REAL ESTATE VERSUS BITCOIN

An image titled BITCOIN VERSUS REAL ESTATE that shows a fight between two boxers in a boxing ring. One boxer with a Bitcoin head and one boxer with a Real Estate head represented by buildings. Liberty Real Estate Fund logo above the crowd in the stands.

REAL ESTATE VERSUS BITCOIN

THE ULTIMATE INFLATION FIGHTER SHOWDOWN

An image titled BITCOIN VERSUS REAL ESTATE that shows a fight between two boxers in a boxing ring. One boxer with a Bitcoin head and one boxer with a Real Estate head represented by buildings. Liberty Real Estate Fund logo above the crowd in the stands.

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Real Estate investing is one of the oldest ways to create value and store wealth on our planet. Bitcoin uses Cryptography and Distributed Ledger Technology (Blockchain) to track and transfer assets, money and value.   Cryptocurrencies are one of the newest asset classes, having started a short thirteen years ago in October 2008.

Both commercial Real Estate and Bitcoin have done amazingly well over the past thirteen years, but which one is best for you to include in your portfolio? What follows is a comparison looking at both the benefits and risks associated with investing in both types of assets.

Real Estate Versus Bitcoin Comparison Criteria

In this article, we provide a complete comparison of the benefits and negative aspects.

The Bitcoin Story

Twelve years ago, Satoshi Nakamoto published the Bitcoin white paper, ushering in an entirely new asset class while creating a technology that instantaneously (within minutes) transfers value and money anywhere in the world.

The underlying blockchain technology made something possible that had never been possible before in the world. Bitcoin can confirm financial transactions without a central bank, central operator or central authority. Bitcoin is a software protocol that is a combination of a distributed ledger system that tracks transactions and a secure payments network. 

Bitcoins are “mined” by expending energy to run high-powered computers that solve complex mathematical equations. The miners on the network race to solve the problem and the winner gets to publish a “block” in the blockchain and also receives a “block reward” of a certain amount of Bitcoin. The software protocol is written so that there will only be 21 million bitcoins mined, getting harder to mine in the future. 

Real Estate Is The World’s Most Proven Asset

In terms of investing, you cannot find a much better or longer track record than real estate. Real estate has value because it is a foundational necessity. You cannot do anything without using real estate. Under all is the land and your entire existence is in or on some form of real estate.

Unlike Bitcoin, Bonds, Stocks or Cryptocurrency, real estate is a hard asset that has tangible qualities along with use value in and of itself, as well as real scarcity. There is only one Claude Vignon Avenue, Saint-Jean-Cap-Ferrat, France; Avenue D’ostende Monaco Park Avenue in New York; Grosvenor Square, London; and Mount Nicholson Road, Hong Kong.

Commercial real estate produces income, tax benefits and leverage (borrowing ability). You can exchange real property into a 1031 transaction and avoid any capital taxes then swap until you drop and the property is inherited by your heirs at a stepped-up basis, paying no estate taxes.

Investing in real estate provides your best tax protected cash flow, inflation protection and asset appreciation. 

Real Estate And Bitcoin Are Hedges Against Inflation

Bitcoin and real estate are great assets to hold for protection against inflation. Thirty five (35%) percent of all US dollars in circulation were printed in 2020! That type of money printing has created more than “transitory” inflation. 

As Milton Freedman said: “Inflation is always and everywhere a monetary problemwhich amounts to “your government is printing too much money”.  This monetary disaster is going to be with us for a while.  

In this new world of cryptocurrencies it could also mean that the coins or tokens are too easy to create which ends up decreasing their value.

An image titled BITCOIN VERSUS REAL ESTATE that shows a fight between two boxers in a boxing ring. One boxer with a Bitcoin head and one boxer with a Real Estate head represented by buildings. Liberty Real Estate Fund logo above the crowd in the stands.

Investment Amount

Bitcoin is the clear winner when it comes to minimal investment amounts, or any type of investment.  BTC = a Satoshi – 0.00000001 BTC. Investors can literally get in for pennies. Investors can dollar-cost average into bitcoin with a few dollars, euros, lira or pesos per week.

