Credit Solutions - Cryptocurrency vs Property

Choosing your Investments Wisely: Cryptocurrency vs Property

When considering ways to invest your hard-earned money, it is hard to ignore the current buzz around cryptocurrencies such as Bitcoin and Etherium. But do the risks of investing in a relatively new, tech-based phenomenon outweigh the benefits? Is it a good time to jump on the charging crypto-freight train and hurtle full-steam ahead? Or would it be safer to invest in good old-fashioned brick and mortar? Both Bitcoins and Buildings have their pros and cons and each has a certain degree of risk. In order to help you decide what’s best for you, we have put together a list of pros and cons for investing in cryptocurrency vs property.

PROPERTY – PROS

  1. Generally Safer

Cryptocurrency vs Property - Credit SolutionsInvesting in property is traditionally considered a safer long-term bet compared to new trends or technologies like hot shares or cryptocurrency. There will generally be a demand for housing as the population continues to increase, whereas no one can really predict what is going to happen with cryptocurrency – bitcoin might keep increasing for months or it could burst tomorrow.

Over time property has tended to be a stable investment. We all know it has certainly had its ups and downs – for example, the dotcom crash of 2000 or when house prices came crashing down triggering the global financial crisis in 2007/2008. Nonetheless, as a whole, investing in property is going to be a lot less volatile than investing in cryptocurrencies. This is partially due to the fact that property takes a longer time to sell, whereas Bitcoin, for example, can be bought or sold in a matter of seconds.

Another factor resulting in property’s stability as an investment is the fact that property is almost always in demand. In Australia, population growth is outstripping supply and we can’t develop housing fast enough. This keeps First Mortgage Lenders like Credit Solutions busy as people scramble to get their foot on the property ladder.

  1. Tax Benefits

Investing in property can achieve certain tax benefits if gone about in the right way. For example, if you are losing money on your property investment property, you can offset your losses against your income and therefore save on taxes (negative gearing). You can also claim depreciation on fittings and fixtures.

  1. Generate cash flow

A great benefit of investing in property is that if you are not living at the property, you can rent it out to other people. If you can obtain enough rent to cover the expenses of owning the property, you will come out on top.

When it comes to property investing, you need to watch the property market carefully and invest in a good location. You might find the perfect looking 4-bedroom house, but be sure to check it is close to transport, shops and amenities so that its increase in value will be quicker and more substantial. It pays to do your research!

PROPERTY – CONS

  1. You can’t access your money straight away

As mentioned above, you can sell cryptocurrency at a moments notice, whereas property takes longer to sell. Depending on the area your property is situated, it may take a bit of time to sell. This lack of liquidity can cause an issue if you need to access your money quickly for use in other areas of your life, like a holiday or unforeseen medical expenses. Second Mortgage Lenders like Credit Solutions can help with this by providing Second Mortgages.

  1. Costs if things don’t go your way

Cryptocurrency vs Property - Credit SolutionsIf you have invested in real estate in hope of gaining rental cash-flow, it can cost you dearly if the property is unoccupied. In this situation, you will have to pay taxes, maintenance, utilities, insurance, and more, meaning that if you find yourself with a higher-than-usual vacancy rate due to factors beyond your control, you could find yourself in a spot of trouble until you find new tenants. If this happens in a business setting, Caveat Loans are often used to pay off debt to help business owners get back on their feet.

  1.  Hands-on work

Cryptocurrency vs Property - Credit SolutionsCompared to crypto-clicking and typing on your laptop or PC, investing in real estate takes a lot of hands-on work. You may have to deal with exploding water mains, gas leaks, broken ovens and bathroom mould! You can hire a property manager to take care of these issues, but this can cost you dearly.

CRYPTOCURRENCY – PROS

  1.     Possible huge returns

Cryptocurrency vs Property - Credit SolutionsIf you invested only $100 in Bitcoin in 2013, today you would have around $40,000! The US dollar price of Bitcoin has risen almost six times since just the start of this year alone. Bitcoin reached almost $5,000 in September this year and fell to $3,200 over the following two weeks. But just like in previous setbacks, the cryptocurrency went on to more than recover from the fall.

