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..
Most likely the lending institutions would not accept bitcoin as collateral for the loan due to the volatility of the asset. You would have better luck in negotiating directly with the seller of the property to see if they would accept bitcoin as consideration for their house. You would then weigh out a lower closing price due to the bitcoins and then you would use the lower price as the principal for the loan.
See post above, they already do accept my bitcoin as collateral. Hasn't been an issue for any property I've purchased.
2) Which government? Almost every developed nation has bitcoin regulations. It's impossible to regulate bitcoin itself but you can regulate at the exchanges when you convert to local currency. As far as the top few owning the majority of bitcoin, this is no more true than the top few in the world owning a high percentage of wealth. A lot of the analysis I've seen on this fails to point out that a lot of bitcoin addresses with a ton of bitcoin are actually owned by exchanges where they could potentially be shared among thousands of people. Volatility is also a function of total market size. On a percentage basis it has gotten way less volatile as it's gotten bigger, and the introduction of bitcoin futures has also significantly reduced its volatility
3) No retailers don't want to take bitcoin because no one will pay a $25 confirmation fee to buy $25 worth of stuff on amazon.
I'm talking about the electricity costs of mining and transactions. If there is no change (in the efficiency of algorithms, or upgrade of hardware/tech), all these miners keeping bitcoin alive will pull out because it will cost too much to run. In the long run it will stabilize, but energy cost to reward gap is getting closer, faster.
Good point about controlling the exchange rate, I'll look more into that
If by wealth you mean cash reserves, this is regulated by government. These top cash reserve holders can not greatly change, by any means, the value of the dollar.
Bitcoin looks more volatile than ever IMO.
Ya...And also it'll take 2 days for a transaction 😂
The difficulty algorithm directly affects electricity costs. If value of bitcoin decreases, that means difficulty decreases, which means electricity costs also decrease.
I'm not comparing bitcoin to cash, hardly any wealthy individuals keep their net worth in cash. I'm talking about other assets and commodities. Do you think average people own a lot of corn futures? Of course not. Most of the world's wealth (assets) are owned by very few. My position is that bitcoin is not a currency, it is a commodity or security, which the SEC has also agreed with. Usually, when a security is owned by a few large players, there is a built in incentive to keep prices high. So centralized control of assets actually runs counter to what you are describing. It's common sense. Take an extreme example and say one person owned 50% of all bitcoin. If he wants to unload all at once, the price would tank so he would never be able to get the price he wants.
You can see this play out in real estate as well. In tier 1 markets like NY and San Francisco the real estate is owned by a few wealthy individuals and institutions, most retail investors (like the majority of BP) are simply priced out. Yet, the prices are far higher (even relative to income and other factors) than places like the midwest where RE ownership is much more spread out.
Bitcoin's volatility is decreasing significantly over time, it's not debatable volatility is accurately measurable for any financial asset. See here: https://www.buybitcoinworldwide.com/volatility-ind...
My prediction is that CME futures trading which opens Dec 18 will reduce volatility even further. When you can arbitrage between futures and the underlying asset financial incentives basically serve to keep volatility down.
If banks take your bitcoin as collateral, then what's the purpose of this post? In your original one you've asked " Are there any institutions that will accept bitcoin as downpayment for a loan?"
Then above you say "See post above, they already do accept my bitcoin as collateral. Hasn't been an issue for any property I've purchased."
So I'm very confused asking if there are any institutions that will take bitcoin as down payment (Which seems extravagantly easy because a bank or lender could/would simply convert to USD) vs you stating that they take them as collateral, which seems like the more difficult task.
@Jerry Shen None that I am aware of at this time. Most institutions are opposed to bitcoin since it a) competes with their business model, and b) they haven't figured out how to make money off of it yet.
But most importantly, why would any investor accept payment in a currency that has such high fluctuation? The entire point of a currency is a store of value. That doesn't work well when the value of the currency changes significantly every day. If bitcoin had less volatility, you would see wider acceptance in its use. But today it is too new, too volatile, and institutions have absolutely no incentive to accept that risk.
Why not sell your bitcoin and move them into a deferred sales trust (defers the capital gains taxes on the sale of bitcoin) and then invest the funds into real estate......... instead of buying real estate with the bitcoin directly since you will owe capital gains taxes on the sale of your bitcoin? Assuming you have held your bitcoin for more than one year, they will be treated as long-term capital gains tax and then you can sell and move the funds into the deferred sales trust. From the deferred sales trust, you can then invest the funds into real estate, stocks, bonds, mutual funds (all the while the capital gains tax is deferred). It is sort of like a 1031 exchange for your bitcoin without the 45 day ID period or 180-day close requirement. There is a $10M bitcoin case closing this week with my partner who is helping the client defer $3M in capital gains taxes. The deferred sales trust also works for the sale of businesses and real estate.
http://www.wsj.com/video/what-you-can-buy-with-bit...
This is a video that shows first hand some of the challenges with bitcoin. A guy tries to buy a pizza in NYC and it ends up taking 5 hours, costs him something like $75, and there's like $15 in fees.
Can this be fixed?
Maybe.
Will it be fixed?
Not sure.
If not, then I don't believe bitcoin or crypto moves outside of some niche 'damn them all' anarchic kind of bent.
@Brett P Swarts that is a great suggestion I do not know anything about DST but will look into it!
http://www.wsj.com/video/what-you-can-buy-with-bit...
This is a video that shows first hand some of the challenges with bitcoin. A guy tries to buy a pizza in NYC and it ends up taking 5 hours, costs him something like $75, and there's like $15 in fees.
Can this be fixed?
Maybe.
Will it be fixed?
Not sure.
If not, then I don't believe bitcoin or crypto moves outside of some niche 'damn them all' anarchic kind of bent.
