Bitcoin Versus Real Estate: Which Investment Is Better For You?

Two popular investment avenues, real estate and bitcoin, have been making waves in today’s market. When it comes to these opportunities, it can be difficult to discern which is the wiser investment choice for you. Both have benefits and, like all investments, carry risk.

If you have been considering these assets and are looking to select the option that’s a good fit for you, let’s examine the pros and cons of each investment. Keep in mind before making any investment decisions to perform your due diligence and consult your financial advisor.

Breaking It Down: Real Estate Investment

Real estate investment is the purchasing of property with the intent of renting or selling it to make a profit. This is a multifaceted investment. You can flip homes, rent business space, be a residential landlord, rent out vacation property or open an Airbnb.

Real estate investing can help diversify your portfolio. Property is also a tangible investment; you can pull money from it and put value back into it. With a proper purchase and research, you can bring in money while putting value into a sellable asset. Additionally, owning property comes with tax breaks.

However, a great deal of effort is involved when it comes to real estate investment. Keeping up with property requires regular maintenance, upgrade and repairs. Owners need to collect rent and worry about utilities, not to mention that purchasing property can be pricey upfront.

Also, property is not an entirely fluid asset. Although you can sell property, it can sometimes be difficult to unload. It takes time to sell, and there’s a chance you might pour a lot of money into something that does not equal out. On the other hand, people need somewhere to live, so real estate will always be a necessity.

Pros:

• Tangible asset.

• Versatile investment opportunities.

• Tax benefits.

• High cash flow.

• Long-term returns.

Cons:

• Not a fluid asset.

• Costly investment.

• High maintenance.

Breaking It Down: Bitcoin Investment

Cryptocurrency, the most popular of which is bitcoin, is one of the newest investment options available. These digital currencies act as a medium of exchange globally as an alternative to money. They are technological currency backed by blockchain technology.

One big benefit of bitcoin investment is the currency can never be inflated, since there will always be a limited number of bitcoins to go around. There’s also not much involved in purchasing the currency. You obtain your cryptocurrency wallet, purchase your bitcoin and mine. The currency is global and can be sold easily on a cryptocurrency exchange. Transactions are marked in the blockchain, which is publicly available, and bitcoin is currently in high demand.

However, as great as all these perks may be, there are some risk factors. Since bitcoin is an intangible asset, there’s a fair bit of room for error in exchange. The currency is entirely digital, which makes it open to cyberattacks, and security isn’t ironclad. Also, although there are only a limited number of bitcoins, there are many other types of cryptocurrency available that could inflate the market.

Additionally, since this asset is so new, there’s not enough data to really calculate its value. As recent price fluctuations show, the market is volatile. You could easily lose everything you invest, so the decision of whether or not to get involved with bitcoin really comes down to how much you are willing to risk.

Pros:

Peer-to-peer system.

Governed by economic principles.

No inflation.

Easy to trade.

Long-term potential.

No maintenance.

Lower cost.

Cons:

• Bubble — inflates and fizzles out.

• Not a tangible asset.

• Security issues.

• Little/no government involvement.

• High risk.

Which investment comes out on top?

As you build out your investment portfolio, your best investment really depends on your personal financial background, your familiarity with the asset and how much you are willing to risk. Purchasing bitcoin is low-maintenance and high-risk with the potential for high reward, while real estate is a long-term investment that could end in a big payout down the road or provide steady income. So it’s ultimately up to what you can afford and what you can afford to lose.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Credit: Greg HerleanForbes Councils Member, Forbes . com

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