Denver, CO · Member since 2016 · 114 posts · 99 votes
I've got some bitcoins that I would like to use to purchase real estate. Are there any institutions that will accept bitcoin as downpayment for a loan?
I've got some bitcoins that I would like to use to purchase real estate. Are there any institutions that will accept bitcoin as downpayment for a loan?
Admittedly I’m not up on the new craz...what is bitcoin?
It's a decentralized digital currency. Basically a way to transact and store value without any middlemen (banks, governments, etc). It's been on a tear this year (my initial investment grew 2000% in 8 months) so I'm looking to cash some of it out into RE but I would rather pay in bitcoin directly than cash out to dollars because cashing out large amounts of bitcoin can move the markets (if I sold $1M of bitcoin I would get a lot less because the entire market would see my sell order and it would drive the price down) than if I just used it directly in a transaction.
Good luck explaining that to a seller and the Title Company. I completely understand, but most people are clueless as to what you are saying.. There are still people out there who only deal with cash, and are queasy about using credit or debit card to make purchases.
Why not liquidate your investment in small chunks, and wait for market to adjust rather than in one lump sump of $1MM. May require some patience, but trust me, this stuff is not easy for some people to follow...
My issue with that is I would have to liquidate before I would like to. A lot of deals fall through in due diligence and if I have to liquidate early I could lose out on significant gains. For example, even if I liquidated by bitcoin just a month ago, it would have lost 50% of its value.
I understand this is not easy, but this is the creative financing forum so trying to think creatively here =)
I'm afraid you are assuming that Bitcoins is not going to crash tomorrow, right? lol..
There was a site I listed a house on to sell via bitcoin in 2014, no luck but I am sure there are other sites in 2017 or more than a few who would take bitcoin as trade.
Maybe in the future you might see sellers request bitcoin or a bitcoin based crypto currency specifically for real estate transactions.
@michael Biggs I am not trying to avoid taxes I am trying to use bitcoin as down payment for a loan. I’m not sure how you know this is impossible banks are trading in bitcoin futures and SEC is regulating it as a commodity so there has to be a few banks that are willing to do it. Hopefully a mortgage broker can chime in here
@Jerry Shen , using bitcoin to buy real estate is not a popular move in today's market. 95% to 99% of the sellers and title company will not accept bitcoin include myself. If you insist on using bitcoin to buy real estate today, you may be limiting yourself to a very small percentage of the inventory.
If you sell the bitcoin and cash it out, you open up yourself to 100% of the inventory availble on the market.
If you are serious about buying properties, cash is the KING today.
Very recently had someone (who did not need to use the Bitcoin) try to increase their down payment by over a hundred grand, so they could be less in debt, using Bitcoin that had not been adequately seasoned (the Bitcoin has just gone up a zillion percent...). FHA loan.
What came up is sourcing the funds. If you have a bunch of stocks in a Fidelity or Charles Schwab account, you can give me account statements. This particular investor had his funds in the Coinbase clearing house. I created a Coinbase account and threw some money in it so I could generate as close to traditional bank statements as possible. We could come up with basically what the mortgage industry would call "Transaction Histories," but not "Bank Statements."
It came down to the anonymity. What people find appealing about Bitcoin, is what made it run afoul of the post-recession and post-9/11 PATRIOT Act anti money laundering stuff.
This is a direct quote from the FHA Customer Service team at the Department of Housing and Urban Development, again for an FHA loan.
The way I read this, Coinbase (or the chosen cryptocurrency clearing house) would need to fully comply with every single thing that Bank of America and Fidelity does to verify your identity, and then issue regular normal vanilla bank statements (if you have to use the word "but..." to argue for how the thing is a bank statement, it's probably not a bank statement), which they currently do not (hours spent on customer service, clicking around my account & the borrower's account, etc etc). Coinbase didn't even ask me for my SSN when I made an account, and it looks like I can change the name/email of the "account holder" in like 3 clicks, which gives validity to the concern raised by the HUD employee.
- Now, I am told that in theory Fannie will (and has) gone for it in the past.
- I am also told that a few portfolio jumbo investors will go for it, provided you can go back to when you invested in the bitcoin, and show the US Dollars clearing your traditional bank account, however many months and years ago that was, and track every single dollar going into it from a traditional depository institution along the way.
Currently your best bet will be to make the down payment and closing costs using USD presently (and for the last two bank statement cycles) residing in a FDIC-type depository institution. Prepayment penalties are a thing of the past, so dump your bitcoin into paying down the balance (and, possibly, dropping the PMI) after the fact - no one sources where you make your normal monthly mortgage payments from.
It's going to be in limbo and a giant "it depends" until such time as someone opens a Bitcoin clearing house that does all the little compliance and PATRIOT Act things that Wells Fargo and Fidelity do, or (more likely) until such time as Fidelity or Wells Fargo adds Bitcoin to their financial service offerings.
If someone wants to be in that "it depends" grey area and try to introduce Bitcoin into a traditional mortgage application process (but don't bother trying if it's FHA), please have a Plan B and be careful with your contingencies.
Interesting points but I don't look for FHA or Fannie/Freddie loans as my income varies quite a bit and I deal mainly in commercial properties so I'm usually getting a commercial loan that originates from a bank or credit union. FHA may have stricter KML laws but I know for a fact that Coinbase is compliant as I have had no problem transferring large amounts of money between coinbase and my bank (Wells Fargo).
Perhaps I should spell this out for people. The government is not a fan of bitcoin. This is because all of the experts say all cryptocurrencies are for the purpose of money laundering. Banks do not tell you when they report your transactions as suspicious to the government.
