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Author Topic: [WANTED] Secured Loan for Apartment Deposit  (Read 2682 times)
Matthew N. Wright
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March 18, 2012, 12:04:55 PM
 #1

Everyone knows I do not work outside of Bitcoin anymore, and they also know that I'm not running off anywhere (I'm already in the place I'd be running off to!), so let's get to the bacon.

While I'm running the Bitcoin Magazine, DCAO, DialCoin, smallpla.net, BitDex and a few other still unmentioned projects in the Bitcoin world, I brought one of my colleagues in from Peru (Vicente) to work together. With expectations to work closely as a team I signed a contract for a 2-bedroom apartment here in Seoul.

Current deposit: $5,000 USD0
Current rent: $750/mo. USD

Due to a mutual agreement, we've parted professional ways and I no longer need a 2-bedroom apartment in the expensive and bustling side of Seoul. In fact, what would suit me better is an apartment where I don't pay rent (they have those in Korea!). The way this works is, I pay a hefty deposit and they eat the interest off of it instead of charging rent.

A $2,500 deposit for a one-room apartment can have your rent at around $400, whereas in the same neighborhood a $20,000 deposit on a one-bedroom apartment can mean nothing or next to nothing in rent. Don't ask, it's a Korean thing and it's why land owners here are billionaires.

Now it is possible for me to move, but until someone comes into this apartment, I can't touch the $5,000. Furthermore, even if I had the $5,000, I'll still be stuck in the same boat of being a slave to the rent machine.

So here is what I propose:


I will ask to borrow anywhere between 2000~4000BTC to get an apartment that doesn't require rent.

There is collateral in the current apartment of $5,000 that is released back to me when the contract ends or another person moves into this apartment.

I am not 100% sure about this proposal, and I welcome criticisms, advice, corrections and reasons why it's insane. I also might change my mind tomorrow because someone decided to buy this apartment off of me tomorrow. That said, my reasons for doing this here are:

  • Foreigners can't really get home loans in Korea (even after they get their F-2s or Dual citizenship-- racism at its finest)
  • Being in Korea, Bitcoin is ideal for sending money for me (especially since all of my businesses pay me out in Bitcoin, not fiat)
  • I want to set a positive precedence for public loans in the community, and increase my trust in the community overall.

Let the flame war begin!

(Note: Even if I do find some borrowers willing to lend or I never find any, I'll keep this thread unlocked and open for educational and entertainment purposes.)

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John (John K.)
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March 18, 2012, 12:10:35 PM
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This has to be one of the greatest loan in bitcoin so far.

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Matthew N. Wright
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March 18, 2012, 12:11:23 PM
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This has to be one of the greatest loan in bitcoin so far.

At least one of the largest publicly visible private loans. I know of larger numbers passing hands in the background on a day-to-day basis.

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March 18, 2012, 12:13:15 PM
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This has to be one of the greatest loan in bitcoin so far.

At least one of the largest publicly visible private loans. I know of larger numbers passing hands in the background on a day-to-day basis.

What is the interest you would be willing to pay on the loan?
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March 18, 2012, 12:14:26 PM
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That has graced this board. I know for one pirate's program could be loads more then this one.
On a side note, you could post your repayment plan and the interest you're willing to part with here too. Easier for the borrowers to calculate their finances.

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Matthew N. Wright
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March 18, 2012, 12:14:33 PM
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This has to be one of the greatest loan in bitcoin so far.

At least one of the largest publicly visible private loans. I know of larger numbers passing hands in the background on a day-to-day basis.

What is the interest you would be willing to pay on the loan?

I'm not even sure what's fair for something like this. I've never done a home/apartment loan in my life. I've always paid in cash or had rich people just lend me on favor. That said, I don't mind paying realistic rates (so long as it doesn't exceed a balance of cost of opportunity + current rent rate).

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March 18, 2012, 12:18:52 PM
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On second thought, it would almost seem like you are trading one payment for another. If you get this loan, and your interest rate is anywhere need the normal rates on this board, you would be paying between 5-10% per month to service the bitcoins borrowed.

