Honest question, why lockup your money in real estate when over the past decade crypto (bitcoin) has better returns and you can now earn passive income and are much more liquid than buying a home? I am moving more and more of my money into crypto and selling homes to accumulate crypto assets, I can make 8.6% interest on a digital dollar that is paid monthly, doesn’t fluctuate and compounds. I also make 6% on Bitcoin and my interest is paid in bitcoin. I don’t have to deal with repairs and the other stresses of managing a property. I would love peoples thoughts on this.
You can't leverage bitcoin, you can't improve it and you have no control over it. Can't BRRR it either. REI is a lot of work, takes a long time, it's messy - so I can see the appel of something that is quick and easy!
To me in many ways crypto reminds me to my first stock investing days back in 1999, it's great until it's not.
It amazes me how the compounding of REI is lost on people. More important than that, it is shocking how the ability to buy on 20% or less of face value, then compound the returns on top of that, is completely lost.
Also, one of the greatest advantages of REI is the fact you are NOT locking up your money. You can get your money out within a year if done correctly, and reinvest it, over and over again, and keep the original property. This is simple math...or at least it should be.
I have had this same internal question over the past 12-16 months...I think it is safer to try to do both. I think Bitcoin is the future but I do not think underlying real estate will ever go away.
I have been saving for a down payment for a SFH acquisition this year but I have been dollar cost averaging into Bitcoin aggressively over the past few years.
Crypto is not fully matured and there will be more growth, I do not want to experience FOMO but I do question whether or not I should nix the SFH and dump the money into BTC. I do not know what is right but I think its a good problem to have
@Joe Villeneuve
Hi Joe, I think your statement is and was valid, however you still have to lock up your money for a year, deal with renovations, maintenance, renting and tenant issues for a historical average of 3% yearly returns on property value, with an 8-10% return on cash. Just look at the returns on Bitcoin since it has been around.
https://www.google.com/amp/s/decrypt.co/51558/bitcoin-beat-stock-market-10-years%3Famp%3D1
Can real estate give you those types of returns over 10 years? I’m not saying it’s going to continue to have such crazy returns and I know it is volatile, but ytd it’s up 73%, plus I make a passive 6% off that hold and could sell and be liquid instantly. Why lock up my money for a year hoping to make 10%?
You can't leverage bitcoin, you can't improve it and you have no control over it. Can't BRRR it either. REI is a lot of work, takes a long time, it's messy - so I can see the appel of something that is quick and easy!
To me in many ways crypto reminds me to my first stock investing days back in 1999, it's great until it's not.
@Marcus Auerbach
Hi Marcus, you actually can leverage Bitcoin, you have no control of the price, you can say the same thing about the real estate market and rent at times. The whole point is that by buying and holding it, your returns as of now will have outperformed any asset class, including real estate, with less of a headache.
If you look at the link, Bitcoins cumulative return since 2011-2020 has been 203.5%, no stock has done that and I don’t believe real estate has offered such returns as well. I thought the whole point of investing in real estate is to make a passive income that you can eventually live off of. I’m saying, I think there is a better option than rei, with less of a headache. Again, it is very volatile, if you plan on holding for the long term, it has outperformed every asset and doesn’t have the complexity of rei.
@Joe Villeneuve
Hi Joe, I think your statement is and was valid, however you still have to lock up your money for a year, deal with renovations, maintenance, renting and tenant issues for a historical average of 3% yearly returns on property value, with an 8-10% return on cash. Just look at the returns on Bitcoin since it has been around.
https://www.google.com/amp/s/d... real estate give you those types of returns over 10 years? I’m not saying it’s going to continue to have such crazy returns and I know it is volatile, but ytd it’s up 73%, plus I make a passive 6% off that hold and could sell and be liquid instantly. Why lock up my money for a year hoping to make 10%?
First, why are you trying to compare REI based on the average return? If you invest correctly, you should make well above the average return, and again, you're missing the most important points:
1 - You are buying RE at no more than 20% of its face value. If you put in $100k into BitCoin, what is the immediate value of it? Not in a percentage, but real dollars? If you gained 5% in REI vs 15% in BC, what would the new number values in DOLLARS now look like? Now add the cash flow on top of that for each.
