Bitcoin's inherent properties make it a better long term store of value than real estate.
I had lunch this week with a friend that has spent 30+ years working in commercial real estate. We were talking about Bitcoin and he asked how I thought it compared to real estate, an investment that has largely been useful for him throughout his life.
My answer was probably half-baked at best so I thought I’d jot down and share a few distinctions between the two that come to mind. My short answer is: Bitcoin is better at everything than real estate (with the exception of serving as a place to live). Here are my reasons.
Real estate is costly to acquire because of taxes, realtor commissions, and any initial upgrades made to the property to enhance its value or make it inhabitable.
Bitcoin, on the other hand, requires a nominal fee (if any) to be purchased and another small fee to transfer into self-custody. Even doing this all properly (buying a proper hardware wallet and node, for example), can cost less than $1,000 and is a one-time expense, whereas real estate acquisition expenses are large and incurred at each purchase.
Perhaps even more significant in real estate investing are maintenance expenses. If the toilet breaks or stovetop goes out, these fixes are mandatory. Yet these smaller items pale in comparison to the annual, recurring costs of insurance and property taxes, which generally run into the thousands of dollars even for single family homes.
Once your Bitcoin is in cold storage, you can effectively set it and forget it. If any hardware you have breaks, a few hundred dollar is enough to replace it.
It goes without saying that houses or apartment complexes or office buildings are rather difficult to move. To a large degree, the success of these investments therefore hinge on the jurisdiction in which they are purchased. Burdensome ordinances, increased taxes, deterioration of neighborhood safety, etc. are all beyond the control of the property owner but can impact the performance of the property’s returns in a real and major way.
Bitcoin can, quite literally, be transferred across any border, body of water or stretch of earth by memorizing a few words that grant an individual access to their Bitcoin. In a situation where escape is required, Bitcoin can come with you. Real estate must be left behind. This matters a lot for people in Third World Countries and those with properties in California.
Other general risks around real estate include confiscation. In the West, this is less common than in more outright tyrannical nations, but there is still a non-zero chance of property being forcefully seized as gold was in the 1930s. Eminent domain laws even legalize this.
Historically, real estate has outpaced inflation and served as a useful means of retaining value and growing wealth for some. Like Bitcoin, the real estate market has had its major swings (upward recently and downward during the Great Financial Crisis, as examples).
However, during the decade from 2013 to 2023, real estate returned a measly 37% total. Compare this to Bitcoin’s 300,000+ performance over the same time horizon. Bitcoin would have to underperform massively over the next decade for real estate to catch up in any meaningful way.
Owning a home or rental property requires time, inconvenience, and expense, which I’ll collectively categorize as “headache.” If you want to outsource all of this, you’ll incur a steep cost for doing so.
There is a small learning curve to buy and custody Bitcoin, but one that is easily overcome. Shameless plug: reach out to The Bitcoin Way if you’d like white glove help with this. Once you do Bitcoin custody right, it won’t throw parties and punch holes in the drywall, or ask you to wake up at 3:00 AM to fix a toilet.
Demand for real estate ebbs and flows and is based on a variety of factors. Unwinding from a home or investment property may be quick and painless (minus the fees), or a long, arduous process, depending on market conditions. One house does not necessarily equal one house, as styles, neighborhoods, market demands, and tax arrangements change.
In contrast, Bitcoin is perfectly fungible: 1 BTC = 1 BTC. The door to buy, sell, or transfer Bitcoin is open 24/7/365. There is always a willing party to transact at the day’s market price for Bitcoin.
A few additional comments. A home to live in is as much a liability as an asset, given the acquisition and maintenance costs, leverage most people take on to have it, friction to sell it, etc. A rental property, on the other hand, may offer cash flow - Bitcoin does not.
As a business, owning rental properties might make sense from an income perspective; after all, most people want to pay their bills. Real estate still brings with it its disadvantages mentioned above, however, and includes others, such as vacancies.
If your goal is not active cash flow but rather long-term wealth accumulation, however, Bitcoin stands apart, absolutely crushing real estate (and all other assets for that matter) over an time period of four or more years.
Bitcoin’s value is driven 100% by its monetary premium: in other words, there is no other real use case for Bitcoin other than to serve as near-perfect money. You can’t live in it like real estate. You can’t wear it around your neck like gold.
Instead, Bitcoin is simply sound, scarce, unconfiscatable, digital money. With this option on the table, might it make more sense just to use houses for their intended purpose rather than an investment?
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