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In this video, I discuss why real estate may be a very poor inflation hedge in a high inflation environment: repair and maintenance costs can increase faster than the value of the house, which could lead to cash flow problems.
Keeping a rainy day cash fund on the side is not a solution either, since the cash will lose purchasing power unless it is stored in Bitcoin.
Skyrocketing property taxes can also lead to cash flow problems and ultimately result in the owner losing the property at the worst possible time.
Unlike real estate, Bitcoin is more:
— Portable
— Divisible
— Resistant to confiscation
— Easy to store without ongoing costs like property taxes, insurance, and maintenance
Not investment advice! Consult a financial advisor.
Watch this video about Bitcoin and real estate first:
Watch real estate repair and maintenance costs skyrocket:
Billionaires like land as a store of value:
Private property often gets confiscated during a revolution:
I am not being paid or otherwise compensated by any company or cryptocurrency project that I mention in my videos. My opinion is not for sale. Please do not contact me with any affiliate or advertising deals.
#Bitcoin
#realestate
#inflation
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Real estate has long been considered a good investment, with many people viewing properties as a hedge against inflation. The idea is that as the value of money decreases due to inflation, the value of real estate will increase, providing a steady return on investment. However, the reality is that real estate may not be the best hedge against inflation.
One of the main reasons why real estate is a poor inflation hedge is because it is an illiquid asset. Unlike stocks, bonds, or commodities, real estate cannot be easily and quickly converted into cash. This means that during times of high inflation when cash is losing its value rapidly, real estate owners may find it difficult to sell their properties at a price that will keep pace with inflation. Additionally, the costs associated with selling real estate, such as commissions, taxes, and closing costs, can eat into any potential gains made from selling a property during inflation.
Furthermore, the real estate market itself is highly sensitive to interest rates. As inflation rises, central banks often respond by increasing interest rates to curb inflation. Higher interest rates can make mortgages more expensive, which can decrease the demand for real estate. Additionally, higher interest rates can lead to higher borrowing costs for real estate investors, making it more difficult to finance new property purchases.
Another factor to consider is that real estate is also subject to market forces and economic cycles. During periods of high inflation, the economy may be struggling, leading to decreased demand for real estate. This can result in stagnant or even declining property values, which would make the asset a poor hedge against inflation.
Another important consideration is the maintenance and upkeep costs associated with real estate. As inflation rises, the costs of materials and labor for maintaining and improving properties also increase. This can erode any potential value gains that real estate may have during inflation.
Finally, investing solely in real estate as a hedge against inflation may not provide the diversification needed to weather economic uncertainties. It is important to have a well-rounded investment portfolio that includes a mix of assets, such as stocks, bonds, and commodities, to have a more effective hedge against inflation.
In conclusion, while real estate may have been seen as a good hedge against inflation in the past, there are several factors to consider that may make it a poor choice for investors looking to protect their assets during inflationary periods. Illiquidity, sensitivity to interest rates, market forces, maintenance costs, and lack of diversification all contribute to the idea that real estate may not be the perfect inflation hedge. It is important for investors to carefully evaluate their options and consider a well-rounded investment strategy that takes into account the risks associated with real estate during inflation.
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If your whole country goes down the tubes, what's the reason to live. Give me a break
You don't make cash flow with Bitcoin. That's the difference. What if you need cash flow?
Soaring maintenance cost is really spot on where I live (France). With all the new renting laws, poorly insulated places will be removed from the renting market until the appropriate work is done to comply with the new energy consumption standards. With all of the shortages on top of rampant inflation, you can bet a lot of properties are going to wash up on the market at the same time and crash it.
Where I live in China, real estate is basically the only inflation.hedge. Their capital markets are broken by a simultaneous lack of disclosure regulation and the government being able to regulate major companies into oblivion literally overnight. Most of them can't access bitcoin easily and everyone is getting completely wrecked as their bubble finally collapses. I feel a little it bad for them, but I dont feel bad for the acquaintances who I explained to that a 30x house price to income ratio is unsustainable and they dismissively said "You just dont understand Chinese culture, bro". Bitcoin is the best asset in the world and you have to be willfully ignorant to not know this by 2023 if you have a smartphone.