2 - You can recover all of your cost in RE within a year (at worst 5). That means you can reinvest it over again...and again, and again, and... You are compounding your original cost, and never actually spending it. Pull the original investment dollars out completely and you are now investing with "house" money, with infinite returns on your investment.
3 - How long do you think these returns on BC can sustain itself? This is a new vehicle with absolutely no track record, but RE has one of the longest, if not THE longest track record of investment returns.
Good questions.
Pro: currently crypto investment is backed up by the strongest capital in the world including Fidelity and big banks.
Cons: If the Fed go againts crypto, it can goes to zero too like in 2018. Remember those 3 years crashes.
So yes it's highly speculative high reward high risk investment.
I hold crypto and have been doing so for the last 6 years. So I am not disputing its returns. I invested because I have been a student of cross border payment systems for 20 years. That’s what got me into crypto vs dreams and fantasies of getting rich! Not once was I speculating!
But at the other end of the spectrum, I bought biotech penny stocks and held them and sold them. Made a good killing! What do I know about biotech? Nothing! I just lucked out. My portfolio looked hot!
That’s what is happening with 99% of the guys and girls who are pounding the table in public forums on Bitcoin and crypto.
Historical returns on crypto are high, sure they are just like if him had invested in Amazon or Tesla or Google in earlier days but do people who are pounding the table even know what it is they are investing in? Do historical returns tell how the future is going to look? Where were these boys and gals when BTC was trading at $1000?
In the end investors are BEST served by building a circle of competence. Be it local real estate or stocks in a particular sector or company or a particular asset class vs trying to chase the herd and that too based on what we hear on BP. If crypto is your circle of competence that’s awesome but there is little reason for someone who knows RE to overnight convert themselves into a Crypto investor because of heresay!
For cypto my plan is to invest via LP syndications, hence it's indirect.
@Justin Thorpe @Joe Villeneuve
1. Again going over historical numbers BTC has given investors a YoY return of over 200%. I’m not even factoring the compound 6% APY you get paid out monthly on blockfi or if you want to avoid risk the 8.6% monthly compounded interest for you USD. Again, I can’t predict the future, however ytd btc is up 73%. We are not even 3 months into the year and that is a better return of my money that 5% in value of my home and the cash flow, plus it is easier and way more liquid than doing a re-fi.
2. You’re able to take loans out on your crypto, without selling it and investing into other things. I would say it is similar with slight more risk. As you assume home prices will continually go up in value. Just like any market there are up/down cycles. Depending on when you buy/sell you may not be able to pull out equity on your home, as you maybe underwater.
3. Bitcoin is a speculative asset and has its cycles just like any asset in growth. I honestly believe bitcoin will continue outperforming all assets for many more years. It is meant to be a digital store of value and is replacing gold. Golds total market cap is 10 trillion, while btc is only at 1 trillion at the moment. I also believe it will continue to eat up other markets as the roi outperforms any asset. I do agree with diversifying.
As Justin stated there are other cryptos that can 100x in a year, these are way more speculative and risky. I am not talking about these. I believe for the next 10 years I can more than 100% my roi each year, while receiving a 6% compounded yield. That will far outperform any real estate investment in my opinion. Again, it is speculative and more risk and I won’t go into the details on why I believe so. I also know the bear markets in Bitcoin areebrutal, 85% loss from last cycles all time high. However if I am in it for the long run, or want to limit my risk, I can collect 8.6% compounded yield on a digital dollar without risk of price fluctuation, which is a better return than a lot of rei, without the headache.
I am not trying to shill anything, I am just starting to rethink how I invest my money, as I previously thought rei was the best route to grow my wealth.
@Kevin H.
Why not do both. I am actually here because I wanted to take some of my crypto profits and invest in something that is less volatile and more likely to still be around in 100 years. Crypto has been a great investment for me bringing me over 25x my initial investment since 2016. The problem that scares me is the VHS/Beta MAX conundrum. At any time bitcoin may be set aside for a newer faster cheaper crypto currency. Until the class has matured it's all a crap shoot.