One of the major limiting factors of commercial Real Estate as an investment is the large amount of capital needed to purchase real estate. Blockchain technology may solve the problem of access to quality real estate by allowing minimum investment amounts and worldwide access to assets. A real world example is RealT who has minimum investment amounts of $50.00 in certain investments.

Income/Cash Flow

Real Estate is the all-time income and cash flow producing champion. No other investment generates free cash flow with the same tax-efficient consistency as Commercial Real Estate. Bitcoin in and of itself does not provide cash flow; it was designed as a payment system and has morphed into a store of wealth. With BTC, you are depending on mass adoption to create appreciation.

Cash Flow is very reliable for producing investment returns. Appreciation can create great wealth but is not as reliable as regular income/cash flow for producing consistent, dependable returns.

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There is also an incredible variety of cash flow streams real estate can produce, including rents, agricultural, mining, oil & gas extraction, communications towers, water rights, leasing air rights, and even Bitcoin mining. In fact, Bitcoin would not exist without real estate from the datacenters to the communications infrastructure.  

You can even create cash flow by renting out rooms in your house or leasing it as a short-term rental on weekends when you are not there.

Value Storage

What is a store of value? It is an asset that holds its value or increases (appreciates) in value over time versus losing value (depreciating). A store of value has to be durable as well as somewhat scarce to maintain its value over time. Perishable commodities, such as cows, pigs, sheep and goats, were used to store value but the value drops to zero once they die or spoil.

This is why real estate, gold, silver, precious stones, gemstones and art have been traditional stores of value.   

Real Estate and Gold have been the reigning champions of value storage, but Bitcoin has promise to be Gold 2.0 because right now the software protocol allows only 21 million to be created.  If BTC lives up to its commitment to restrain from issuing more Bitcoins, it could be the new champ. 

However, Bitcoin’s value is entirely based on market sentiment. Since it has built an elaborate industry around it, there are a lot of players in the game. If something better comes along or its adherents decide it no longer has value, the game will end very similarly to what could and probably will happen to the US dollar.

Real estate, with its long, long historical track record of retaining value and creating income, for now retains the title of store of value champion.

Portability

Portability is the “take it with you” quality that allows cash and credit cards to dominate our financial system. For a long time, gold and silver were excellent at storing value in a compact package for lower value transactions. But at higher amounts of value, they are cumbersome to carry, transport and secure. 

Bitcoin solves the portability problem in that you can have a fortune worth billions of euros, dollars, yen, yuan or rubles on a USB memory card or even memorize your Seed Phrase (also known as recovery phrase, mnemonic seed phrase, recovery seed, wallet recovery phrase) and carry it with you across any border.  Financial freedom is upstream of political freedom.  Bitcoin is international. Bitcoin is borderless. 

Real Estate for all its great qualities is not portable, moveable or transportable. Location, location, location cannot be duplicated but it can also not be moved. Political risk is a major risk factor for profitable real estate investmenting. High taxes, high regulation, corruption and crime can all ruin a profitable real estate investment.  Bitcoin has so far avoided these pitfalls.           

Liquidity

Liquidity is the financial concept of “how fast can I buy it, sell it or trade it?”. If an investment or asset is liquid you can buy, sell or trade it quickly and easily. The US Dollar is probably the most liquid asset in the world right now.  The US Dollar as the world’s reserve currency is almost universally accepted around the world and convertible into other currencies.

Bitcoin (BTC) has the ability to be incredibly liquid, trading 24 hours per day, 7 days per week, 365 days per year (24/7/365). Bitcoin can be bought and sold directly from person to person (peer-to-peer) with no middleman, bank, broker or intermediary in a transaction, known as an Atomic Swap. An Atomic Swap is a smart contract that allows a trade between two parties without using a third party exchange. They are programmed to execute the trade for both or either party.

Trusted exchanges and trading infrastructures have helped Bitcoin move past its early liquidity issues. Bitcoin will become even more liquid with wider adoption and acceptance at stores and for purchases. You will now find Bitcoin Automatic Teller Machines (ATMs) throughout the world from Chicago to El Salvadore to Estonia to Capetown. As the Bitcoin market capitalization increases, liquidity and acceptance should also increase. 

