Retirement Planning: Traditional real estate method vs. Cryptocurrency?
Retirement planning today offers investors a great deal of freedom and a wide range of choices. The retirement money was previously invested in pension schemes or other traditional vehicles such as stocks, bonds, mutual funds, Treasury notes, etc., but that is not the case now. As the times have evolved and technology has developed, the investment process has also been taken to a different level.
Real estate investment has been considered to be a great investment option for retirees as it has the potential for long-term appreciation along with tax benefits. However, due to its high capital requirements, it was considered to be an option only for those with high financial stability. With the emergence of blockchain technology, gone are the days when only the elite could invest. Blockchain technology aims to make real estate accessible to people around the world.
The real estate sector is a huge market that forms around 60% of the global market. Despite being one of the largest sources of wealth, the real estate sector is largely illiquid. As already stated, the real estate market was earlier considered to be the market for the rich alone. Now that is not the case. Let’s see some of the reasons why trading real estate through cryptocurrency is considered to be an efficient choice for retirees.
What is cryptocurrency?
Cryptocurrencies are digital currencies that are used instead of tangible fiat currencies. They are digital assets that are assigned arbitral values and encryption techniques are used to regulate the generation of such currencies. It is also verified by transferring the funds over a highly secured blockchain network.
Blockchain is a technology that is specifically designed to host a decentralized marketplace. It is designed to make the transfer of funds unanimous and protected using the highest of securities. For any transactions to take place successfully, the computers connected to their network should provide and confirm the impending transactions. Blockchain also acts as a ‘smart contract’ and all the predetermined criteria need to be successfully met in order to proceed or even complete the transaction.
Now that the real estate assets are distributed using blockchain technology, the use of cryptocurrency enables the retirees to exploit the benefits of blockchain and ensure a secured transaction using a single global currency.
Cryptocurrency and its impact on the real estate market
Cryptocurrency has been introduced almost a decade away, but it has not been utilized to its full potential yet. Investors believe that cryptocurrency does have the ability to alter the financial landscape. Real estate transactions are known to have lengthy closing periods. The sheer amount of paperwork and involvement of several individuals, usually makes the transaction a lengthy and inefficient process. With the use of Cryptocurrencies and blockchain technology, the entire trading process has been simplified and the time spent completely on the deal has also been shortened.
The fact that the real estate assets cannot be converted into cash immediately, was something that was a major concern for the investors. With the tokenization of real estate, now real estate is no longer an illiquid asset and can be traded whenever you want at its market price. With the development in technology, investors have also started to prefer fractional ownership over joint ventures. Blockchain has efficiently made it possible for investors to pool in their funds to acquire a single high ticket property.
As the blockchain-oriented platforms follow decentralized procedures, it is considered to be the most secure technology among others that are in circulation. The ease in verifying the details of the buyers and sellers has also been instrumental in boosting the confidence of the sellers as well.
Traditional real estate vs. Cryptocurrency
|
Pointer |
Traditional Investment |
Cryptocurrency |
|
Capital requirements |
Real estate investment through traditional methods can be a little costly as it requires large funds. |
Real estate assets are broken down into smaller blocks using blockchain technology. Thus, you can invest in real estate now with lower capital as well. Cryptocurrency and Blockchain have helped in eliminating the entry barrier. |
|
Ease of investing |
Traditional investments can be time-consuming and costly. You are required to carry out due diligence on your own or with the help of professionals. The traditional investment process also can be time-consuming as it involves several paper works. |
Cryptocurrency and blockchain have made the investment process a lot simpler than the traditional process. You can invest in real estate using cryptocurrency with just a few clicks. |
|
Risk Factor |
A risk factor is comparatively lower in traditional investments as they are more stable and because they are tangible. They are also long term financial assets that are capable of earning you monthly returns. |
Cryptocurrency stands a risk as it is intangible and since it is stored digitally, it stands a risk from malware, hackers, and operational glitches. If a hacker manages to get access to your private encryption key, then Bitcoins can be easily transferred. |
|
Traditional real estate investments are illiquid or have a very low liquidity rate as they cannot be converted to cash quickly. |
The cryptocurrency has increased the liquidity rate for real estate assets and has made real estate assets easy to trade. |
|
|
Tax benefits |
Tax benefits are more on traditional methods. By investing intangible properties, you can claim tax deductions under section 24 and 80. |
Limited tax deductions on income generated through cryptocurrency. |
Bottom Line
Blockchain technology and cryptocurrency are newer technological developments that are yet to be used to their full potential. As more people become more familiar with the concept, it is most likely to disrupt the real estate sector and replace the traditional investment process to a large extent. As a retiree, you would like to invest in opportunities having less risk and a stable income. Since real estate properties are stable and less volatile, it may be a good option for retirees. However, the high capital requirements may cause a huge entry barrier that can be eliminated using cryptocurrency and blockchain technology. Assetmonk is a platform that operates through blockchain technology and offers real estate assets that offer high capital appreciation along with an IRR of 21%.
Retirement Planning: Traditional real estate method vs. Cryptocurrency FAQ's:
National Pension System (NPS), Public Provident Fund (PPF), Mutual funds, bank deposits, real estate, etc. are some of the best investment options for retirees.
Yes, Bitcoin and the investment through blockchain technology is a good investment as it is easy to trade and comparatively the most secure network to transact. It has made real estate a more approachable investment option as it breaks down real estate assets into small blocks. Investing in real estate using cryptocurrency and blockchain technology can help you reap the benefits of both options.
No investment is completely safe. Options such as bank savings accounts, CDs, Treasury securities, money market accounts, real estate, and fixed annuities are some of the most common investment options availed by retirees.Â
