Bitcoin Forum
November 20, 2017, 12:55:02 AM *
News: Latest stable version of Bitcoin Core: 0.15.1  [Torrent].
 
   Home   Help Search Donate Login Register  
Pages: [1]
  Print  
Author Topic: How people will use bitcoins to buy real estate in 2020.  (Read 1606 times)
Vladimir
Hero Member
*****
Offline Offline

Activity: 812


-


View Profile
February 04, 2013, 01:51:57 PM
 #1

I made a post in another thread and decided that this thought deserves it's own discussion and a separate thread. Steal my idea and when 1 BTC = 1000$ start a company that provides "Bitcoin Collateralized Loans" AKA BCL's.

It is 2020 and you have some bitcoins and you want to buy a house. What is the best way to do it?

Do it like Larry Ellison http://www.cnbc.com/id/49194482/How_Larry_Ellison_Actually_Funds_His_Lavish_Lifestyle and unlike all the shipple selling themselves into debt slavery by taking our mortgages. But use your Bitcoins instead of a stock portfolio. This is a smart way to "monetize" bitcoin fortunes for those marathon runners among bitcoiners.

However, nothing new here. Google "stock loan" or "securities based credit line" or "stock backed lending". This is actually the smart way of buying high value property as opposed to various mortgage products.

The idea is that instead of having a mortgage AKA "buying one house for yourself and two houses for the bank"  you borrow money using your stock portfolio as a collateral.

A typical "stock loan" is readily available for amounts above 100k$, you pledge your portfolio as collateral in exchange for some amount of money, you keep whatever dividends your stocks brings, you pay whatever interest rate is agreed until the loan is repaid. Usually such loans are not callable by the lender but debtor can walk away from the deal at any time and stop paying any interest without repaying any capital but sacrificing the portfolio. The creditor usually hedges all risks associated with such a deal using options. Think about it, dividends are (hopefully) paying lion share of interest, you keep your stocks and get back control of them after you will have paid out the loan. If stock drops to 0 or to some other low value you can walk away from the deal at any time without any further liabilities.

I would say this is the way to buy a house for those who have 100k$ or more in liquid assets. Of course this could be combined with traditional mortgage (at lower interest rates due to large LTV) if "top up" is needed.

Just to illustrate here is a simplified example.

You buy 430k$ worth of Realty Income Corp (NYSE:O), 10000 shares, 43$ each. It pays 5% dividend. You use this portfolio to get 400k$ loan at a fixed 3% interest. You buy yourself 400k$ house outright without any further lending. eventually dividends pay off the loan and you get your stock back. Or at any time (if stock tanks big time, for example) you just walk away and keep your house and have no any debts. Alternatively, if your stock rises significantly you can settle the loan for a portion of your portfolio and walk away with the rest of it.

Essentially, this way one turns the power of compound interest from one's enemy to one's friend, offsets interest with dividend, offsets inflation with stock price appreciation, lets lender to offset risks of stock depreciation.

Now enters Bitcoin. Imagine that a few years down the road Bitcoin trades on various financial exchanges just like all other currencies, there are liquid bitcoin ETF's which are optionable and these options are rather liquid with about the same liquidity as a typical S&P 500 stock (or simply liquid Bitcoin options).

Once the above conditions are in place it is likely that Bitcoin's market cap is around 10 billion USD (I use today's dollars i.e. ignoring fiat inflation for simplicity). Let's assume that 1 BTC worth about 1000$, a round number for simplicity again.

I guess a typical deflationary Bitcoin loan in 4-8 years time or Bitcoin owners would be like the following:

You own 430 Bitcoins. You pledge it as a collateral for 400k$ at 3% interest. You buy a house outright. Every month the lender sells 0.1-1 BTC and/or you pony up some cash to pay the interest. Few years down the road your loan is paid up, you keep the house and , say, 430-N BTC that worth about the same amount of USD as your 430 BTC when you have bought the house.

So just have 1000 BTC and in a few years you will be able to use such or a similar scheme to buy yourself a house outright and keep most of your bitcoins in the process.

All you need for this to be a realistic scenario is a bunch of BTC and 1000$ exchange rate. At this point options on BTC and therefore "BTC collateralized lending" will be available.

Here is a bit of my wisdom for you: keep your bitcoins until you can buy a house (or an yacht or whatever) like that. Also note how no tax event is triggered in described above scenario. Note how one could become a tax exile for a year or so and move out his bitcoins out of a punitive taxable jurisdiction. Estate planning opportunities will be great for those who can keep their bitcoins untouched for a while.

-
Join ICO Now Coinlancer is Disrupting the Freelance marketplace!
Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction. Advertise here.
1511139302
Hero Member
*
Offline Offline

Posts: 1511139302

View Profile Personal Message (Offline)

Ignore
1511139302
Reply with quote  #2

1511139302
Report to moderator
1511139302
Hero Member
*
Offline Offline

Posts: 1511139302

View Profile Personal Message (Offline)

Ignore
1511139302
Reply with quote  #2

1511139302
Report to moderator
Seth Otterstad
Sr. Member
****
Offline Offline

Activity: 328



View Profile
February 04, 2013, 03:24:54 PM
 #2

I was not aware that I could collateralize a loan with a stock portfolio.  Can I do this with gold too?

