Thank you 🙏🏻 Very valuable thoughts. I will have to double check if your calculations apply to EU/Germany, but I generally agree.
Is real estate a shitcoin? TLDR: yes.
I've heard many people refer to real estate as a shitcoin but it's hard to make sense of that statement without the numbers. Everyone still needs a place to live right? So I made a shitty spreadsheet just to get an idea and I was very surprised. I did my best to actually puff up the real estate numbers and use ultra conservative numbers in bitcoin.
I ran the numbers for a multifamily triplex with rental income on an FHA loan (3.5% down payment). The rental income really dampens the amount you spend on your mortgage payments. I also did not account for any vacancy periods, troublesome tenants, or maintenance fees in real estate. Any financial planner that fails to calculate these factors would be committing fraud and the return on real estate compared to bitcoin in this case would STILL not even be close. On the other side with bitcoin, I used a conservative 30% annual appreciation over 30 years. Yes I know it fluctuates and, over a long enough time frame, the average returns have been much higher historically but I really wanted to steelman real estate. The DCA BTC website helped me a lot with this. If you began a weekly DCA 8 years ago, you would be up 1,142% today which is 143% annually! I believe a 30% annual return on bitcoin is conservative to say the least.
The numbers I used were from a lender's estimate I got in March of this year. Note that interest rates are higher now. The triplex was quoted at $700k. Cash to close was $37,273 (remember this number). If you spent that $37,273 on financing a triplex and lived in one unit while renting out the other two, after 30 years, your property would be worth $2,134,644. I used an average 4% annual appreciation in real estate and subtracted the 1% annual property tax to reach this number. Yes I know there are factors like income tax and depreciation but I want to keep the numbers simple.
Now the fun part: what would bitcoin have done during that 30 years if you invested the same cash to close in it? I used the rental price of a local apartment that was $25,140 for the first year and I added a 3.2% annual inflation rate every year. Again, I am really trying to steelman the case for owning your own home. After 30 years, your $37,273 in bitcoin would be worth $73,882,979!
Eminent domain is the government’s “right” to take your property for public use. Even if you have your keys and deed, you still only have a claim to your shitcoin. The Sovereign Individual thesis is much more doable with bitcoin. You can easily leave the jurisdiction that is mistreating you when you are not tied down to real estate. If you spent the rest of your life DCAing into bitcoin and lived as a renter, you would not have to worry about the major headaches that come with property management. Is the jurisdiction you are living in forcing you to eat ze bugs and stay home because there are aliens outside? No problem, take your bitcoin and go somewhere else. This is what freedom money is!
This is the part where I say this is not financial advice and do your own research. I don’t know the future and I don’t claim that anything above will actually play out that way. My numbers may be wrong, if so please let me know.
#bitcoin #nostr
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Discussion
I need those numbers for Germany too, my wife thinks we should get a house.
You can buy a house, then take a loan against it and buy BTC with that money. Then you still have the BTC whatever happens with the house, the bank, and the country 😁
Sounds tempting 😉 Unfortunately this won’t work (at least in the EU). The bank will only give you a loan when it sees the signed contract for the house purchase and all necessary insurances. It’s part of the loan deal.
If I could buy a house first, without the bank, why would I bother at all? Also in that case, I would just go all-in for bitcoins and buy a house after the nearest halving.
I thought about that but it isn’t as simple as it sounds. A lot of banks hold custody of the bitcoin. If something happens to the bank, country, or house they can sell your bitcoin because you don’t hold the keys when you take out the loan. Also, the interest rate is over 16% on the websites I’ve looked at so you are paying about the same as capital gains tax. And you have to post a significant amount as collateral. If the bitcoin price tanks, then you have to post more collateral or get liquidated.
I proposed to take a loan against the house, not against the bitcoin. So in worst case you lose the house, not bitcoin.
My bad brain fart lol yeah that may work but I haven’t run the numbers. Most my age are still trying to buy a home so this isn’t an option for everyone.
Plus new homeowners won’t have much equity to take a loan out against anyway and the interest rate is going to be pretty high on that as well. Fiat games are annoying.
But if you morgage the house and use that money to buy bitcoin and hold in own custody that sounds possile, or are there more hidden tricks they play?
One should check in individual case, what is better. I guess, that because the mortgage is available for both someone who already has enough money to buy and the one who doesn't, it is in general less efficient for the first group of people. Banks have to exploit the second group of people somehow, so conditions should be worse in general. But everyone should check themselves, because it may vary from country to country and from person to person :)
The landlord might surprise us and tell us to move out in which case we will have to find a new place but all the rental prices have gone up. Buying a smals house just might make sense. But it feels more tempting to get bitcoin before the halvening.
You can also wait for halving in a cheap country, e.g. in Thailand.
Definitely let me know what you find. My guess is that it’s probably worse in Europe.
Yes, it’s also my feeling. Despite the 2022 price fall, it would be nearly impossible to get a loan with suitable conditions (banks adapt and react faster than people). The inflation comes on top of that. In addition, Germany‘s economy is doing well rn, the recession is gaining momentum (2nd year quarter without a plus in a row). Taxes have not been raised, but it’s a matter of time given our leftist government.