Opposite of Bitcoin and the US Dollar is the traditional illiquidity of Real Estate. The buying and selling of real estate is still typically a localized market and could take months to prepare, list for sale with a real estate broker, conduct title searches along with title insurance, zoning reports, property condition reports, appraisals and mortgage financing documents (if purchasing with debt).

Blockchain technology shows promise to create new liquidity for Real Estate. Title documents will be stored on blockchains in a distributed, secure and accessible format as opposed to record books stored in the basement of a courthouse.

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Commercial property data will be published and stored to blockchains, making closing, financing and valuations much easier. Two companies at the forefront of the monetisation of real estate data are Inveniam.io and Earn.re.  

Tangible Asset

The Tangible Asset test evaluates if you can touch, feel or stand on the asset. Real Estate even has “Real” in its name; it is a part of the tangible, real universe, not some fantasy metaverse. Real estate is not dependent on electricity, the internet, communication systems or software you don’t understand; it is the all purpose investment. If things get really bad in the world, you can still use your real estate to live, grow food, exercise, worship and produce other necessities of life. 

Real estate’s tangibility is also a factor in creating its scarcity. One piece of real estate is not interchangeable or irreplaceable. Location, location, location creates scarcity. Real estate can also be repurposed and redeveloped as new concepts and use cases come along (like a Bitcoin mining facility).

Bitcoin at its essence is a software program. Granted it is an extremely sophisticated and ingenious software protocol, it still depends on electricity, the internet and Game Theory along with computers and smartphones to execute its code. You cannot touch, eat, live in, wear as jewelry or even hammer in a nail with a Bitcoin. Aside from mass adoption and belief in the protocol, Bitcoins are worthless electrons in a distributed database.

Leverage

One of the really cool things about Real Estate is that you can control large amounts of real estate with the judicious use of debt. When using leverage, you borrow funds (capital in the form of a mortgage or bonds or other types of debt) from a lender to acquire a real estate investment property without having to pay all the money at closing by yourself. 

Real estate has a long historical track record of being the “World’s most proven asset class.” Real estate is also desirable for lenders because, while prices may rise and fall, real estate tends to increase in value over the long term and is not volatile in price fluctuation. Because of more than 800 years of experience lending on real estate, there are deep capital markets providing many forms of debt for real property. These many lenders competing to loan off attractive properties lowers borrowing costs for those seeking leverage.

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Leverage allows you to not only buy more real estate than you would be able to by purchasing with all cash but also increases your return on capital invested. In certain situations, you can even borrow 100% or more of the value of the property. No other asset has a better developed industry for borrowing and lending. Only running a bank in a Fractional Banking System allows for more leverage than you get with real estate!

You can also borrow against your Bitcoin. However, you are limited to much lower leverage amounts on your BTC. Most lenders will only allow up to 50% leverage on BTC and charge very high interest rates for the privilege of borrowing. This is because of the volatility of cryptocurrency and a growing market for lending on and borrowing against bitcoin. 

The volatility of Bitcoin also makes pledging your BTC as collateral very risky (see Volatility). BlockfFi https://blockfi.com, Ledn, Coinbase, and Nexo allow you to borrow against your crypto. BTC has had several drawdowns or drops greater than 50% and one time where the value decreased by more than 85%. This Bitcoin price volatility can force the borrower into a margin call whereby you must either put up more Bitcoin as collateral or have your position liquidated. In large Bitcoin drops, these borrower liquidations can lead to a cycle of further downward pressure on the price of Bitcoin.  

Confiscation/Theft

Bitcoin, for now, is the ultimate player in personal finance. If you control your keys and your wallet, your Bitcoin is yours. Your money is not confiscatable and it is theft resistant. Financial freedom is upstream of political freedom. It takes some amount of wealth to create freedom, liberty and independence. Bitcoin, as we have seen in recent incidences of government overreach, is outside the banking system and, therefore, censorship resistant and non-cancellable. 