Seth Otterstad's Blog          @SethOtterstad on twitter          Seth on google+
johnyj
Legendary
*
Offline Offline

Activity: 1834


Beyond Imagination


View Profile
February 04, 2013, 03:27:43 PM
 #3

I currently have stock backed loans with a relatively low interest rate (2%), and the loans only issued for those big companies which have large capital base.

So to reach this state, BTC must be traded on major stock exchanges and regarded as more secure than those large capital companies. Actually mtgox can even develop such a service now to be the first, it is not the dividend but the price increase of BTC pay off the loan interest


johnyj
Legendary
*
Offline Offline

Activity: 1834


Beyond Imagination


View Profile
February 04, 2013, 03:29:37 PM
 #4

But I think people will use that loan to buy a powerplant to power more ASICS  Grin

Vladimir
Hero Member
*****
Offline Offline

Activity: 812


-


View Profile
February 04, 2013, 10:52:55 PM
 #5

I was not aware that I could collateralize a loan with a stock portfolio.  Can I do this with gold too?

Probably yes. All the lender wants is ability to hedge risks. This means availability of reasonably liquid options for the underlying stock/etf. If say you convert your physical gold into GLD and use it as collateral there is no good reason for lenders to refuse. I guess some swiss banks, for example, might hold physical gold for you while it is used as collateral too. This is something that is to be discussed with the lenders directly as such matters can vary from lender to lender.

-
marcus_of_augustus
Legendary
*
Offline Offline

Activity: 2436



View Profile
February 04, 2013, 11:48:10 PM
 #6


Interesting ideas Vladimir ... time to start putting on suit?

Besides such fun and financial games I take a small issue with this assumption ....

Quote
Once the above conditions are in place it is likely that Bitcoin's market cap is around 1 billion USD (I use today's dollars i.e. ignoring fiat inflation for simplicity). Let's assume that 1 BTC worth about 1000$, for simplicity again.

Current bitcoin "market cap" (I like to think of it as Monetary Base) is around $200M ... by 2020 there will be approx. 18 M btc in existence, so at valuation of $1K/btc puts monetary base at $18 billion.

nobbynobbynoob
Hero Member
*****
Offline Offline

Activity: 756


Annuit cœptis humanae libertas


View Profile WWW
February 04, 2013, 11:50:49 PM
 #7

Yes, could be a conservative estimate. $1k per BTC is a fair assumption. If Bitcoin has evolved to the point that all kinds of commoners (rather, richer ones!) want to use it to buy real estate, we might be looking at more like $50k per BTC anyway but you never know. Smiley

Earn Free Bitcoins!   Earn bitcoin via BitcoinGet
BTC tip: 1PKkvuwC24Vqjv9odigXs1QVzE66jEJqmb (if <200 µBTC, please donate to charity)
LTC tip: LRqXaNdF79QHvhPpS5AZdEJZnLiNnAkJvq (if <Ł0,05, please donate to charity)
Vladimir
Hero Member
*****
Offline Offline

Activity: 812


-


View Profile
February 04, 2013, 11:55:18 PM
 #8

point taken, but what is an extra zero between friends (editing in a zero in the original post on the back of your feedback sic.).

A necessary condition for existence of such lending company is availability of someone willing to buy and sell BTC related risks i.e availability of liquid options on BTCUSD. Until there are available decent financial instruments and derivatives on BTC  this idea is a nonstarter. Gotta wait with the suit for now.

Basically, the following things have to happen first:

1. Bitcoin based ETF.
2. Liquid options on this ETF.
3. Availability of some properly insured bitcoin storage services/banking.


-
Sukrim
Legendary
*
Offline Offline

Activity: 2184


View Profile
February 05, 2013, 12:48:51 AM
 #9

Well, a bank has to rate Bitcoins as safe a collateral as stock, houses, cars, gold bars or whatever else you can put up to make sure you are actually "worth something" that you could sell any time to pay back your debt. If this is done via ETFs, directly by showing a Bitcoin wallet or completely different is not that important I guess.

https://bitfinex.com <-- leveraged trading of BTCUSD, LTCUSD and LTCBTC (long and short) - 10% discount on fees for the first 30 days with this refcode: x5K9YtL3Zb
Mail me at Bitmessage: BM-BbiHiVv5qh858ULsyRDtpRrG9WjXN3xf
Bit_Happy
Legendary
*
Offline Offline

Activity: 1638


A Great Time to Start Something!


View Profile
February 05, 2013, 02:16:29 AM
 #10

...we might be looking at more like $50k per BTC anyway but you never know. Smiley

Doesn't hurt to dream big.   Cheesy

enquirer
Sr. Member
****
Offline Offline

Activity: 297


View Profile
February 05, 2013, 02:25:41 AM
 #11

Highly unlikely bank will loan money for long term with stocks as collateral. Nobody will write stock options for 30 years.

>> Or at any time (if stock tanks big time, for example) you just walk away and keep your house and have no any debts.

Are you seriously thinking banks are that stupid?

>> Larry Ellison

Larry and the likes use loans to circumvent insider trader regulations. As an insider, he can't sell stocks any time he wishes, but he can take a loan at any time.
Pages: [1]
  Print  
 
Jump to:  

Sponsored by , a Bitcoin-accepting VPN.
Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!