My recommendation would be to invest a small percentage of your REI profits into a variety of crypto's that have a real world usage.
Honest answer, Nobody is asking you or begging you to invest in real estate. Put all your money in bit coin if you want.
It is your money and you can do whatever you want with it. Bottom line. Nobody on this forum is here to change your mind.
Do what you want with your money.
@Damaso Bautista
You're missing my point, I'm already invested in both and not asking for permission. What I am asking is, are people thinking like this as well? Are people starting to rethink putting their money into rei and putting it into crypto. My goal in investing in real estate was to make money and I thought it was the smartest way for me to grow my wealth. You have an opportunity cost/loss, if you only could invest $1 in real estate or $1 into crypto and crypto roi is significantly outperforming real estate, why would I invest in real estate? Or would I change my investing habits and diversify my portfolio to be less heavy in rei? I no longer think REI is the best way to grow my wealth but I'm curious on if other people are starting to think the same or differently.
I am 49 years old and maybe I am old school but I am in the don't put all your eggs in one basket type.
Yes I have missed out on great opportunities the past 30 years by not jumping on name something that blew up the past 30 years.
But steady as she goes for the past 30 years, mirroring the S&P and real estate has placed me in a great position financially for when I retire in 4 months at 50.
Specifically hindsight is 20/20. If I could go back and jump on everything that blew up in the past I would, but I can't.
Everyone Monday night quarterbacks or start thinking about it differently once the results are in. But its the investor who is willing to put it all on the line before the game starts that will come out big in the end.
I am not that much of a risk taker with my finances.
Just my opinion. Steady as she goes and well diversified has done real well for me. I am not complaining.
@Damaso Bautista
First off congratulations on your success in real estate and being able to retire. I too am considering putting less money into real estate and more into crypto. I have major worries on unemployment, eviction moratoriums and some of the other headaches that come with investing in real estate. The whole goal for me was to have passive income and have my mortgages be paid off by tenants and increase my equity. It’s getting harder and harder to find deals where you can get over 10% cash flow and the pandemic has made me uncertain if I want to continue investing in real estate for the time being. I’m not saying put all my money into crypto, however I started learning about it and I don’t think it is a fad. I too think it will continue to grow, I need to learn more about receiving interest for holding Bitcoin, it doesn’t sound like a bad way to earn passive income without the problems real estate brings.
Then take more money and put it in Crypto. This is my point from the beginning. Every investor has their own money. You are the controller of your money. You can invest in what you want to.
I just gave an example of what worked for me that is all.
@Damaso Bautista
Would you consider buying more houses in the CA area if you weren’t retiring and still active? CA has been one of the hardest hit states from the pandemic and eviction moratorium. Plus home prices have skyrocketed, I don’t know the roi for homes in CA, but I would think it would be tough to find a good cash flow house, plus all the other issues in that state would make me weary.
I used to be more bullish on crypto but as things have matured a bit, I don't think it has as much upside since I can't see it taking over mainstream transactions but can still be seen as a store of value like gold.
Without gov't backing and the difficulty of tracing transactions, can you imagine the target on rich people who hold large sums of crypto? No longer needed is the money bag drop for ransoms or blackmail and all you need is asking someone to transfer the crypto to a foreign account.
I also look at gov't intervention stepping in eventually. Look at online poker and how the US shut it down since they didn't want large inflows and outflows of capital without regulation and visibility.
I am more curious about other cryptos that utilize the blockchain for smart contracts and other applications though and their potential value.
If the right deal fell in my lap I would buy in a second. The only thing I can do is be ready for when the deal drops. It doesn't happen often but when it does I am ready.
I am biased towards appreciation because that is where I have made money here in California.
Cashflowing $100 a door seems like its not worth it from my point of view but I would not be against it with any out of state investments that are low cost.
As far at the other issues with this state. I have lived here my whole life so I don't know any difference.
Bitcoin and real estate are too VERY different things.
TLDR: I dont think "either or" is the right approach.
