Buying RE with Bitcoin
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..
@Account Closed Try reading more websites that do not contain "bitcoin" in the domain name. First it is not a currency. The deflationary myth goes back to before people understood it could be fractionalized.
Oh well. That's ten minutes, twenty four seconds I can never get back!...
@Jerry Shen My advice to you would be to possibly consider foreign markets. There's actually a large real estate offering underway right now in Dubai. Finder's fee if you take advantage of it lol
http://money.cnn.com/2017/09/06/technology/dubai-bitcoin-apartments/index.html
@Jerry Shen how much higher are you "prognosticating" that bitcoin will go up? If you sell some now, will that be liquidating all your holdings? It's no different than those who hold stocks, then need to liquidate to purchase items. Yes they "may" lose some potential future value, but cash in hand for a needed purchase is better than holding on & the market tanks just before you need the money.
As a side note, the real true investment is in the underlying technology, block-chain, not in the crypto-currency of the month. There plenty of industries that are now seeing the value of block-chain. IMHO bitcoin has lost its earlier years luster of being able to purchase "real items" in the "real world". At $16K a coin, what can you purchase? Whose going to accept .0001875 of a bitcoin for a grande at Starbucks? I do remember the days when I could of harvested the coins, but I had a Win98 machine hooked up to a dial-up modem. DSL was not in my area yet, but I did have the software downloaded to do it. I just thought it was a little fad for nerds at the time.
@Jerry Shen how much higher are you "prognosticating" that bitcoin will go up? If you sell some now, will that be liquidating all your holdings? It's no different than those who hold stocks, then need to liquidate to purchase items. Yes they "may" lose some potential future value, but cash in hand for a needed purchase is better than holding on & the market tanks just before you need the money.
As a side note, the real true investment is in the underlying technology, block-chain, not in the crypto-currency of the month. There plenty of industries that are now seeing the value of block-chain. IMHO bitcoin has lost its earlier years luster of being able to purchase "real items" in the "real world". At $16K a coin, what can you purchase? Whose going to accept .0001875 of a bitcoin for a grande at Starbucks? I do remember the days when I could of harvested the coins, but I had a Win98 machine hooked up to a dial-up modem. DSL was not in my area yet, but I did have the software downloaded to do it. I just thought it was a little fad for nerds at the time.
I'm not prognosticating a particular price, I'm hedging against the entire financial market. Crypto is the only asset that is completely disconnected from the existing financial system. So my investment thesis is that during the next crash (which is likely soon), RE will be at its lowest while crypto is at its highest. So to maximize my returns I need to hold the crypto as long as possible. I could be wrong, but the only way to make lots of money is to make educated bets and execute them. So that's what I'm trying to do.
I will never sell my entire bitcoin holdings because I am long term bullish on the technology. I think crypto is where internet was in 1995, a lot of what people on this thread are saying about crypto you can replace with "internet" in 1995. That's part of why I still think it's a great time to get in because most people who are not in technology are very skeptical but there is clear underlying value.
As for bitcoin vs blockchain I think there is value in both, but other applications built on the blockchain are largely unproven so I don't invest in any of them. And bitcoin hasn't been a currency for years. The current price of bitcoin is based on its perceived value as a store of value vis a vis gold. And I think it will be difficult for any other crypto to displace bitcoin for this particular function simply because bitcoin's security has been constantly attacked and hardened for 10 years. It also has the largest market cap so it's too large for 51% attacks even by nation states. Those are significant network effects and technology maturity factors that will make it very difficult for a crypto to supplant bitcoin as essentially the global reserve cryptocurrency. There will most likely be other cryptos that serve other functions but I would be very surprised to see anyone take this over from bitcoin (not is anyone else really contending).
Curious. With what you are planning to do are you going to write your offer in bitcoin? If that’s the case then I see no problem with it. How mad will you be if you write the offer and it’s accepted at the equivalent of 100k and by the time you close it is worth the equivalent of 150k?
No I would write the offer in cash and put the down payment in the equivalent exchange rate at closing to the seller (if all cash purchase) or bank (if financed). The volatility of bitcoin is not a factor at all (except in the 30 mins or so it takes to get the bitcoin transaction confirmed on the blockchain and exchanged for USD I guess). I tried saying this in previous posts but maybe did not make it super clear.