Bitcoin can be stolen or confiscated by governments and hackers (see US Government Seized $3.6 Billion in Stolen Bitcoin Linked to 2016 Bitfinex Hack). Ilya Lichtenstein and Heather Morgan evidently stored their wallet addresses and cryptographic private keys in a googledoc that was able to be accessed by law enforcement. Thieves and hackers can also access and steal your BTC and crypto this way.  Quantum computing may or may not disrupt Bitcoin and the cryptography it relies on to remain secure.

As we discussed above, Real Estate, due to its immobility, is very at risk to over-taxation, confiscation, corruption, political schemes, condemnation and taking through eminent domain.  Kelo versus City Of New London is one of the more notorious cases where the US Supreme Court found it was acceptable for a governmental body to take one individual’s house and give it to a large corporation as part of a larger project to spur economic development.

Liabilities

Bitcoin has no liabilities for its owner unless it is outlawed by their government or attracts unwanted attention from criminals looking to steal it or commit extortion.  Bitcoin is not completely anonymous so if you make a transaction out of a wallet it can be traced.  Certain jurisdictions tax bitcoin on sale or for Capital Gains which will create tax liabilities for bitcoin traders.

There are however some counter-party liabilities that bitcoin maximalists tend to gloss over.  First, Bitcoin is dependent on the internet, if there is no electricity or communications it will be very hard to produce your bitcoin to pay for food. 

Unfortunately, owning Real Estate creates some liabilities.  Those liabilities are mostly manageable if you are prudent and prepared.  Someone can slip and fall or get hurt on your property for which you may have to pay damages or even be sued.  There is a large insurance industry working to mitigate this risk and also the risk of damage from fire, weather and other disasters. 

Real Estate creates tax liabilities in the form of property taxes and income taxes.  The income tax benefits for Real Estate are the best of any asset class as you will see below but filing tax returns and paying taxes is an inevitability. 

Income producing Real Estate also has counter-party liability as a result of leases with tenants generating the profits.  If the tenant defaults or goes into bankruptcy you will lose your stream of income and most likely incur legal fees to get possession of the property covered by the lease.  

Tax Benefits

Real Estate is the GOAT (Greatest Of All Time) when it comes to tax benefits for both passive and active investors. Real estate ownership and investment creates economic development and political stability. Most governments want to incentivize both development and stability for the well being of their citizens.   

A few of the Tax Benefits for real estate are: 1) Expense Deductions (mortgage interest, operating expenses, property insurance, repairs, property taxes, travel, legal, accounting & property management fees are all deductible); 2) Deduction for Depreciation (the US tax code and many other countries allow for a yearly deduction of the depreciation caused by wear & tear to a property, even if the market value is actually appreciating); 3) Accelerated Depreciation with Cost Segregation; 4) Tax Credits (in special situations); 5) Capital Gains Treatment; 6) Opportunity to Defer Taxes (1031 Exchanges and Opportunity Zones); and 7) Shelter Other Income (depending on the situation, the Tax Benefits from Real Estate may shelter some of your other income from taxation). 

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In fact, many newly wealthy Bitcoiners are borrowing against their Bitcoin to buy real estate not only to diversify their portfolio but also for strategic tax considerations to legally reduce tax liabilities. 

In the United States, Bitcoin can be subject to both Income Taxes and Capital Gains Tax. When holding Bitcoin, it is treated as property for tax purposes and any gain or loss from the sale is taxed as a capital gain or loss. If you are paid in BTC or actively “mine” bitcoin, your earnings are treated as income and taxed at the Fair Market Value (FMV) on the day in which it is received.  You should always check with you tax professional before making decisions but the IRS has published guidelines in this FAQ article.

Versatile Investment Opportunities

Real Estate has many forms of investment and has as many varieties as a person can imagine.  The major categories of commercial real estate are Office, Industrial, Retail Hospitality and Residential, with a few smaller categories like Single Family Rentals, Self Storage, Senior Housing and Student Housing.