I do both of them. Both have worked well and both have very different goals and uses. Of course, in hindsight, yes it would've been great to put ALL of my real estate money into bitcoin in 2015. But hindsight is always 20/20.
Note: I say bitcoin and not "crypto" because altcoins are bogus. But you get the idea.
@Marcus Auerbach
Reminds me when I got involved in buying stock options in 1999. I remember Qualcomm going up uto one hundred points a day. I traded Rambus, Tern, Cisco and other tech stocks. I made crazy money, thought I knew what I was doing until the tech crash of 2000 wiped out all my gains. RE is stable, tangible everyone needs a place to live in. I still trade stocks, options and have settled on a method that works for me along with RE.
My 2 cents
Leverage.
It amazes me how the compounding of REI is lost on people. More important than that, it is shocking how the ability to buy on 20% or less of face value, then compound the returns on top of that, is completely lost.
Also, one of the greatest advantages of REI is the fact you are NOT locking up your money. You can get your money out within a year if done correctly, and reinvest it, over and over again, and keep the original property. This is simple math...or at least it should be.
I think Joe knows his stuff and I virtually always agree with his comments and this one is spot on.
I have zero of my money invested in any RE purchase that is over 3 months old. The Property I purchased in Dec is likely at 90% LTV (current market value).
To the best of my knowledge, I can not buy crypto with no money invested. Note with nothing invested, all return is infinite.
I have never claimed My RE route is passive (at least not obtaining infinite return). So if you want a passive investment, my RE route is not it. If you want outstanding return and are willing to work smart to obtain it, then my route works.
I am not one of those RE investors who think it is perfect for everyone or that there is not many different RE routes. I am one that realizes my RE route produces far superior returns to the OP reference.
>Can real estate give you those types of returns over 10 years? I’m not saying it’s going to continue to have such crazy returns and I know it is volatile, but ytd it’s up 73%, plus I make a passive 6% off that hold and could sell and be liquid instantly. Why lock up my money for a year hoping to make 10%?
I achieve a lot more than 10% return. For 10%, I would definitely look at other options. S&P 500 lifetime is close to 10%. There are numerous investments for accredited investors with lifetime return far above 10%. Even at 20% or 30%, after you have achieved some wealth accumulation, active RE may not be worth the effort. Seeing that all but my most recent acquisition is at infinite return ...
I want the newer RE investors to realize that the return on their first RE investment is likely going to be exceeded on most (virtually all) subsequent RE investments. If you wait for homeruns, you may be waiting a long time.
>The whole point is that by buying and holding it (Bitcoin), your returns as of now will have outperformed any asset class, including real estate, with less of a headache. If you look at the link, Bitcoins cumulative return since 2011-2020 has been 203.5%, no stock has done that and I don’t believe real estate has offered such returns as well.
My market RE has appreciated 91% in the same time span (Typical Home Value for Southern California Counties Since 1996 (laalmanac.com), San Diego) but realize investment RE (Non OO) is typically purchased at 75% to 80% LTV (OO can be much higher LTV). I will use the worse of those LTV numbers to show what that does to the 91% appreciation. It would 4X it, so 764% return from appreciation (seems to be better than the 203.5%). Now realize this is from just the appreciation and has not factored in any cash flow, principle paydown, tax advantages, etc. Note with the current RE rules, I never expect to pay taxes on my appreciation (rules can change) even though I have extracted appreciation multiple times.
I am not stating my RE route is passive. What I am saying is that I have done far better than 203.5% return (because I BRRRR, I have done far better than the 764% return) over that time span.
If you are happy investing in Bit Coin keep investing in it. It has done well. It is less work than my RE route. I do not know enough to predict if its upward trajectory is sustainable. If you want something that you have more control over, but is likely more effort, than RE can be a good option.
There are many different investment options. They typically have different pros/cons (Risk: aggressive/safe, effort: passive/active, Cost of entry: high/low, restrictions: is it only available to accredited investors?, etc). Pick the one that is right for you.
Good luck
Bitcoin has been around for what...10 years?
That's a drop in the bucket in terms of data and investment stability.
Real estate has been around since forever and has proven itself as the best method of accumulating wealth over the past several hundred years.