I think it's ironic that the so-called experts that are calling bubble on bitcoin are the same ones that purposely create bubbles to enrich themselves and leave taxpayers holding the bag. Bitcoin is probably a bubble (which is why I'm long term bullish but not trying to make short term profit) but so was the internet in 1995, that doesn't mean when the bubble crashed the internet had no value. The only difference with bitcoin is that this particular bubble is outside of their control, as it's completely open source, transparent and decentralized. Not the best asset class for Wall Street to fleece the public on =)
@Jerry Shen why when bitcoins doing so well for you do you want to buy real estate? What type of real estate are you looking for, and where? It seems like there should be sellers that would be willing to take their equity or at least a portion of it in trade for bitcoin. Is it possible to transfer Bitcoin to someone else, or does it need to be liquidated? What was your initial investment into bitcoin (if you don't mind sharing, and how long were you invested?) There's been some posts recently discussing the issue, so I'm curious.
I want to buy real estate to rebalance my portfolio. As to how much I put in I originally put in exactly 4% of my net worth in March. In 8 months it's appreciated 2000% so now it's about 43% of my net worth (much more than I have in RE at the moment) so I'm looking to diversify out without sacrificing gains. In investing that's typically done by exchanging one asset for another rather than using cash as an intermediary (which would require you to time the market perfectly).
Selling $1 M would "move" the market? According to blockchain.com, the total market value of all bit coins in circulation is over $280 Billion. The market "sees" hundreds of millions transacted daily. No offense, but anyone who claims a sale of $1 M of anything makes a noticeable impact in a market worth $280 B does not understand how large markets work. Btw, I'm not a fan of bit coin or any kind of crypto currency. Not into speculating. I have no dog in this fight other than I simply understand ratios. 1 M out of 281,000 M is nothing...not even 1/3 of 1%.
So I think you'll be safe to liquidate, if desired, and buy the real estate using good old USD. Unless the Seller is certifiably insane, they'll add a clause to the contract that the bit coin will be assessed at the time of closing and the present value applied toward the total purchase price that is denominated in USD or some other currency. I don't know of any title agency that would handle a closing like that since you wouldn't know the amount of funds needed to bring to the table until the minute you do the signatures....but maybe you can find one. This "investment" can pop and drop any time for the least foreseeable event. If there's one thing everyone agrees on, it's that crypto currency is volatile. One hack...value drops 30% in 10 minutes....pray that doesn't happen on your way to the closing table because you'll need another $300,000 USD to cover your purchase (if we're talking $1 Million). The other side...even worse perhaps, is the two hours after you buy the real estate, the coin doubles in values, meaning overpaid by 100% for the real estate.
Selling $1 M would "move" the market? According to blockchain.com, the total market value of all bit coins in circulation is over $280 Billion. The market "sees" hundreds of millions transacted daily. No offense, but anyone who claims a sale of $1 M of anything makes a noticeable impact in a market worth $280 B does not understand how large markets work. Btw, I'm not a fan of bit coin or any kind of crypto currency. Not into speculating. I have no dog in this fight other than I simply understand ratios. 1 M out of 281,000 M is nothing...not even 1/3 of 1%.
So I think you'll be safe to liquidate, if desired, and buy the real estate using good old USD. Unless the Seller is certifiably insane, they'll add a clause to the contract that the bit coin will be assessed at the time of closing and the present value applied toward the total purchase price that is denominated in USD or some other currency. I don't know of any title agency that would handle a closing like that since you wouldn't know the amount of funds needed to bring to the table until the minute you do the signatures....but maybe you can find one. This "investment" can pop and drop any time for the least foreseeable event. If there's one thing everyone agrees on, it's that crypto currency is volatile. One hack...value drops 30% in 10 minutes....pray that doesn't happen on your way to the closing table because you'll need another $300,000 USD to cover your purchase (if we're talking $1 Million). The other side...even worse perhaps, is the two hours after you buy the real estate, the coin doubles in values, meaning overpaid by 100% for the real estate.
I've addressed this the $1M is hypothetical the actual amount is more than that. And yes you can move the market with just $1M. As you said bitcoin is volatile that means small things can swing the pendulum in unpredictable ways. Exchanges are not connected so all you need to do is move the price on one particular exchange, you don't have to move the entire market. And spreading across multiple exchanges would mean I get eaten up by fees.
