Gold Used as Collateral to Finance Real Estate Investments
Hello everyone I perused the BP community in the forums section to determine if gold as hard assets (with the ability for liquidation) would have application as collateral for doing a real estate deal.
I am a collector of gold and silver coins and would easily convert that into hard money. Unfortunately if you have been keeping up with the news "paper" money colloquially called "cash IS trash." Who says that Robert Kiyosaki a multimillionaire.
They say "follow the money" but I think it should be "follow the gold." There are a myriad of different innovative strategies to finance any deal. I also learned about Binary Options. Rather than talk about this let me show you I subscribe to Michael Maloney's youtube channnel. He is the financial adviser to Robert Kiyosaki of Rich Dad, Poor Dad fame. This IS eye opening and of course it has relevance for the real estate industry...
It might be collateral IF you would be willing to physically deliver into a bonded escrow(aka give up possession), but imo, to use as a down payment you would need to convert to cash and deliver it to the escrow agent.
That first video hopefully painted a grim picture you deserve an upgrade (free of course). I am no financial wizard far from it but I listen to multimillionaires or financial advisers to multimillionaires (Robert Kiyosaki)
Originally posted by @Raymond Ebbeler:
I am a collector of gold and silver coins and would easily convert that into hard money. Unfortunately if you have been keeping up with the news "paper" money colloquially called "cash IS trash." Who says that Robert Kiyosaki a multimillionaire.
If gold and silver were super easy to use to finance real estate acquisitions, then cash would indeed be trash and this thread would not need to exist.
As it stands, this thread exists, ergo cash is not trash.
If we lived in a world where bricks were superior to actual money, you'd just be able to point to a rock and say "look I haz a brick" and someone would lend on it at some interest rate far better than what interest rates secured by real estate command.
As it stands, money secured by real estate is the cheapest money that exists for non-institutions that need access to capital. I'm not aware of anyone that'll lend at 3.25%-4.75% based on being able to keep a gold brick if not paid back with a reasonable LTV (yup pawn shops think in terms of LTV behind the scenes and would happily hold onto your brick at 25% LTV).
Hell, even a car is useful. I can drive it. A house gives me shelter. If I'm a tech manufacturer then I have a use for gold in electronics, but as a normal person what am I supposed to do with this brick? Paperweight?
Because of that complete lack of utility, a brick will never be lent on at rates that come anywhere close to what homes and cars get.
You are right, gold would need to be converted back to "real" money not "cash" to purchase real estate. The reason for Robert Kiyosaki's statement "cash IS trash" IS because of the Federal Reserve (not a governmental institution) printing money to compensate for our over-the-trillion dollar deficit regarding the gross domestic product (GDV).
Consider when water becomes ice; the process can be reversed back to water without loss of value. Perhaps gold would need to be converted back to "paper" as a gold IRA.? At closing IS where we as real estate investors desire profit in cash...but like water to ice (not wine or whine)...I am not a miracle worker...the cash (the devalued dollar) can be converted back to gold ( a choice not an obligation). Here is where you can diversify your portfolio (I desire 75% precious metals; 25% non-precious metals -- which could be money or some other financial investment that can covert into money such as diamonds). The section is on innovative strategies which my discussion is on...there is NO right or wrong simply that there IS...I like to listen to multimillionaires who have a pulse on the economy...
So I will hold onto my gold and use paper currency only to derive profit from the acquisition of real estate deals...and only as a choice I will convert that currency into gold bullion as another means for diversification.
Hopefully the profit is sufficient enough to also purchase palladium and platinum...and even silver. Diversification is the key to spreading risk should there be an economic collapse as predicted by Peter Schiff and other leading economists on May 28, 2016.
I would like to know if the currency in my bank will not be wiped out...I already have withdrawn most of my assets from my bank. The gold assets are protected from government confiscation...I like that.
Also as a pro member (you should be one); I am looking for individuals who know the value of time and money and how gold has stood the test of time...where cash has not. So "cash IS trash" in the sense that it has lost its value over time.
Regarding real estate transactions currency is needed and value of time and money would be executed as "buy and hold" but with the equity and interest income converted into precious metals as a tax hedge. There is a method to capitalizing on currency - to - gold and other precious metals in the form of paper -- gold, silver, palladium, and platinum mines. It IS what It IS...
If everything were easy than the answer to the question what is "life, the universe, and everything would be 42" ala the Hitchhiker's Guide to the Galaxy... well then as a real estate investor are there "loopholes" in real estate industry that an armchair millionaire wannabee can have to his / her advantage.
I mean the blood sweat and tears that come with real state proper...I observed a loophole as I am a member of the Outsider Club an online investor's portal.