An example might help:

Borrow 2000 btc at 10% interest per month. You monthly payment on the principle would be 200 btc per month or at this moment, over $1k USD.

If your rent is cheaper than this, you are better off staying on the rent treadmill.

If you get a better rate, things may pan out in your favor.
Matthew N. Wright
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March 18, 2012, 12:21:28 PM
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On second thought, it would almost seem like you are trading one payment for another. If you get this loan, and your interest rate is anywhere need the normal rates on this board, you would be paying between 5-10% per month to service the bitcoins borrowed.

An example might help:

Borrow 2000 btc at 10% interest per month. You monthly payment on the principle would be 200 btc per month or at this moment, over $1k USD.

If your rent is cheaper than this, you are better off staying on the rent treadmill.

If you get a better rate, things may pan out in your favor.

That does make sense, except you're forgetting that the new apartment has a contract that is renewable, so as long as I want to stay there, I just keep the deposit there with little or not rent, whereas the rent I'm paying now would just be throwing money away.

Apartments in Korea = literal savings account.

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March 18, 2012, 12:26:58 PM
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Apartments in Korea = literal savings account.

This is true, I was going to do it when I was there but didn't have the up front cash. I did lease for a year at a time and got a good deal.

I guess you are planning on staying awhile Smiley
Matthew N. Wright
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March 18, 2012, 12:27:36 PM
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Apartments in Korea = literal savings account.

This is true, I was going to do it when I was there but didn't have the up front cash. I did lease for a year at a time and got a good deal.

I guess you are planning on staying awhile Smiley

Well, been here 7 years so far. ^_^

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March 18, 2012, 12:29:48 PM
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On second thought, it would almost seem like you are trading one payment for another. If you get this loan, and your interest rate is anywhere need the normal rates on this board, you would be paying between 5-10% per month to service the bitcoins borrowed.

An example might help:

Borrow 2000 btc at 10% interest per month. You monthly payment on the principle would be 200 btc per month or at this moment, over $1k USD.

If your rent is cheaper than this, you are better off staying on the rent treadmill.

If you get a better rate, things may pan out in your favor.

That does make sense, except you're forgetting that the new apartment has a contract that is renewable, so as long as I want to stay there, I just keep the deposit there with little or not rent, whereas the rent I'm paying now would just be throwing money away.

Apartments in Korea = literal savings account.

Matthew,

What are the terms you are wanting? 2000 or 4000 btc? What interest rate are you willing to pay? How often will you be paying the interest and principle on the loan?

These are questions you will need to answer to get any serious offers.

I would also recommend setting up a good spreadsheet to keep track of this as the amount you are requesting will more than likely be funded from multiple people.
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March 18, 2012, 12:41:16 PM
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.. and based on USD, Won or coin?
Matthew N. Wright
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March 18, 2012, 12:50:00 PM
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Matthew,

What are the terms you are wanting? 2000 or 4000 btc?
I guess I was fishing for people who knew more about rates and policies at first, but if someone is willing to do 4000BTC, then that's ideal (way better opportunities real estate-wise). I guess I would need 3 different options then wouldn't I?

  • 2000BTC (12 month) plan - $10,000USD borrowed, $833 USD (principle) + $167 (interest) paid monthly.
  • 3000BTC (18 month) plan - $15,000USD borrowed, $833 USD (principle) + $167 (interest) paid monthly.
  • 4000BTC (24 month) plan - $20,000USD borrowed, $833 USD (principle) + $167 (interest) paid monthly.

The plans I wrote above are roughly  20% interest.

What interest rate are you willing to pay? How often will you be paying the interest and principle on the loan?
I am not exactly sure how these types of loans work, but the way I figure it the following basic terms would be safe and logical (correct me if anything seems "non-standard"):

  • Paid back monthly
  • Based on USD/KRW, not BTC
  • As a penalty, if in any given month the principle cannot be paid back, an additional fee equal to the interest will be due that same month.


These are questions you will need to answer to get any serious offers.