I've addressed your second paragraph in prior posts but tldr is that I am executing a particular hedging strategy and want to maximize my return based on that strategy.
Jerry, you're a bigger fish in a bigger pond that I am if you're hanging onto $1 M+ in bit coin. Given your considerable net worth, I'm a little surprised you're asking for advice on how to close a deal involving over 7 figures in crypto currency....but I guess we all have our blind spots. I wish I had some helpful advice for you on this, but I'm outclassed in this discussion. Best wishes on finding someone to help transact this deal.
I'm curious what lender would take something that can have swings of 50% on a weekly rate as collateral? I understand annuities, bonds, bank accounts but bitcoin?
Just deal with it - Either sell the bitcoin for USD, or keep it in hope that it goes up.
At one time I had over 2000btc, sold a great deal when while was under $100/btc to start my rental business. Now i'm planning on being around 85 units end-of-year. I don't regret selling the Bitcoin one bit. I got my first BTC back when you could go on one of the many faucets and collect 0.5btc/1btc a day. I lost it a year later after a Javascript injection looted something like a quarter of all bitcoin wallets. I've seen the price from 10c to now nearing $20k.
So, don't be shocked when 99%+ of banks won't take it as collateral. If you ABSOLUTELY want to do it, just spend a few satoshis and find the contacts for a private lender that will do the deal. There's ALWAYS options out there but you're going to have to go around and do most of the work yourself.
Jerry, you're a bigger fish in a bigger pond that I am if you're hanging onto $1 M+ in bit coin. Given your considerable net worth, I'm a little surprised you're asking for advice on how to close a deal involving over 7 figures in crypto currency....but I guess we all have our blind spots. I wish I had some helpful advice for you on this, but I'm outclassed in this discussion. Best wishes on finding someone to help transact this deal.
Well that's part of the problem Erik. All of the financial experts I've spoken to know less about bitcoin and crypto than many teenagers who are dabbling in it. Believe it or not I've gotten more information out of this thread already than I've gotten from some very expensive wealth planners. That's the nature of disruptive technology I suppose.
And I don't think the actual amount of the transaction is really relevant so I wouldn't say you are outclassed. Even if there was someone who has done something similar for 1BTC I would love to know how and with whom.
I'm curious what lender would take something that can have swings of 50% on a weekly rate as collateral? I understand annuities, bonds, bank accounts but bitcoin?
Just deal with it - Either sell the bitcoin for USD, or keep it in hope that it goes up.
At one time I had over 2000btc, sold a great deal when while was under $100/btc to start my rental business. Now i'm planning on being around 85 units end-of-year. I don't regret selling the Bitcoin one bit. I got my first BTC back when you could go on one of the many faucets and collect 0.5btc/1btc a day. I lost it a year later after a Javascript injection looted something like a quarter of all bitcoin wallets. I've seen the price from 10c to now nearing $20k.
So, don't be shocked when 99%+ of banks won't take it as collateral. If you ABSOLUTELY want to do it, just spend a few satoshis and find the contacts for a private lender that will do the deal. There's ALWAYS options out there but you're going to have to go around and do most of the work yourself.
You're probably right that private lending is probably going to be a better option for now. What better way to find those lenders who want bitcoin than posting on biggerpockets, though? =)
And again, I sound like a broken record, but no lender needs to hold the bitcoin as collateral. They can unload immediately and not be subject to the volatility of the asset. It's the timing and uncertainty of closing on commercial transactions that is the core problem I'm trying to solve.
Jerry Shen has raised the issue that concerns me most about bitcoin. There are lots of people in the world and certainly companies that have enough money to cause a collapse of bitcoin.
We do not know who the insiders are in bitcoin. Jerry Shen might be Satoshi Nakamoto. We do not know if big players are shorting their own positions because they plan on collapsing the bubble.
I do hope Jerry Shen was able to turn his fortune from Yahoo! (Does the "!" show my age?) into 5000 times more money with bitcoin.
I wish George Soros was here. He is brilliant in shorting currencies and their equivalents.
Jerry Shen has raised the issue that concerns me most about bitcoin. There are lots of people in the world and certainly companies that have enough money to cause a collapse of bitcoin.