Lightning network is a technology that is designed to solve the fees problem, but it's probably still a ways away from being used. Technologically, it can be fixed.
Crypto is definitely not niche anymore in 2017. Bitcoin futures are being offered by the CME which is the world's largest futures exchange. So pension funds, 401Ks, investment banks, etc are all going to be getting in on 2018. I think bitcoin will hit 100K/coin by the end of 2018. That's my prediction.
I would go out on a limb and say no there most likely is not institutions that accept Bitcoin as payment of any sort as it is too volitale for their risk profile and could change drastically in value unless you guarantee its value upon the transaction. This is one thing that will hold bitcoin back in commercial transactions.
I would go out on a limb and say no there most likely is not institutions that accept Bitcoin as payment of any sort as it is too volitale for their risk profile and could change drastically in value unless you guarantee its value upon the transaction. This is one thing that will hold bitcoin back in commercial transactions.
Not really going out on a limb I think you are 100% correct.
One ETF I am in has 8% in bitcoins. I think that is their largest single asset/stock allocation actually too.
100k sounds lofty. I was thinking 40k but seriously idk jack squat so just a guess based on mostly past user growth projections. Those napkin projections put it at 1 mil in 9 years though. Total users double every year is the math on that. Think facebook but instead of users breakfast photos, it is the users money.
Either way Bitcoin has done what gold bugs have said for decades was going to happen. They were 100% right...but called it on the wrong asset so far.
BTC is up 1800% for me so far in 8 months. Most institutional investors (which represent orders of magnitude more capital than is currently in the market) want to get in but can't until Dec 18 when CME opens futures trading. All of my contacts in the financial sector say bitcoin futures trading is going to explode in 2018, so I think a 500% increase in the next 13 months when the floodgates are open to institutional money isn't a huge stretch. Even at 100K/coin it still puts it at 1/4 of gold's market cap.
BTC is up 1800% for me so far in 8 months. Most institutional investors (which represent orders of magnitude more capital than is currently in the market) want to get in but can't until Dec 18 when CME opens futures trading. All of my contacts in the financial sector say bitcoin futures trading is going to explode in 2018, so I think a 500% increase in the next 13 months when the floodgates are open to institutional money isn't a huge stretch. Even at 100K/coin it still puts it at 1/4 of gold's market cap.
Nice that is insane.
I am at 1757% less this year in stocks as compared and I thought that was great. I am down for a coin or two once I can figure some more basics out a little better at least. I get the bigger picture part. What storage wallet do you use btw if any? It is definitely interesting what is happening and I could some see landlord and real estate applications coming soon if this keeps rolling. When I tried selling that house in 2014 there was just not enough users, 2018 maybe a lot easier to do. Especially in vacation homes I imagine.
BTC is up 1800% for me so far in 8 months. Most institutional investors (which represent orders of magnitude more capital than is currently in the market) want to get in but can't until Dec 18 when CME opens futures trading. All of my contacts in the financial sector say bitcoin futures trading is going to explode in 2018, so I think a 500% increase in the next 13 months when the floodgates are open to institutional money isn't a huge stretch. Even at 100K/coin it still puts it at 1/4 of gold's market cap.
Nice that is insane.
I am at 1757% less this year in stocks as compared and I thought that was great. I am down for a coin or two once I can figure some more basics out a little better at least. I get the bigger picture part. What storage wallet do you use btw if any? It is definitely interesting what is happening and I could some see landlord and real estate applications coming soon if this keeps rolling. When I tried selling that house in 2014 there was just not enough users, 2018 maybe a lot easier to do. Especially in vacation homes I imagine.
I use trezor hardware wallet I highly recommend it.
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 =)
If you expect the gains to continue, why get out of Bitcoin? There is also a good chance that once you get out of Bitcoin, the price of Bitcoin will drop tremendously. It's a gamble either way.
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 =)
If you expect the gains to continue, why get out of Bitcoin? There is also a good chance that once you get out of Bitcoin, the price of Bitcoin will drop tremendously. It's a gamble either way.
I’m not getting out of bitcoin I will never sell all my bitcoin I am putting a small amount in RE
@Jerry Shen I know you have enough money to make these kinds of investments. I love the casino so I am not one to talk.
My advice is to keep taking profits along the way. Rebalance... Rebalance... Rebalance...
PS... I know you code C++ well enough to create bitcoin. I am sure the creators of biggerpockets would be really happy if you admited you were Satoshi Nakamoto right here in this forum. Can you imagine the press?
Here's a great article on the topic if you haven't read it: https://www.bloomberg.com/news/articles/2017-12-14...
Maybe "Bitcoin Jesus" will lend you the money for your down payment(s). Even at 12-20% interest, it could be a smart play if BC continues upward at the current rate.
Or, solve the problem for everyone by starting your own credit union that recognizes BC as collateral on loans. Every problem is a business waiting to be born, and this thread has repeatedly exposed the problem. Salt, Nebeus, CoinLoan and EthLend are still getting off the ground, there's plenty of room in this nascent BC lending market for someone with means (and balls)!
@Jerry Shen Check out ATLANT, it's a blockchain based real estate investment platform. I also wrote a block that relates to this topic. Feel free to share opinions!
This thread is too great @Jerry Shen. I own some Bitcoin, Litecoin, Etherium, Dash, Ripple, Iota, Tron and Lisk. I think it is hilarious reading through this thread. The fact half these people are still thinking tulips or have no idea what to think keeps me bullish. My grandmother finally knows how to use the internet, she has a cell phone, and uses Facebook. They'll come around. I can't wait to see where we are at at the end of March. I have a rental I own in cash and will gladly work out a bitcoin deal with you. Keep on keeping on bud.
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.
Quick before the bubble bursts, I know some big investors who accept Bitcoin see if a hard money lender would be interested.