Imagine a hyper inflation scenario and you're renting. You wont be for long. Hit up that camping store for your tent, maybe they will take bitcoin as payment.
I am a Bitcoin owner and believe it has it's place in portfolios. But I dont understand how the bitcoin sheep take the inflation hedge seriously anymore. I get they are sheep but did they sleep under a rock this past two years? No, Bitcoin is not an inflation hedge. The data is clear and unequivocal.
People obviously shouldn't but real estate and not rent it out or make cash flow with it in some way, like farming, etc. I wish bitcoin guys would stop this comparison because it's really not a good argument. Yes it has expenses, it also should have income. It's like are you also going to start a restaurant but not let people eat there? Real estate is more of a business, it should not be completely passive like owning bitcoin. I love the channel generally.
Good information as always. Another real estate concern is commercial real estate. Some predict a major crash. I’m not sure they are wrong with so many people working from home and not going back after Covid plus the general decay in major cities. What if it happened and commercial real estate tanks. I would expect more failures. How will all that impact Bitcoin?
Tnx
What a load of crap, your videos sre getting more radical
Hi Matthew,
In your videos, you suggested selling our rental property.
Currently, I have a rental in the Boston area that gives me a positive cash flow of $1500 per month.
Why not keep the rental and use the cash flow towards buying more BTC?
Easy decision for me, BTC every time. The biggest reason for me is the hassle factor. Thanks Matthew
Hello, Big fan of your work. Few things: I buy real estate for free, always 100% finance to HOLD, use it for tax advantages/ no for the cash flow. And i am planning to 1031 in the future/ one by one to leaves those assets to future generations. Whats your thoughts on that ?
Real Estate is a good hedge in India due to depreciating Rupee
You sound like Bob Ross, we could call you the Bob Ross of Bitcoin. And a happy little self-custody wallet right here
The biggest risk is lack of scarcity, you can literally build 10x more homes and still have room for like 100x more houses on Earth. The only reason why real estate has value is coz we didn't have video calling 50 years back ( video calling and satellite internet removes the need to stay put in the CBDs of a city decreases ), couple this with '3D printed houses' and the decline of US Dollar in international finance ( due to Bitcoin ) means buying Real estate in the US is a lose-lose proposition.
I talk to family about bitcoin from time to time. I have gotten my son to invest in bitcoin but not much luck with other family members.
Matthew, I’ve been following Swan Bitcoin recently as well as Trader University. Listening to it CEO, it sounds like Swan wants to offer BTC related banking services. Do you have any thoughts on Swan?
I wish my wife understood this when saving for a house.. I tell her here in Canada the wage vs house price is unreal. So to help us is to buy Bitcoin but, I can't get her to agree on a good amount to put aside for said house. Probably won't be time for her to believe until it's over 100k
Interesting talk by Whitney Webb on u tube – the attack on bitcoin coming from w e f
It sounds like you think the world exists for the sake of Bitcoin and not the other way around. Property and land have value-in-use (which cash, bank deposits and Bitcoin do not but silver and gold do) and people will always have need of them. If you have a government confiscating your property and land I very much doubt that you are living in a world where Bitcoin is that useful to you, your real problem is dealing with your oppressive government.
What’s the other option? You still need to live somewhere? Either buy or rent. Unless do you mean as a second property hmo etc
The Government can confiscate even Bitcoin. Or you go to jail. No way to avoid it. Bitcoin is not a magic.
do one video about land
But is paying rent and losing all that money this way and being exposed to constant rent increases really better than owning where you live? In the end landlords role over those maintenance costs in the form of rent increases
There will always be value and a necessity in having a place to live and place to work. The value of real estate is based on determining the value of discounted future cash flows. There’s plenty of Asymmetric upside if you understand how to do the math and find the value – and you can convert those cash flows into BTC! Of course there are risks in owning RE, but claiming its too risky because of some outlier, tail end, events is not entirely intellectually honest.
You are burning grey matter with this higher thought. RE maxis are going to be upset with you.
Good job!
One question I have is: How can you pay for daily expenses when the only assest one has is Bitcoin, since not many businesses yet will accept Bitcoin as payment. And if you most sell some Bitcoin for cash, how do you avoid the taxes?