We do not know who the insiders are in bitcoin. Jerry Shen might be Satoshi Nakamoto. We do not know if big players are shorting their own positions because they plan on collapsing the bubble.
I do hope Jerry Shen was able to turn his fortune from Yahoo! (Does the "!" show my age?) into 5000 times more money with bitcoin.
I wish George Soros was here. He is brilliant in shorting currencies and their equivalents.
Most big players are shorting their own positions (especially miners) as a hedge. Hasn't caused a crash so far. With bitcoin futures volatility has decreased pretty significantly.
Keep in mind to short a future you need someone else to hold the long position. It's a two way contract and it's cash settled so no actual bitcoin ever changes hands.
Your concern is definitely possible but I don't think it's quite as likely as you may think.
Before the introduction of futures there was no effective way to short crypto which I think is why it had such a huge run up so quickly. Time will tell of course, CME (world's largest futures exchange) opens bitcoin future trading in 4 days. Exciting times...
@Jerry Shen I apologize if this is a repeat of info or if it constitutes an "application" that you don't trust, but your thread prompted me to locate Propy.com, whose website says "Propy allows buyers, sellers, brokers, and escrow/title agents/notaries to come together through the utilization of a suite of smart contracts on blockchain to facilitate transactions." I have no stake in anything crypto, thus appreciate the interesting thread and feedback from all.
Interesting thread, although I think you just set up a straw-man argument with the statement about the internet in 1995. The internet was a viable platform back in the '90s. The internet companies that failed, failed because they didn't have a viable product or service, not because of the underlying technology of the internet. BC is not a currency being used by the masses for any reason.
Like I said earlier, I remember bitcoin when it first came out & it was still in the single digits per bitcoin. I could of mined it. I doubt most people even know that at one time, you could of "created" your own bitcoins & litecoins out of computing power magic. The novelty of bitcoin for non-criminals, was finding places that accepted bitcoin to spend. Bitcoin was also & still is the wild west in regards to it's use in the darkweb, the INSECURITY of storing your bitcoins, etc. Now they have exchanges, which are still not as secure as they are advertised to be by the operators. They are still insecure to those of us who know what they are doing & have a desire to steal bitcoins. I still remember an article about a guy who threw out some old hard drives, which unfortunately had his bitcoin wallet on them. At that time bitcoin was still in the $200-$500 range, and he had over a $1M in bitcoins on them. He was an early adapter and mined his coins.
Unlike bitcoin or other cryptocurrencies, we know where gold is stored. Once an exchange or your wallet is hacked, which has and still is happening, you are out of luck.
BC is still not a true investment, in that there is no underlying asset. Unless you count "hope it goes up" as an asset. I mean why is it today $16K vs several years ago when it was $500? What in the "real" world has driven the value up? Block chain is truly the investment. It's not a smoke & mirrors concept. It's straight up math & technology. Various industries are now starting to utilize it for true real world services. IMO, the "pipe dream" of BC is definitely driving the creation of all these other crypto currencies. With all of these crypto-currencies, which one is going to 1)be accepted by the world-wide banking industry, 2)be accepted by the regular man on the street that wants to buy some gas at a gas station, groceries, clothes, etc. At the price point now, BC can only be "used" for big ticket items & that if it is accepted. Sure you can cash out, but what happens when a bubble is determined, like the housing & stock markets, it's value will crash and crash hard. If it is not accepted by the banking industry, it won't rebound to where it was. Parts of this country haven't rebounded from the real estate market crash.
I do wish I had spent more time setting up my lab to mine both BC & LC. Who knows, I definitely would of been a crypto multi, multi millionaire, but I doubt it b/c I'm sure I would of cashed out at some point before it headed north of several hundred dollars
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.
I read a WSJ article about this.
Personally I have no interest in bitcoin. My main reasoning:
Money is often defined in terms of the three functions or services that it provides.Money serves as a medium of exchange, as a store of value, and as a unit of account. Medium of exchange. Money's most important function is as a medium of exchange to facilitate transactions.
For none of these 3 things does Bitcoin pass the sniff test - some might say it might be in the future - I don't buy it.
I'm selling the stuff. The other thing that creeps me out is the anarchic bent of many of the evangelizers. In some circles you will be ostracized/labeled any number of bad things by saying anything bad about bitcoin.