Investing in real estate or buying into the crypto market both have their pros and cons, but which one should you choose? Compare the two to see how they stack up against each other and decide for yourself.
If you want to know more about the benefits of each, read on!
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Are you investing for fun or profit?
Ask most people why they invest and they’ll say, For fun. If you’re asking yourself that question, look into investing in crypto. Investing for fun has its perks—you can buy and sell at any time and enjoy a little bit of excitement every once in a while—but it comes with downsides as well.
You could lose money on a whim and forget about your investments until it’s too late to recoup any losses. With crypto investing, you know exactly what you’re getting into; if your investment isn’t profitable, no one will be more disappointed than you.
Investing for profit sounds much better, but real estate and crypto investing are two very different animals. If you’re looking to invest for profit, it’s a good idea to choose just one.
It can be difficult to manage two investment portfolios at once, especially if you’re starting out as a new investor with limited capital.
What are your time horizons?
Choosing whether to invest in real estate or crypto depends on your time horizon—the length of time you’re willing to put up money for potential returns.
The safest play for long-term investment gains would be putting that money into a nice, stable index fund that matches your personal financial goals. If you have a specific retirement date in mind, it could make sense to invest in stocks as opposed to something more volatile like cryptocurrency.
On a shorter timeline, if you’re planning to retire in 5 years, there’s more upside to be gained from investing in something like real estate.
If you can pay cash for an investment property and expect it to double over 10 years, that would be a 15% annual return on your money—which isn’t bad at all! But remember that house prices do go down as well as up, so that risk has to be factored into your thinking.
Investing in cryptocurrency carries with it more risk but also more reward; those who were investing before 2017 might have seen their investments quadruple during that year alone.
Ultimately, the decision comes down to how much risk you want to take on, what your tolerance for volatility is, and how much you plan to invest.
Do you have an exit strategy?
Every investment needs a contingency plan, and your choice between real estate and crypto will no doubt be an important one. The major consideration in determining whether to invest in real estate or crypto comes down to one thing: your exit strategy.
That’s because one option offers quick liquidity with low potential for growth, while the other offers significant upside (but slower transaction times).
Real estate often presents itself as an option with flexible rental rates that can allow you to sell a property without actually selling it—but you’ll want to keep in mind that both real estate and crypto are illiquid investments.
With that in mind, your decision comes down to whether you’re ready to deal with both high potential and slow transaction times or prefer slower transactions and greater flexibility.
Whether you choose real estate or crypto will be dependent on whether you’re okay waiting for a major upswing before taking your profits—or if speed is more important than gains.
Don’t panic when there’s a dip: Real estate investment isn’t without its share of volatility.
Do you have the risk tolerance, investment experience, and sufficient knowledge and skills necessary to invest in cryptocurrency or real estate?
Investing in crypto and real estate may sound complicated, but it doesn’t have to be. Do you have the risk tolerance, investment experience, and sufficient knowledge and skills necessary to invest in cryptocurrency or real estate? If so, you’re ready to start investing.
To get started safely (and legally), consider hiring a realtor who can advise you on the ins and outs of real estate investment. Cryptocurrency investors don’t need advice from brokers or accountants because cryptocurrency exchanges aren’t regulated.
Invest at your own risk! Caveat emptor! Buyer beware! Make sure that you are aware of all risks associated with each type of investment before deciding which one best suits your situation and goals.
If you don’t have experience investing in real estate, consider starting with cryptocurrency. Investing in cryptocurrency can be a little more straightforward than investing in real estate. You may not need an expert advisor because most platforms require that you register and provide identification before they allow you to invest.
Is your strategy diversified enough given your financial goals, your stage in life, and other investment considerations (including tax implications)?
If you own significant assets such as a home, retirement accounts, and investments, and your investment strategy doesn’t account for all those assets, you could be setting yourself up for unintended consequences.
For example, if you invest in real estate and have other sizable assets, your taxes could be higher than expected. Also, consider whether your choice to invest in crypto or real estate will have tax implications.
If one has no way to convert their investment into cash easily and they don’t keep careful track of their gains/losses each year then it can be very hard to stay on top of current trends when filing with the IRS come tax time.
You should also ask yourself if your strategy will still work in case you need to tap into some of those assets before you’re ready.
For example, if you purchase property with money from a home equity loan and rely on that property for income, what happens if you have an unexpected financial emergency? And remember that real estate and crypto are both volatile markets.
While diversification can reduce risk, sometimes it isn’t enough to protect your investment.
How do you allocate your portfolio across different types of investments given their unique risks, returns, fees, tax treatment, and other factors?
Answer that question by simply asking yourself, What’s more, important to me right now, growth or income? What’s my appetite for risk, and how long do I want to hold onto these investments? Once you can define what’s most important to you—and there are plenty of valid reasons to have different criteria—you can choose between investing in crypto and real estate.
For some investors, crypto holds too much uncertainty; they might be willing to hold onto their crypto investments but hesitant about putting new money into it because they aren’t entirely sure how long it will take for those holdings to appreciate.
Other investors might put 10% or 20% into cryptos and be happy if those investments pay off. As an example, let’s assume you’re a first-time investor who has $50,000 and wants to invest it in real estate or crypto.
If you choose real estate, you can either put it all into one property and take on all that risk or spread your money across many properties with less risk. Using traditional fiat currency (dollars, euros, etc.), you could purchase a single apartment building for roughly $100,000—but what if prices drop 50%?
Are you comfortable keeping track of these investments on your own or would you prefer professional help?
It really depends on your investment goals. If you’re looking to invest in a high-risk, high-return scenario, then I would suggest holding these investments yourself.
However, if you’re more concerned with having a solid real estate and cryptocurrency investment portfolio, it may be wise to seek professional help. There are many options for buying real estate and investing in cryptocurrencies (and other highly volatile assets) out there.
When it comes to real estate and cryptocurrency investments, there are pros and cons associated with both investment styles. With that said, I would suggest holding these investments yourself if you’re more concerned with growing your portfolio as quickly as possible.
However, if you’re looking for solid long-term growth opportunities, then I would look into hiring a professional.
Is there anything else I should know that could be relevant to how risky this investment is for me personally?
Cryptocurrency, like Bitcoin, and real estate are two very different investments with very different risk profiles.
On one hand, you have a volatile digital currency that has risen in value astronomically over just a few years; on the other hand, you have an investment in tangible property with history to its value.
However, both investments come with unique risks for consumers looking to diversify their holdings without exposure to traditional stocks and bonds.
With an estimated 25% market share, blockchain technology has made it easier than ever to get involved in cryptocurrency.
However, with that ease of access comes increased risk from fraud and investment scams. This makes it even more important for investors to do their homework and research a cryptocurrency before buying any coins.