As an outsider I was made privy to something that impacts on real estate...as I am only a member to receive "hidden information" and subscribe to other financial strategies this discussion is for forward thinkers.
I have excerpted a "piece of information" that I believe has relevance...keep an open mind I am simply the messenger.
"....this “Internet Royalties” stock is actually a Real Estate Investment Trust (abbreviated REIT), and it will probably trade like a REIT during times of interest rate upheaval, so we may see better buying opportunities as the Fed shakes the tree for investors in REITs and other income-focused investments. What follows has not been updated or revised since September, 2014 but I have added an excerpt from my recent note on this stock at the end (that note is from when they raised the dividend in December, the price was right around current levels then) to give you an idea of my current position if you’re curious.
— from 9/12/14 —
This of course this was followed up with the following elevator pitch ala an ad copy to get me to buy something. Whatever it is? I had to read on...
Here’s the pitch:
“How to make Netflix pay YOU ‘Internet Royalties’ for EVERY movie it rents
“Thanks to a new profit loophole, you can now earn ‘royalties’ of up to $48,000 per year from any of the Internet’s top 200 retailers….
“Netflix, the world’s leading online movie provider, rents roughly 200,000 movies per day.
“That amounts to more than 8 million movies per month.
“And thanks to a now-available profit loophole known as ‘Internet Royalties,’ you can legally skim a small amount of cash off of each one of those 8 million rentals and deposit it into your bank account.
“Now, the portion you earn per rental won’t be a lot. In fact, it’ll likely amount to something in the neighborhood of 1/20th of a cent.
“But while that may seem like a very tiny amount — and it is — consider this:
“If you were to earn just 1/20th of a cent EVERY time Netflix rents a movie this month, you’d pull in $4,000, free and clear.
“Do it every month, and you’re looking at $48,000 per year in pure profits.”
So the idea of “Internet Royalties” struck a chord and prompted me to present this as a discussion in this section since it addresses innovative strategies. I of course would like to know what are Real Estate Investment Trusts (REITS). Is this real estate stock? I heard that term at a Guru seminar...is this for the rich and famous ($1,000,000 accredited investor) ??? From my notes highlighted I wrote:
**REITs are strong income vehicles because REITs must pay out at least 90 percent of their taxable income as dividends to share holders**
As a real estate investor is there a loophole called Internet Royalties as such??? Obviously the elevator pitch caught my eye; what do other's think..? My first question is what is a REIT? I am sure some savvy pro BP member can enlighten me on this area of real estate (sounds lucrative).
https://www.reit.com/investing/investor-research/reit-directories/searchable-directory. Just to let you know I joined for free and intend to research this area of investments.
By now you know I like this area; and I am opening myself to new and innovative approaches to investing. Diversification is the key to spreading risk and I believe that. As I am an investor in gold and silver; I still work at a job though...
My job is as a mental and medical health counselor. In Florida we do not have a shortage of elderly just a shortage of healthcare facilities which is commercial real estate. My aha moment!!!
So I work with this population group. However, I have background in research and I have always held a high regard for psychographics and demographics... call it legal profiling...and rightly so.
I am now considering investing hard money into tangible assets that indirectly are targeted for seniors which is a real problem...with a real solution... since as real estate investment patterned after mutual funds REITS are attractive as income producing capital for long-term growth. I will be one of them (60 years and counting...but not to fast and not too loud, LOL)
So my renewed interest is not only practical,.. I live in Florida and work with the elderly, but the shortage of healthcare facilities for this group constitutes a demand.
Father Sarducci from Saturday Night Life fame said it best with his Italian accent "all you really need to know about business is 'supply and demand' and to think I invested good money to get an education to earn my MBA. I would like to think (and grow rich) that that translates as Major Bank Account (heard that at a Guru Seminar on options LOL.
I am looking at different strategies and REITS maybe one area for long-term growth. All I know is that it is still passive income...and I like that. I am open to any feedback and why I should NOT pursue this or Why I should pursue this specialization ... and why it has been around since its inception in 1960 enacted y congress...but know one seems talk about! Here I went straight to the horses mouth...the government
HIGH DEMANDThe rate at which American Seniors are retiring is truly staggering. The number of Americans 65 and older will increase from 47.8 million in 2015 to 79.2 million by 2035, due to the emergence of Baby Boomers into the age of retirement. Such a vast increase only creates a greater demand for Senior Living Facilities. Is there finanical growth here?
LOW SUPPLYAs the elderly population grows, the rate of senior housing new construction is not keeping pace. Units under construction began a significant decline in 2008 and continued to fall through 2011 with only modest growth through 2014. When these two dynamics are married, the need that is left unaddressed is the growing market for newer and better facilities/communities tailored to emerging retirees.
Now that tells me something about supply and demand...
