Finding your space: Crypto Vs real estate
In a world where Cryptocurrency has created a €3bn market in what feels like a few years, and with it, challenging monetary governance around the world. In a world where NFT investment is making millionaires overnight, and where people are already wondering what the real estate market might look like in a metaverse. We spoke with Roman Carel, Founder of Athena Advisers, to see where he thinks real estate fits within today’s constantly changing paradigm of investment opportunities.
"How long will it be before someone asks to swap their image of a gorilla in sunglasses for a penthouse in Lisbon?"
Roman, if we’ve already helped clients invest in destinations like Lisbon using realised Cryptocurrency profit, how long will it be before someone asks to swap their image of a gorilla in sunglasses for a penthouse in Lisbon?
Ha! It’s only a matter of time. NFTs are just a new form of Crypto - Crypto Art. They’re less understood by the masses right now, but the same was true of Bitcoin back in 2015. Back then with a bit of effort, you could buy a Bitcoin for less than a thousand euros. Today, that Bitcoin is worth tens of thousands of euros.
If anything, Crypto art has hit the wealth markets faster than Crypto did. The digital artist Mike Winkleman selling a portfolio of 5,000 of his images for $69m via Christie's is no better example. Five months before this happened, the most he’d ever sold a print of his work for was $100. So wealth creation from these newer digital assets, and also generally as a different route for investment, is already a proven model.
With that in mind though, where do these more modern forms of investment sit today, when compared against traditional real estate investment? How would you compare the risk?
This is the ultimate question and it has been asked again and again, ever since the origins of stock trading became a significant competitor to the model of owning real estate, which itself is thousands of years old.
In a capitalist society, people are looking to invest for various reasons. To make money. To protect wealth. To perpetuate a certain lifestyle. Whether we’re talking about new currencies, new market places or new asset types, it’s always going to come down to a balance of priorities for the individual and what they want to do. It’s lifestyle versus investment, risk versus reward.
If you take currency as an example. Today’s newest currency is digital. There are now 10,000 different cryptocurrencies all vying for market prominence. But if you look back, it’s not the first time history has seen new currency come into play. When the first Forex market was created in the Netherlands in the 1500s, the American dollar didn’t even exist. The dollar was officially established in the late 1700s and America didn’t become a real superpower until the end of the 1800s, some years after the Civil War had ended.
How did people look at the US dollar or US investments throughout these periods? Into a young country, with a new currency and a market with many internal difficulties? There was a huge risk. Then within 30 years or so, the US was a global superpower.
"Investing in a hard asset is about two things: the overall wealth strategy for the family and the lifestyle value it provides."
So people look at Crypto today as many would have viewed the US dollar back then. As, quite rightly, a market with much trepidation. As we all know, between November  and January  Bitcoin lost 48% of its value, causing thousands of owners to sell before it went further south. Since then, it’s gone back up by 25%. But Bitcoin isn’t the official currency of any one country and the way people deal with it currently is more like a stock than a currency, where you can make money, but only with risk.
When the value of cryptocurrencies rises and falls, as does a stock, as can the value of real estate, all these types of assets are affected by demand and supply, but the range of margin is different between them.
For property, you may not see the value of it multiply 10-fold in a few months, but what makes sense from a wealth point of view about investing in a hard asset is what it delivers in two areas: firstly the overall wealth strategy for the family and then secondly, and most importantly, the lifestyle value it provides.
A second home is just one type of property asset and it’s about creating family legacy and moments together, for making memories. For some, it’s about the actual creation of it, the design and construction, like building a piece of art and the legacy it provides thereafter.
For others, it’s about the revenue generation strategy behind it, from rental to capital appreciation, as a hedge against inflation or the monetary system being challenged by the new financial models we see today. It has this timeless sort of preservation associated with it.
But what about how you buy it? That’s the other big difference with real estate - the ability to leverage the money of others to purchase it. This is something you can’t do with stocks or Crypto.
Yes. If there is magic in property made through memories, the other magic is from the financial standpoint. It’s the only asset that can be bought not using the money of others, with the larger amount paid by the bank and the repayment amounts of this loan again paid by others through rental income. Yet in the meantime, you can accumulate family memories that will hopefully give grounded stability and help you and your kids towards a good life path, often by having everyone in the outdoor world.