Real estate investing literally has something for everyone to enjoy, no matter what your interests are. For example, if you enjoy travel, you can invest in hotels, motels or short-term rentals. If your interest is eating out, you can invest in restaurants, from fast-food chains to Three-Star Michelin dining to Ghost Kitchens. 

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You can invest in farms, forests, ranches, goat grazing, dairies and wineries. You can invest in coconut oil, macadamia nut oil, avocado oil and petro oil operations. If you are high on Cannabis investing, you can allocate to cultivation, distribution or dispensaries. Real estate investing can literally be a gold mine, acres of diamond, coal mines and even bitcoin mining data centers.  

Real Estate investing is versatile and differentiated, including cell towers, solar farms, casinos, breweries, distilleries, tobacco farms, hospitals and medical centers. Real estate investments provide places to live, love, eat, heal, worship and create, along with providing goods and services to others. 

Bitcoin is kind of boring. One Bitcoin is one bitcoin — a series of cryptographic hashes not useful as food, jewelry, shelter or farming. Although, bitcoin mining using the geothermal energy of a volcano  is pretty cool. 

Maintenance Costs

Once mined, a Bitcoin has close to zero maintenance costs. You can argue that the bitcoin network, nodes and miners need to be maintained in order for BTC to have value. Many have tried to attack bitcoin based on its energy usage but a comparison with gold mining, the banking system and military-industrial complex emissions shows how little emissions it really produces versus value provided.

There are security issues that you as the holder need to address, such as protecting your wallet from hacking and damage. You also need to rely on complex technology to all fit together and work correctly. 

Bitcoin is distributed among many participants and has a few single points of failure. 

Real estate risk is highly concentrated in the area where it is located.

Real Estate needs to be maintained and improved. Except for raw land, real estate depreciates and needs to be constantly cared for and most value is added by changing or improving the property. 

Passive Investment

Bitcoin is a passive investment but, since bitcoin provides no cash flow or tax benefits in and of itself, the only real investment gains are from appreciation. You buy your BTC (Stack your Satoshis or Stacking Sats) and HODL (Hold On For Dear Life). One Bitcoin is the same as any other bitcoin so there is no need for lots of due diligence or investment analysis. 

Real Estate investing can be a spectrum of completely passive investments to extremely activity value creation. If you invest as a limited partner in a real estate syndication, your investment is almost passive; almost because, for any real estate investment be it passive or acquiring it yourself, you need to perform due diligence. This investigation includes learning about the location, the market, demand factors, tenants in the property and condition of the property.   

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Most people think of tenants, trash and toilets when considering a real estate investment, but there is a commercial real estate investment that is almost truly passive. Net Lease properties, sometimes called NNN or Triple Net properties, are very passive investments. With a Net Lease (NNN or Triple Net), the tenant pays for all of the maintenance, insurance and real estate taxes.  You as an investor tuly get nothing but net income. We have created the Nothing But Net – NNN podcast series to explain the benefits of Triple Net investments and provide helpful tips for how to get started with NNN properties.

Real estate’s cash flow is more reliable than Bitcoin’s hope for appreciation.

Volatility

Real Estate, because of its illiquid nature, is one of the least volatile investments you can make.  Real estate investing has a lot of friction, including long lead times for acquisition and sales, along with many fees associated with securing a purchase. 

Real estate’s long track record of appreciation and stability allows for an extensive debt and equity financing market, creating more options for investors to use leverage to acquire more assets. With better data and tokenization on blockchain, real estate may become more liquid, creating more volatility.

Bitcoin is a highly volatile commodity and its price currently fluctuates, on average, as much 4.5% per day but has many days of much wider swings. BTC has dropped 99%, 84%, 83% and more than 50% numerous times. 

Bitcoin’s value can swing widely based on an Elon Musk tweet or, in the case of the 2020 pandemic, drop with the stock market indexes. The volatility of Bitcoin also makes pledging your Satoshis as collateral very risky and could wipe out your entire investment if the value drops below the collateral.

Bitcoin wins on ease of trading and disposition but, even here, markets and exchanges are imperfect with price differentials up to 20% on different exchanges in the past. Bitcoin, like real estate, is a decentralized system and market, so there is not one standard global price.