While some experts believe bitcoin to be a potential bubble ready to burst, others believe it may still continue to climb for months to come.

  1.     Free from government control

Cryptocurrency vs Property - Credit Solutions

Cryptocurrencies use the de-centralised network of Blockchain and therefore is not controlled by a centralised system like a bank. This can be a great advantage as States otherwise seek to limit cash circulation and aim to create transparency of your finances for regulatory authorities. Storing your cryptocurrencies, however, is free and unregulated by bureaucratic institutions. But be warned, this can also pose a threat, as discussed below.

  1.     Direct and Immediate

Purchasing real property typically involves a number of third parties, like real estate agents and conveyancers. There are also usually delays and payments of various fees including stamp duty. Cryptocurrencies on the other hand claim to eliminate third party approvals and transfers can be completed instantly.

CRYPTOCURRENCY – CONS

  1. Highly volatile

Cryptocurrency vs Property - Credit Solutions

Investing in cryptocurrency is extremely risky business as it is highly volatile and you could potentially lose all your money if things go belly up. While some people are optimistic about the future of cryptocurrencies, the technology is still in its infancy, which makes for a turbulent investment option.

Bitcoins, for example, have been considered over 5 times as volatile as gold and more than eight times as volatile as the S&P 500 over the last three years. Marie Brière, associate professor of Universiteé Paris Dauphine in France, calculated Bitcoins as having a 175% volatility!

Case Study: Timothy Loftus, 30, from Perth Australia, makes more money investing in cryptocurrency than he does at his full-time job as a research scientist. He believes that it is important to absorb as much information as possible about what is out there, and how each cryptocurrency is fairing against the other. Instead of putting all his eggs in one basket and hoping for the best, Tim continuously buys and sells different cryptocurrencies and consults a wide range of forums – such as the r/investing sub-reddit – to stay ahead of the game. “You have to be smart with it,” says Tim, “You can’t be too reckless, but you don’t want to be a Panicky-Pete either. Make sure you have a backup plan in case the cryptocurrency you have invested in completely tanks and don’t listen to what every neck-beard on the internet tries to tell you!”

Tim’s approach might be beneficial for someone who is enthusiastic about investing and willing to put in the extra hours to maximize profits, however, your everyday citizen may be too overwhelmed by the dizzying amount of differing opinions regarding the fate of various cryptocurrencies.

  1. An intangible & unregulated asset

Unlike other currencies, there is no precious metal like gold to back up cryptocurrency. It is all in the “ether” of the internet. As there are no actual physical notes or coins and no central bank, there is essentially no backup copy which can be drawn upon in the event of a computer crash. Therefore, it is possible that one’s balance could one day be irrevocably wiped out.

Since cryptocurrency is not regulated by any financial organization, there is no safety net to protect users from human errors, fraud or a 51% attack. There is no security for the money, and there is not much investors or traders can do if they lose their money.

  1. Lack of understanding

Many people still do not understand how cryptocurrency works. This can cause issues as it creates a lot of scepticism and doubt. For example, a lot of businesses chose not to accept Bitcoin or any other digital currency, thus restricting the use and application of cryptocurrency.

THE VERDICT

So there you have it.

When looking at cryptocurrency vs property, investing in property is the ‘safer’ and less volatile option, whereas Crypto-trading can get you money fast and free of restrictions. Investing in property is a long-term slow burner that could see you living comfortably in future years but will not likely make you money overnight like you can with cryptocurrency.

If you are looking at investment for the longer term and do not wish to risk losing a lot of money, then we would suggest investing in property due to the property market being more stable than cryptocurrency. By choosing the right property, in the right location, with the right Private Funding, you will be on the right track to building your own personal empire!

As First Mortgage Lenders, Credit Solutions are available to answer any other questions you have about your investment choices. Be sure to check out our products on our products tab. Call us at 02 9199 7477 or contact us to find out more on short term caveat loans or our other credit solutions options provided – such as first and second mortgage loans, mezzanine financing, and construction financing.

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