How then do you see it when comparing different types of property? The ski property in the Alps or the apartment in Lisbon, these are often lifestyle purchases, they are second homes. So if we think of these as different assets, the same way there are different cryptocurrencies, and also different stocks, there are also different real estate types. Commercial properties, even real estate trusts and funds too.
Exactly, there are different types of all investments and only a few people can claim to understand each to a point where they can provide sound advice. Most people think of any investment process backwards. They have good intentions, to increase their wealth for example, but without a goal people fall into the ‘making money’ traps. When instead, whether it’s through crypto, stock or real estate, it should really be approached as money management to serve a life goal.
And it could be a family goal, an individual’s goal, a quality of life goal, a lifestyle goal. They’re all different, but without them, people end up racing around trying to deal with the money, rather than make it work for them in the best way to achieve their goals.
Commercial property is often an interesting example with goals in mind as people often say there’s no lifestyle benefit of owning a commercial property. How could owning a logistics warehouse or high street retail shop provide a lifestyle benefit? You can’t use it, visit it or have holidays in it. But again it depends on the goal and most commercial property investments come from the desire for one or all of the following: income, peace of mind or incentives.
The logistics warehouse is outside Lisbon, a city where online shopping continues to grow. That’s your peace of mind. By investing in a commercial property you can apply for a Golden Visa application, putting the investor and his dependents on the path to European Citizenship. That’s the extra incentive, but with significant long-term benefits, such as the children more easily going to university in Europe. And then the income is the money the investors receive, perhaps to support a lifestyle choice, holidays for the family, education funds for the children or retirement.
So commercial property, the hardest asset of all real estate, can also be a lifestyle investment too, as long as you’re using the money for goals.
But now we’re talking about peace of mind too, and isn’t time management a big part of this? How does this link back to the different investment choices people have today?
Time is the one thing we all take for granted with our investments. In our business at Athena Advisers, it’s always refreshing to see someone put such a high lifestyle value on time, a value that’s higher than any cryptocurrency.
Take our recent German client for example, the latest to buy an apartment in Lisbon using Cryptocurrency capital gains. Aside from this being more evidence of Crypto fuelling a real estate market through the de-risking of portfolios, for him it was the time and the peace of mind factor that was the deal-breaker around him turning crypto capital into a tangible piece of property investment. Crypto or stocks are stressful markets to be involved with and real estate, provided you’re given sound advice, it is the opposite. We helped him invest in a growing market, to create a tangible asset that can be used as a family home, all whilst generating income.
And you can’t forget the often-overlooked benefits too. As a property owner in Portugal, he can now look at the country’s NHR programme, potentially reducing his tax profile worldwide. This shows you how the original real estate investment can save or make money in other ways too.
It’s interesting how Lisbon still has this draw though, isn’t it? We’ve been involved in this market way before it was the popular destination it is today so we’ve been fortunate to experience Lisbon’s curve firsthand. What do you expect for this market in the future?
I was asked this by a friend recently and the best way to explain it is to go back to the start of Athena Advisers. I think we started Athena on the basis of helping people invest in nice places they loved and enjoyed. And at the time, back in the early 2000’s, this was linked to growth of low-fare airlines and the fact that the mobility of people going abroad on holiday was generated by the accessibility of low travel costs.
But then what happened is that people realised that these places offered better lifestyles, more permanently. And some people move and relocated in southern Europe, away from the Northern European dynamic and business environment because they had already worked enough for them to be able to afford that quality of life.
After the 2008 recession, Portugal was one of the poorest countries in Europe, with Spain, Italy and Greece as well, and yet now more and more of the richest people are moving to live in Portugal for most of the year. And it’s not just down to the comparatively low price of prime real estate, or any one thing. It’s a Generation X movement, where people want to live the life they want and success is not seen as 'getting good grades', or 'getting a good job' and earning the most money.
Instead, it’s about having the creativity and opportunity to create a job that you are passionate about, where you can enjoy a better quality of life. And today, Portugal fully understands this movement, this purpose, better than any other in the world.
Life quality, safety, good weather, good education, a good health system, good infrastructure, a culture of championing new business and leading with technology. It went from being a poor country to offering what exactly the whole world wants. And with incentives like the Golden Visa programme, the NHR programme and so on, this global demand for a forward-thinking country will only continue.
To discuss investment strategies or opportunities across Lisbon or wider Portugal, please feel free to get in touch with us via our contact page.