Should I Sell My House To Buy Crypto?

4년 전

As crypto values have been exploding, people have been asking this question more and more.

"Should I sell my house/rental property/car and put it into crypto?"

This is a question that most people would think should have gone on the Shit Crypto Newbies Say article, but I'll make a case below why it's not that crazy.

Of course, common wisdom says "HELL NO!", and 'Hell no that's f'ing stupid!'.

And common wisdom is wise, for all the reasons that it is.

However, now might actually be a GREAT time to sell assets into this burgeoning speculative market.

I will list reasons why selling an asset and investing in crypto isn't a terrible idea, and I'll list reasons why YOU absolutely shouldn't do it.

REASONS TO SELL YOUR HOUSE AND PUT IT ALL INTO CRYPTO

A. The housing market is due for another crash. If you have profits, it's never a bad idea to take your profits.

B. - Houses in general are expenses. If your property is appreciating in value, great. If not...it's just an expense.

  • Rental property brings in income (and pays for itself). Whereas a house is mostly just a money pit. Keep the rental property if you like being a landlord. If you don't, or if the value has gone up enough, if you can afford the risk of going into crypto, then it's time to measure the risk/benefit ratio. If you like the steady income from a reliable income producing asset....just keep it.

  • If you have a $20k+ car with monthly payments and insurance....then one can argue that it's a MUCH better risk to get a $5k car and be putting the 'savings' into crypto. Spending $6k a year on a car is dumb (unless you're rich and can afford to blow $6k+/year on driving an expensive car, then hey, go for it)

C. The crypto market is the next paradigm of technology. It is the future. It will follow the dot.com pattern where the early entities make bank and then disappear (I'm talking about you Bitcoin), and from the ashes will rise the Facebooks and Amazons of the new crypto world. 2017 was a breakout year. 2018 is going to be crazy.

Taking a big risk now could very well pay off BIG. One could have said that the dot.com 'bubble' was a once in a lifetime paradigm shift....but it looks like we're going to get TWO once in a lifetime paradigm shifts. It's still in it's infancy, mania is a psychological law and it's not even in full swing yet (nor even close to it), we're at the bottom of a HUGE amount of industry wide growth.

Sitting on the sidelines is a bad idea. While selling your house to invest it all may have risk to it, and while it may be against common wisdom, objectively it's NOT the worst idea in the world, depending on your circumstances*, of course.

*Having said that, a winning bet or three in crypto can be life altering and change your circumstanes in a way that sitting there slaving away to pay for your money pit house never will. So taking some risk now, 'sacrificing' some comfort now, is oftern worth it. No risk, no glory.

WHY -YOU- SHOULD NOT SELL YOUR HOUSE TO GO ALL IN ON CRYPTO

There's a few non-negotiable reasons why you should NOT sell your house and put it all into crypto.

A. You asked a bunch of strangers on the internet if you should sell your house to get into crypto.

If that was you, DON'T DO IT. That I even need to explain why is why.

  • You have no clue what you're doing. That's a BAD place to stand. That's FAR more risky than selling your house and putting it all into crypto.

  • You asked STRANGERS on Facebook about a MAJOR financial move. Not only that, but you asked clueless strangers. That makes you stupid, and you should respect the common wisdom that urges you to not take unwise actions.

B. The crypto market can have a big crash that could take years to recover from. So if you sell your house and buy at the top of the market, you instantly lose A LOT and then have to sit on that loss until the market (probably) recovers some day and THEN sit on it even longer until that life changing profit arrives.

(Now, if you had those funds available, and bought in near the bottom of that crash.....)

I presonally think that we're not going to see that crash for a couple years, and then when it does it won't take that long to recover.....but nobody has a real crystal ball.

If you aren't really clear of the risk/benefits ratio and able to shoulder the possible downsides, don't make such a big move.

ALTERNATIVES TO SELLING YOUR HOUSE

A. Houses are expensive (depending on where you live). You're on the hook for the roof, water damage, broken windows, monthly mortgage payments than rent, etc

Just like getting out of an expensive car and into a cheaper one provides instant savings, one could easily make the argument that getting out of the expensive house and into a small cheap rental would save you lots of money every month. That's savings that could be put into crypto on a regular basis, increasing your profit potential.

And maybe you get some cash in hand as profit from sellign the house. Now you have options. Put some or all of it into crypto....but now you have options and can increase/decrease your risks (but you're instantly saving money every month, that's a win).

B. Rent out a room in the house. Or turn the garage into living space and rent it out.

That's instant monthly income that you can put in to crypto (Ha! Have them pay you in bitcoin.)

It's an exciting time to be investing (gambling) on crypto. You might now want to sell your house and go all in as that's too much risk for most people (who don't have a clue what they're doing), but there's a lot of options to get more skin in the game.

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Good read. What would be your advice to someone thinking about taking out a second mortgage to invest in crypto?

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I wouldn't ever give 'advice' because I'm not a licensed financial advisor. :)

Having said that, I personally wouldn't go into debt to invest in crypto.

Getting out from under an expense and/or taking profit to speculate with is an ENTIRELY different animal than taking on debt to speculate.

Said another way, you want to gain, not lose. Taking on debt is losing.

If you took out $10k or less that's one thing....if/as one can pay that off even if lost it all. Dumb but might be worth it in a risk/benefit analysys, depending on you and your scenario.

But taking out $100k+ as personal debt to gamble?? Hell no. If you win you win big great, but if you lose you lose BIG. Again, it's all relative. If you can afford to gamble with $100k of debt, I would (but I can't, so....therefore it would be REALLY REALLY dumb.)

Common wisdom is 'Don't invest more than you can lose'. Which is really 'Don't gamble more than you can afford to lose'. You can't afford to lose $100,000 -and- still owe $100,000 to the bank (which could possibly end up with the entire home and whatever equity you have in it).

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Agreed! I would never take out a loan to invest in something. Trying to be debt free not accumulate it. Never invest more than you stand to lose is sound investing; otherwise it's just gambling.