I remember reading the book "Acres of Diamonds" but rather than talk about this pearl of wisdom here is the url for everyone to read (at their leisure) -- Lord knows we do enough reading on real estate alone...
I like that...
Here is something that I heard about...if I told I would have to kill you...(NOT)
Now I am all for free things or next to nothing $35.00; The CIX is too costly to locate properties http://******************.com/myaccount that I decided that as a tax payer I use our county seat(s) in all 50 states to get access to ad volorem taxes.
I just need to pay a one time cost to get access to tax delinquent properties and probate cases and I do a random search by name, parcel number, or address.
Now that is one-stop shopping till you are dropping my friend...literally after hours and when in down time mode I am perusing the county clerk's web portal to located delinquent tax records and probate cases by name.
For example I used "ab" in their search engine for FREE and generated the following response at https://www.pinellas.county-taxes.com/public/real_estate/parcels/R438521/bills/8409779
This seems like a pitch.......
the only thing I know about gold is....it has no utility, and no liquidity. The only people I know who have any use for gold are those running cash for gold scams and it can't be used as collateral at any banks I know of.
Alexander, a name that is synonymous with great "Alexander the Great -- a great Greek conqueror...but as a banker hmmm....I would think that you would be more informed regarding our current or recurring recession and I would like to think and believe that gold has stood the "test of time" to that of fiat money which as history so repeats and often dictates is a "devaluation of currency (money)" the leading causal factor to hyperinflation http://www.usagold.com/germannightmare.html
Recall the Weimar Republic in Germany...I just did that for you as an event in history that shall be remembered for the German people. I googled the word "hyperinflation" and not "hype" that some self-proclaimed experts use in their marketing ad copy to peddle gold hopefully not to fleece the public.
I like to get my facts from investopedia using the keyword "hyperinflation" (number one position in Google -- must mean something). Rather that you enlighten yourself than I tell you because I am no expert just the messenger. Visit the link at http://www.investopedia.com/terms/h/hyperinflation.asp?layout=infini&v=5C&orig=1&adtest=5C
This is an interesting topic as relates to gold markets and real estate. I have done a detailed analysis of geo-politics, gold and real estate. The answer to your question is: Of course gold can be used as collateral to finance investments. In the ideal world there would be the gold standard and much less credit lending necessary.
Yes after the gold standard was removed by President Nixon in 1971 http://www.federalreservehistory.org/Events/DetailView/33 the world money supply was devalued by the printing of fiat money by the Federal Reserve. I Would consider that when backed by gold the dollar could be redeemed as a gold certificate. Would you approach a real estate transaction using a Gold IRA or some other "paper" asset since gold coins or bullion would be not be applicable but the value converted into paper would have value as collateral. Could gold be issued as a long term strategy once a transaction results in money. At closing the real estate investor receives after a tax deed sale property at FMV $60,000 and wholesales the property for $50,000 on an investment of $1,500. The profit would be $50,000.00 - $1,500.00 = $48,500 which I would invest $20,000 in gold; and $28,500 on another tax deed to acquire property at FMV and sell that at discount (ten cents on the dollar). Always converting half of the profit in gold. Seems doable since the acquired properties are always tax deeds and free and clear. Could "gold" be included in a "proof of funding" (POF) letter to use as a "future" purchase with a seller / owner that is retired and as a free and clear title with the rationale for investing gold based on the projection of its value
gold is not going to replace cash for a few reasons. It has many competitive disadvantages to cash.
1. denomination problems. $20 dollar bill is a $20 dollar bill, even if the corner is cut off. Gold coins found from periods of gold use (roman et al) are often shaved down. a gold coin that is not whole is a big problem, as a gold coin only has its own intrinsic value not extrinsic value given by a state. It is costly to carry a scale around with you to weigh coins every time you make a transaction. A strong central state backed currency eliminates this inefficiency.
2. Tungsten. It is easy to counterfeit gold. gold plated tungsten has a density very, very similar to gold. go to alibaba.com and search for gold-plated tungsten. A thriving market exists only to supply con-artists passing gold-plated tungsten off as gold to naive gold buyers. You cant carry an acid test kit and drill around with you to drill and test every payment you receive. But your dollars have good anti-counterfeiting measures.
3. History is in the past. Previously it was very, very hard to maintain rule of law through a physical territory. With inventions like printing presses, telegraphs, and internal combustion engines maintaining the rule of law over distance became alot easier, and states (countries, not TN or AL) are now able to ensure the veracity of their paper currency. The limitations of state power that made gold the optimal currency are gone, prolly forever.
If there was a revolution (to anarchy?) or a nuclear war or some other apocalyptic event that destroyed the rule of law, having some gold is prolly a great idea, but those scenarios seem to have a low probability of happening to me.