that appreciation isn’t guaranteed.
Defined exit strategy
One of the great things about real estate is that there is a defined way to get out of the investment. Investors can sell the property and receive their money either through a traditional sale or by using the rental income on the property to pay them back over time.
There are those who believe that real estate is the best investment for most people, and for good reason. It has a long track record of being a solid investment and has plenty of investment options.
Cons Of Investing In Real Estate
High initial investment
One of the biggest issues with investing in real estate is that you need a large enough cash outlay to buy a property. Unless you are buying a single-family home and taking out a loan, it isn’t likely that you will be able to afford to buy a piece of real estate on your initial investment alone.
Even though real estate does provide positive cash flow, it isn’t always a steady stream of money. The cash flow on real estate can vary widely based on how much you are charging in rent, how much utility bills cost, and even how quickly you can manage repairs and maintenance issues.
There are a lot of benefits to investing in both real estate and Bitcoin. Real estate has a long history of providing positive returns, and there are plenty of investment types to choose from.
With Bitcoin and other cryptocurrencies, there is a chance to make a large amount of money, but it is also a gamble because the price could collapse at any time.
Whether you choose to invest in real estate or cryptocurrencies, make sure that you understand the risks and rewards associated with your investment type.