Many transactions over about $9500 ($10,000 is a soft cutoff. Multiples of $9000 + will also automatically get reported) that a bank can tell are from a cryptocurrency conversion will be reported. It is done with a simple click by the teller or by a processor later.
Each one of those reported transactions makes it more likely the person will be audited by the IRS. If you are a foreign national or someone else that might be on a watch list those are the exact transactions the USA PATRIOT Act's financial provisions were meant to detect.
@Chris Mason is spot on as usual. Bitcoin and other cryptocurrency cannot be used as a down payment in a traditional mortgage (Conv, FHA, VA, USDA). However if you liquidate the Bitcoin, and can show evidence that you were the one who made the initial investment(s) via bank statements, then those funds should be able to be used, as long as you are prepared to show all that. Sourcing of funds is 100% required, every time.
Perhaps I should spell this out for people. The government is not a fan of bitcoin. This is because all of the experts say all cryptocurrencies are for the purpose of money laundering. Banks do not tell you when they report your transactions as suspicious to the government.
Many transactions over about $9500 ($10,000 is a soft cutoff. Multiples of $9000 + will also automatically get reported) that a bank can tell are from a cryptocurrency conversion will be reported. It is done with a simple click by the teller or by a processor later.
Each one of those reported transactions makes it more likely the person will be audited by the IRS. If you are a foreign national or someone else that might be on a watch list those are the exact transactions the USA PATRIOT Act's financial provisions were meant to detect.
I'm not sure where you are getting your information but my experience as someone who holds (and transacts) in large amounts of bitcoin:
1) Money laundering with bitcoin is no easier than with cash. In fact, the blockchain is public and completely NOT anonymous this is a common misunderstanding. It is very easy to trace bitcoin transactions they are in plain site and any exchange that operates in the United States has to abide by the same KML and anti-terrorism and anti-money laundering laws and as any other financial institution.
2) Everything you wrote also equally applies to cash. There is no difference. Anything above $10K in cash is also reported.
3) Likelihood of an audit is not a concern unless you are hiding money. That's not what I'm trying to do. Most people with lots of money have a higher chance of being audited anyway.
4) The government does not hate bitcoin, it has been adopting a wait and see approach but I encourage you to read actual government statements like the one released today by the SEC chief on ICOs. Bitcoin transactions are 100% transparent and available on a public ledger. It's a dream for the IRS and far easier to track than cash. Why would they be against that?
Your statements may have been accurate 4-5 years ago but they just aren't true anymore.
@Chris Mason is spot on as usual. Bitcoin and other cryptocurrency cannot be used as a down payment in a traditional mortgage (Conv, FHA, VA, USDA). However if you liquidate the Bitcoin, and can show evidence that you were the one who made the initial investment(s) via bank statements, then those funds should be able to be used, as long as you are prepared to show all that. Sourcing of funds is 100% required, every time.
Makes sense, but I don't buy traditional mortgages because I invest in large commercial properties which are outside of standard loans anyway. So curious if that still applies or if it's bank by bank.
@Jerry Shen ahhh, if you're talking commercial lending, that's a whole other animal. My guess is that the institutional big banks would have a problem with it, while the smaller local banks and non-bank lenders probably wouldn't care as much. But that would be a lender-by-lender call...
You may be better off selling the bitcoin and buying with normal cash. I am willing to bet that any institution which based part of its income on normal cash fees will be reluctant exchange for something so volatile.
@james they don’t have to hold on to the asset they can liquidate to cash as soon as they receive it. Just looking for a lender with some flexibility on this. I know I can always liquidate myself but it’s not a very flexible approach as I am long on bitcoin and I think it will still go up in the next year.
People just trade bitcoin they don’t use it (yet). And how would that transaction go? The bank says oh we’ll accept 57 bitcoin. Oh that’s worth half what it was two weeks late? Yes you could have significant gains... or losses.
My other point is.
Tulips
Ironically, my law firm just did a presentation about this, feel free to privately message me and I can put you in contact with one of the few attorneys in the nation advising clients on how to use bitcoin for financing RE.
Some people are bull on bitcoin, others are bear on bitcoin. Whether bitcoin goes up or not is an unknown.
I wonder what would happen if a lender accept bitcoin from you today (Dec 13, 2017), and the value of the bitcoin drop by half at closing (say one year later, Dec 5, 2018)?
If the bitcoin value is dropped or lower than the price (the time you offered the bitcoin to the bank), the bank may reject the transaction last minute at closing.
Sorry my post was muddled. My point was that a bank is going to want stable currency to do a deal that will take a month.
Sorry I'm not sure I quite understand your point. I'm not looking to settle the amount on bitcoin, I'm looking to settle on dollars. No different than if I had euros and on closing just sent them to the bank at whatever the prevailing exchange rate was and the bank can just exchange to USD.
Sorry my post was muddled. My point was that a bank is going to want stable currency to do a deal that will take a month.
Sorry I'm not sure I quite understand your point. I'm not looking to settle the amount on bitcoin, I'm looking to settle on dollars. No different than if I had euros and on closing just sent them to the bank at whatever the prevailing exchange rate was and the bank can just exchange to USD.
Euros and bitcoins are not even remotely the same. That's like comparing apples to oranges.
Brian please elaborate on how it’s different. At closing bank takes x euros valued at y USD and exchanges immediately or takes x euros valued at y usd and exchanges immediately. Bank gets cash either way
I'd go talk to portfolio lenders and explain the situation. You may find one that is willing to count your bitcoin as cash in the bank knowing your plan to cash them out right before the purchase closes. Then you get around the having to cash out and have it sit in cash for too long.
Sell them on coin base, then just use that money to put down. Banks really don't understand crypto, and the ones that do hate it because it POTENTIALLY puts t hem out of a job.