153 sats \ 9 replies \ @orthwyrm 1 Jul \ parent \ on: Stacker Saloon
I think the rent vs. buy debate is especially interesting from a Bitcoin lens, because:
- There's a severe opportunity cost in deploying capital for the deposit which could otherwise be allocated to BTC.
- Bitcoin's success is somewhat antagonistic to real estate, as both are competing for the role of store-of-value.
- Bitcoiners are especially sensitive to what constitutes "true" ownership. Housing can be seized and destroyed in a fashion not really applicable to Bitcoin.
I've always had the sense that buying presents too much of an opportunity cost, but I never really ran the numbers. So I started playing around with this calculator yesterday:
https://smartmoneytools.co.uk/tools/rent-vs-buy/
I concluded that if Bitcoin appreciates at least 20% per annum, you are simply better off renting. This is assuming 7% mortgage rates, 7% annual rent increases, a 20% deposit for a fairly typical property (£250k), first-time buyer, and standard config for everything else.
tl;dr I reaffirmed my belief that housing is a shitcoin and you should probably avoid becoming boomer exit liquidity.
Whilst I agree with your premise the advantage of a mortgage is surely the ability to overgear your initial deposit and access that large capital amount and its potential gains? And location plays a hugely variable part in all this.
Not sure the bank will lend me 10x my deposit to buy Bitcoin lol…. Their loss.
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Agreed, but it's simply that the opportunity cost of not having the deposit in Bitcoin really is that powerful. I think my calculations were rather biased in favor of buying real estate, honestly.
RE: location, it depends on how good you are at picking your market. Places which are already nice have a premium (larger deposit = larger opportunity cost), whereas up-and-coming neighborhoods are cheaper but more of a gamble.
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It’s hard to pick those up-and-coming places so as a rule its better to have the worst house in the best area than the best house in the worst I guess…
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You have to factor in leverage
Borrow 80 percent, home equity increases, etc
Maybe you can take out a home equity line of credit and buy bitcoin
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I think you're right. Renting has some advantages and disadvantages, but everyone has a different life situation and we have to see what's best for each of us. Thanks for the calculator!
This happened in Japan in 1990. Rich retirees sold their assets and Japan has been in a slump for 34 years
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Boomer exit liquidity
Great line
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