Market Manipulation

Real Estate is a $280 trillion dollar asset class; as of this article, Bitcoin has an $860 billion market cap, which makes commercial real estate much less exposed to market manipulation.

The real estate market is very difficult to manipulate in mostly free countries because of the size, scope, demography and different geographical local economies. While it’s true that local zoning, state and regional laws along with regulations from different countries can affect local real estate markets, it is almost impossible for large buyers to manipulate countrywide or global real estate markets. This is why it is an important diversification strategy to get exposure to real estate investments outside your area and even country. 

Bitcoin and cryptocurrencies are much more open to market manipulation by one or a few “Whales” (large investors) pumping up the price of coins and then doing a “Rug Pull.”  It is known that large Investment Banks and Hedge Funds sometimes participate in this behavior to make trading gains in cryptocurrency markets.

In fact, it has been seen in the crypto markets that large holders can move the market downward by dumping a substantial amount of coins. This drop then starts a downward cascade where over-leveraged holders of BTC are cashed out of their positions and the price starts dropping even faster. Fragmented exchanges and 24/7 trading can exacerbate market manipulation and lead to more cryptocurrency volatility. 

See these informative articles on Crypto Market Manipulation:

THE MECHANICS OF MARKET MANIPULATION 

SPOTTING THE 5 COMMON CRYPTO PRICE MANIPULATION PATTERNS

Political Risk

Bitcoin is an outstanding asset to avoid political risk. Your money and assets are literally outside any country or jurisdiction system. It is its own system running parallel but unreachable for tyrants, dictators, politicians and bullying bureaucrats.

Unlike cash, real estate, gold, silver or precious stones, Bitcoin is highly portable and confidential.  One billion dollars in BTC can be stored on a thumb drive or in your brain with a 12-letter random word “Seed Phrase.”  You can literally walk out with all your wealth.

The bitcoin protocol is distributed throughout the world, although at times, the mining has been concentrated in more authoritarian countries. Currently, there are 14,000+ reachable bitcoin nodes (Nodes are computers that store the entire blockchain “Ledger” and validate each block and transaction before adding them to the blockchain) distributed throughout the world. The Bitcoin is still highly concentrated in North America, Europe and Russia.

Real Estate is an asset class that is probably most vulnerable to political risk. You cannot move the real estate. The parts that make it tangible and irreplaceable also expose it to excess taxation, overregulation, nuisance fees and permits, and outright confiscation or even destruction by war.

Complex Technology

Real Estate investing is really not that difficult to master. In fact, real estate has created more millionaires than any other investment asset class. It has been mastered by men and women, people old and young, by all races, by high school drop-outs and rocket scientists. 

While real estate is not a complex technology, it does take some education to understand the nuances of investing. Most investors start in some form of residential real estate because almost everyone has lived in a house or apartment.

The fact that real estate has been mastered all over the globe by both rich and poor, educated and uneducated alike, is a testimony to its basic ease of understanding.

Bitcoin consists of complex computer software code, cryptography, the internet communications network, sophisticated computer hardware to mine and run nodes along with needing electricity to power the network. 

To be a truly valuable and safe asset, the bitcoin network of miners and nodes need to be distributed as widely as possible across the planet. Right now, there is a high concentration of the network in North America, Europe and Russia. As recently as 2020, more than 55% of the mining pools were located in China.

Bitcoin is vulnerable to attack if more than 50% of the miners (hash power) combine to “fork” the protocol in which one group uses the previous software system and the forkers take the protocol and assets in a new direction. As a result of forks to Bitcoin, there is now Bitcoin Cash, Bitcoin Classic and Bitcoin SV, along with others.

Inflation Protection

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” – John Meynard Keynes.

Real Estate has proven to be an asset class that actually benefits from inflation. Real estate generates cash flow and benefits from asset appreciation during times of inflation.

Real estate owners have an ability to raise rents and some leases have automatic rent adjustments tied to the increase in the Consumer Price Index (CPI) published by the US Bureau Of Labor Statistics. Certain retail leases contain percentage rent clauses, which are tied to the tenant’s store sales that give shopping center and NNN investors extra inflation protection.