I would also recommend setting up a good spreadsheet to keep track of this as the amount you are requesting will more than likely be funded from multiple people.

Good point. This is a fun learning experience so far. What exactly would be in the spreadsheet? Exactly what I had said here in this post?

Matthew N. Wright
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March 18, 2012, 01:18:05 PM
 #14

If you borrow in coin, and BTC goes up 500% you might be in trouble. You will need to carefully hedge this.

Something to keep in mind.

Thanks. I realize. I can't imagine a sane reason in this ridiculously volatile market to borrow any significant amount of coins. It could double tomorrow.

  • Paid back monthly
  • Based on USD/KRW, not BTC
  • As a penalty, if in any given month the principle cannot be paid back, an additional fee equal to the interest will be due that same month.


EDIT: To clarify (since someone asked me on Skype and was confused), I would be doing a USD fixed loan but accepting it and paying it back in BTC.

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March 18, 2012, 06:13:08 PM
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  • 2000BTC (12 month) plan - $10,000USD borrowed, $833 USD (principle) + $167 (interest) paid monthly.
  • 3000BTC (18 month) plan - $15,000USD borrowed, $833 USD (principle) + $167 (interest) paid monthly.
  • 4000BTC (24 month) plan - $20,000USD borrowed, $833 USD (principle) + $167 (interest) paid monthly.

The plans I wrote above are roughly  20% interest.

True, and it's not a bad interest rate in "real-world" terms, since the loan is denominated in USD. With the plan outlined above, however, there is no incentive for any lender to go above 2000. For 4000, a lender gets 20% return over two years, and for 2000 the lender gets the same percentage over one year.

Are you sure the costs to incentivizing a loan won't end up exceeding the actual rent you'd be paying without the deposit. As far as lenders here are concerned, currency risk is eliminated (assuming people want USD) by the loan being denominated in USD, but counterparty risk (I don't think you're dishonest, but we don't know how solvent you are, etc.) is still present. Your landlord, on the other hand, has your identity and the full power of Korean law to go after you if something goes wrong, so the risk is actually lower for him/her. Assuming other things equal, that would lead to lower costs for you if you figured something out with the landlord.

Of course, this is all making a lot of assumptions. But naively, I'm not convinced it's in your best interest to take a loan from us, unless it's partially intended as a bitcoin experiment for its own sake.

Edit: also, who would lend to a horse?
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March 18, 2012, 06:16:22 PM
 #16

This has to be one of the greatest loan in bitcoin so far.
Pffff. I've been trying to get a one-year mortgage for a few days.

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March 19, 2012, 12:07:35 PM
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As Copumpkin and his fiscal acuity pointed out, this doesn't make sense financially. As a BitCoin experiment, it might. A better experiment would to get your landlord to accept BitCoins.

I see this as a Rent 'Short'.  Ingenious if BTC goes down, no so much if it goes up.

How's the magazine coming?


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March 19, 2012, 01:32:00 PM
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Not commenting on this other than to say that I also live in Korea, and Matt's description of the various rental/deposit systems here is pretty much spot on. So if you're sitting there wondering WTF is up with that, well, welcome to our life.

Matthew N. Wright
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March 19, 2012, 01:33:26 PM
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Not commenting on this other than to say that I also live in Korea, and Matt's description of the various rental/deposit systems here is pretty much spot on. So if you're sitting there wondering WTF is up with that, well, welcome to our life.

And make sure when you come to Korea to bring a small fortune if you want to live a normal life.

..unless you're planning on working some job in Korea that gives you an apartment but I digress.



you're planning on working some job in Korea
if you want to live a normal life.

The two are mutually exclusive.

Matthew N. Wright
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March 19, 2012, 02:08:50 PM
 #20

I'm seeing three people now talk about problems and dangers etc regarding using bitcoin for the loan.

I'll restate this a third time:

The loan is fixed USD loan, just paid in BTC. I cash out of BTC as soon as I get the loan. I buy BTC for spot value of what I am paying back when I pay it back. I fail to see why that is "dangerous" or "non-beneficial".

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