Nigel Ojji: Real Estate Or Crypto, Where Should I Invest?

In this current financial climate, individuals and organizations are looking out for the finest investment options to venture into, investments that guarantee good returns over a given period of time. Looking at the world today, there is a huge buzz about cryptocurrency (crypto) and other tech ideas, this has led to various comparisons between real estate investment and crypto investments. A lot of investors have consulted me for guidance therefore, I am compelled to write this article.

We can categorically say real estate and crypto are at the top echelon in global investment options. While real estate is seen as one of the oldest forms of investments, dating back to thousands of years, crypto on the other hand is a new form of investment. The “Bitcoin” was founded about a decade ago and has yielded a massive return on investment greater than most orthodox forms of investments. The past three years alone has shown drastic price changes for both real estate and crypto, however, the argument on which is the better investment option still remains. For the sake of my target audience and based on my wealth of experience, my emphasis will be narrow to the Nigeria real estate market. In this piece, I wish to refer to cryptocurrency as “bitcoin”.

Nigeria Real Estate Market

The Nigeria real estate market is unique compared to other parts of the world. In 2008, the US housing market crashed and lost 42.3% of its value, grew by 29% in 2019 according to the S&P 500 Real Estate Index and has experienced consistent growth since then. Unlike the US, the Nigeria market does not crash, it can be a bit stagnant or slow but certainly never crashes. There is a reason for this, aside our uniqueness in Nigeria. I will discuss this in my next article.

In Anambra state, eastern Nigeria, the commercial real estate sector was the most affected by COVID-19 pandemic. The effects of the pandemic on residential real estate market ranged from difficulty in rent collection to a decrease in investment yield. However, in Lagos, tenants request for the extension of long-term leases were denied, rental and sale values rose for commercial assets in general and there has been an increase in the demand and supply of land for commercial real estate. A breakdown of Nigeria Bureau of Statistics data reveals that the sector recorded 3.85 percent growth in Q2 2021 despite the COVID-19 pandemic, “this shows investors’ confidence in the Nigeria real estate sector as a subsector of the economy which thrives despite the current inflation and devaluation of the naira” Freeman Osonuga, Real Estate Investor, Advisor and Best-Selling Author, says.

Cryptocurrency in Retrospect

Bitcoin is the most popular of all cryptocurrencies and most talked about investment opportunity right now. The mayor-elect of New York City has said he wants to be paid in bitcoin and wants to make the city “Centre of the cryptocurrency industry”. Many cryptocurrencies are now accepted as a medium of exchange in most parts of the world and are currently backed by blockchain technology. Bitcoin was created in 2009 and it took just eight years to breach the $1000 mark in 2017. Since then, following a rollercoaster of spikes and crashes, it peaked at an all-time-high of $68000 in November, 2021. Despite its volatile and speculative nature, a retrospective glance reveals an asset that packed the potential for very high returns.

The staggering increase in bitcoin prices means that despite median homes prices also enjoying an upward curve since the pandemic, crypto investments were the best choice. Even in markets that have seen a significant home price appreciation, such as Lagos, (150% median home price increase), the gap between real estate compared to bitcoin gains can be measured in billions of naira.

Real Estate or Crypto?

Do not forget the aim of this article, it is meant to help you in your decision making between real estate investment and crypto investments. After an overview of both options, let us compare using L-SCRIPT, which is Liquidation, Stability, Capital, Regulation, Inflation, Potential, Tangibility.

Liquidation

How long will it take to liquidate any of the investment and get cash?
Real estate is not so easy to sell off. Before you can liquidate any of your real estate portfolios, you have to list it and find a buyer. The sales circle is usually in months. Crypto on the other hand, can be sold in minutes, using any of the exchange platforms like Binance, Blockchain, etc. Crypto investors call cash “fiat”.

Stability

The real estate market is stable and is not as volatile as the crypto market. Crypto however, is highly volatile. Bitcoin for example, hit an all-time-high ATH of $68000 in November 2021 and on the first week of December 2021, it witnessed a heavy decline and later went as low as $47000 and currently fluctuates showing the unstable nature of crypto investments.

Capital

Real estate is expensive and capital intensive. Recently, few real estate companies have made it easier for investors to diversify their portfolios without breaking the bank. Kerae Homes for example, gives investors the opportunity to invest as low as ₦1million for a period of 12 months and earn a good return on investment. Crypto investments however, are more affordable, you can start your investment with any amount and watch it while it appreciates in value. It may depreciate due to fluctuations but it always rises back and sometimes exceeds the initial ATH.

Regulation & Control

Government and institutional policies can determine the price in the real estate market, however, the strength of crypto lies in the fact that there is no central authority controlling it, no central bank or body. It is totally decentralized, although, this can also be a weakness, as investors’ fate are left in their own hands.

Inflation

Realtors usually encourage investors to buy properties to hedge against inflation. Part of the reasons bitcoin was created is to serve exchange purpose independent of any financial institution. The digital assets are not controlled by any government or central body and are free from inflation in any country.

Potential

We can agree that both investment options have growth potentials. However, the real estate market growth is quite slow compared to the crypto market, prices are stable and spikes in price rarely happens, but, crypto have the potential of yielding an incredible return on investment especially if you hold for a longer period. It also has better short-term yielding returns compared to real estate.

Tangibility

Real estate investment involves a physical asset, owning a property, we can say you have something tangible you can always bank on. Crypto investment on the other hand, are digital assets held in a wallet. If something terrible happens, like in event of losing the access to the wallet, only God knows what you will fall back to as an investor. Think about your mental health.

Conclusion

You have read the analysis, the PROS and CONS of both investment options, smart investors prefer to diversify their portfolios in their quest for passive income. Personally, I will have more real estate portfolios and a bit of crypto so I can sleep well at night. Someone might say my judgement is biased, based on the fact that I play in the real estate space. Well, they might be right. The truth is, I have in-depth understanding of the Nigeria real estate market. I always advise my family, friends and clients to invest in what they understand and have a bit control over. It is best to safeguard your mental health.

After making money from various investment options, what will you do with your money?

Trivia Question