Higher cash flows and income also correlates to increased  valuations and appreciation for real estate.

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Bitcoin has been described as digital gold and has a built-in monetary policy that is designed to be “deflationary.” Only 21 million bitcoins will be mined (mining bitcoins is the process of creating value by converting electrical energy into computing power to solve complex mathematical problems, known as “Proof Of Work” blockchain technology). 

Since Bitcoin started recently, it does not have a full cycle to show that it is as good of an inflation hedge as real estate, gold, silver and other precious metals. For bitcoin to be true digital gold, it needs to be recognized as separate from the rest of the crypto projects, which are more like software companies or tech stocks. 

Inflation started to kick in during the spring of 2021 (from all the money printing and interruption of supply chains in 2020) and bitcoin responded by losing close to 20% of its value. During that same time, gold and the S&P 500 went up respectively by 7% and 8%. Real estate had 10% to 25% gains in some markets.

Historical Track Record

Real Estate is the world’s most proven asset class with thousands of years of historical performance. You can read about a land deal done about 4000 years ago in Genesis 23, where Abraham negotiates with Ephron the Hittite to purchase a burial plot for his recently deceased wife Sarah.

Investing in Real Estate is the No. 1 method for preserving and increasing generational wealth. Millionaires, billionaires and even trillionaires might make their money in tech, retail, manufacturing or finance, but they all invest in real estate to diversify and store their wealth. 

Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.” – Andrew Carnegie

Smart investors know that real estate is a tangible asset (not a number in a ledger or blip on a screen) and has real world uses that provide appreciation, cash flow, ability to leverage and tax benefits.

Related Article: WHY ARE NET LEASE PROPERTIES POPULAR WITH HIGH NET WORTH INVESTORS AND FAMILY OFFICE INVESTORS?

Bitcoin has only been around since January 3, 2009 (or October 31, 2008 with the publishing of the Bitcoin Whitepaper). Granted, bitcoin has seen phenomenal worldwide growth, started an entirely new trillion-dollar industry and fundamentally changed the financial system. Between 2015 and 2022, Bitcoin’s value has risen more than 18,000% in US Dollars.

However, Bitcoin has no real world uses. Real estate and gold are tangible assets with excellent use cases. The history of Bitcoin is too short to go 100% in and say “There Is No Alternative.”

Bitcoin was designed to be a “A Peer-to-Peer Electronic Cash System” but has morphed into “digital gold,” or the “risk-on, risk-off asset.” So, is it all of the above? Or, will it mature into something else altogether? Or, is it a giant pump-and-dump scheme? 

That history has not been written but is exciting to be watching and worth investing a little in to have access to what might be significant gains and learning about the cryptocurrency revolution. 

CONCLUSION: Real Estate Beats Bitcoin In A Technical Knockout

So, Bitcoin is the new trend in investing opportunities, exponentially escalating since its fruition. But, real estate is the world’s most proven asset class with centuries of wealth backing it. Investing in real estate is the only option today that offers stable cash flow with a tangible asset backing it. Real estate is by far the biggest asset class in the world, holding the most value of any investment option with over $280 trillion dollars of assets.

There are both pros and cons of Real Estate versus Bitcoin. Real estate is a tangible asset. It is real; you can touch it, feel it, improve it and work it. Real estate also has intrinsic value because it is real and has real scarcity. It will only not be scarce if we suddenly find a new planet close enough to inhabit and is capable of sustaining productive life.

The tax benefits of real estate are unmatched. Almost every country in the world writes their tax system to encourage real estate investment and development. The Real estate industry is the primary source of all economic development. Commercial real estate in the US is one of the best investments you can make for generating tax efficiency and tax saving returns. It is better than stocks, bonds, cryptocurrency or cash at providing legal ways to reduce your taxable income.

Real estate has many ways to create income. You can farm it, you can mine it, drill down into it, build on top of it and even sell the air rights above it. Private property and property law are some of the most developed and established laws on the planet. This also goes for tax law regarding owning and generating income from real estate.

Real estate is also carbon neutral. Some things are used to generate carbon emissions, which is great for plants and trees, like farming and forestry that reduce carbon.

For Bitcoin, it is liquid, international and harder to confiscate or steal. Bitcoin also has scarcity because there will only ever be 21 million of them mined. However, Real Estate is arguably more scarce; each property is unique and only has the characteristics and locational value for that particular property. There will only ever be one particular property in one particular location. Conversely, if a property is in a bad location, it will have less value or maybe even negative value.

Bitcoins are all the same and have the same value that can only go to zero. You can either gain or lose your investment depending on market sentiment, making Bitcoin more at risk from volatility and recessions.

Another pro of Bitcoin is that it has no liabilities; you can’t be sued by customers on a property from someone using your Bitcoin, unlike Real Estate.

Bitcoin is portable, with you 24/7 as long as you have your smartphone or laptop with you. Staking and lending your Bitcoin also lets you earn income. Although, you can only borrow against 50% of your Bitcoin and the volatility of cryptocurrency could wipe out your entire investment if the value drops below the collateral.

The best asset in the world for financing and borrowing options is real estate. You can borrow up to 100% in some cases, but even conservative financing gives you the ability to regularly borrow 75% of the value. Real estate also has some of the most developed lending markets in the world.

Real estate provides investors with passive income, as well. Most real estate is necessity payments. People or corporations are paying for the use of the property for sleeping, growing food or doing business/providing services. Cryptocurrencies like Bitcoin also provide passive income, but it is primarily lending your assets to be used by other investors or creating functionality for the network.

Some people may point out that Bitcoin wasted electricity. I would point out that the entire banking system uses much more electricity, and the US dollar is guaranteed by the US military, which uses billions of dollars per year to back up dollar dominance.

Real Estate right now is a much better choice than Bitcoin to invest in and is above all other income classes, including stocks, bonds and holding your money in cash.

For more information contact: 

About the author

Michael Flight is a founding principal of Concordia Realty Corporation, Concordia Equity Partners LLC  and more recently CEO of LibertyFund.io, a net leased property fund curated to create a conservative, safe haven portfolio of long term, Single-Tenant Net-Leased properties designed for geographic diversification, tenant credit diversification and industry diversification.  Michael is also a co-founder of the Blockchain Real Estate Summit and founder of the Blockchain Real Estate Meetup.

Michael is a real estate entrepreneur who is an expert in Retail Real Estate (Shopping Centers and Single-Tenant Net-Leased investment, leasing, operations, and redevelopment. Michael has been active in commercial real estate over the past 35 years and has handled more than $600 million worth of real estate transactions. Michael has extensive experience in development, leasing, sales, property management, and innovative financing techniques.   

Michael has been featured on The Real Estate Guys Radio Show, Cash Flow Connections podcast, and the Cash Flow Ninja podcasts to name a few.  Michael is also a well-known speaker at FreedomFest, Investor Summit, Intelligent Investors Real Estate Conference, Multifamily Investor Network Conferences, Hawaii Millionaires Mindset Blueprint,LA Blockchain Summit, Security Token Summit, the Global Family Office Summit in Dubai and the Blockchain Real Estate Summit. He is host of the Nothing But Net – NNN Show a podcast all about Net Lease, Triple Net and NNN investing. 

DISCLOSURES, LEGAL AND TAX COUNSEL: Liberty Real Estate Fund and Concordia Equity Partners LLC. (collectively “LibertyFund”) and their affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction or undertaking. LibertyFund highly encourages individuals and investors to seek the counsel of a qualified attorney as well as seek the counsel of a tax professional or Certified Public Accountant (CPA) to determine if there are any potential tax liabilities or consequences as the result of anything contained herein.  NO GUARANTEE: All users of this website should understand there are NO GUARANTEES of any success, outcome or profitability of any transaction or undertaking, expressed or implied by LibertyFund or any of its members, shareholders, officers or affiliates and will NOT be liable for any financial or other losses or damages incurred as a result of any undertaking. Go HERE to view complete DISCLOSURES.

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