Investing in Commercial Real Estate With Crypto - Investing in cryptocurrencies is a strange thing. After all, it sells itself as a kind of digital currency, but at the same time, only a few vendors will accept it as a substitute for legal tender. United Wholesale Mortgage, for example, recently announced that they are considering taking some type of cryptocurrency for mortgage payments, but you will still need a traditional mortgage to take advantage of this. But what if you could bypass the middleman and only pay for your next commercial investment with Bitcoin in your wallet?.
Magnum Real Estate Group, a New York-based commercial real estate company, hopes to enable lucky investors. It has put the retail condos that make up the lower floors of the CODA building in Gramercy Park for sale, for an estimated $29 million. The property has approximately 9,000 square feet of turnkey rental space, with three long-term tenants classified as "essential" already in existence. All you have to do is show them the money -- well, the Bitcoins.
Cryptocurrencies are real estate transactions this isn't the first time a bit of real estate has been sold for cryptocurrencies, though it may be the first commercial real estate in that situation. On May 27, 2021, a new $22.5 million construction condominium located in Miami's Surfside neighborhood was sold for cryptocurrency. Although details of the transaction have been kept secret, it is known that this particular property was under contract and closed in just 10 days (positioned in Miami, a city that wants to be known as the nation's crypto capital, did nothing to damage the condo sale).
So far, 385 First Avenue hasn't had a fast enough Miami condo sale, but hope, as they say, exists forever. If a lucky Bitcoin buyer shows up, they will be able to close the transaction using BitPay, without having to cash out their crypto or have to carry a paper cashier's check to the escrow desk.
“Acquiring stable real estate assets with Bitcoin has never been easier,” said BitPay's chief commercial officer, Sonny Singh, as quoted in a press release. “This landmark offering at 385 First Avenue is a tremendous step forward in proving that crypto is a viable alternative to fiat transactions. We are excited to be able to provide integrations for companies like Magnum Real Estate to process cryptocurrency payments quickly and seamlessly.”
Price 385, day by day There's a lot going on here with the retail condominium package at 385 First Avenue and its crypto candidates. Let's start with the price.
On the day of its registration, September 14, 2021, one Bitcoin was worth $47,096.02, as of 11 p.m. that night. On September 21, 2021, at 3 p.m., the same coin is worth $39.6 million. As of this writing on October 7, 2021, at approximately 4:22 p.m., the same coin is worth $54,375.01.
So, let's say the property is contracted on the day it is registered. At $47,096.02 per coin, this would bring the contract price to around 615.76 Bitcoin. However, if it were placed under the contract on September 21, it would be around 732.32 Bitcoin. If it were under today's contract, the price would be 533.33 Bitcoin.
So, in more basic pricing terms, if the property had contracted on the day it was listed at 615.76 Bitcoin and closed today, the transaction would be worth $33,481,956.16 -- $4.48 million more than the price on the day of the contract (this is completely valid because contracts will be written for Bitcoins, not US dollars).
On the other hand, if the contract was on September 14th and had closed on October 7th, it would have actually closed for $24,384,096.00, $4.6 million less than its asking price. Due to the nature of cryptocurrencies and their volatility, someone takes a 15% hit, more or less, and no one can guess who it is until all the documents are signed.
I'm not surprised that people looking for commercial turnkey rentals aren't ready to dive into it yet. Commercial real estate investors tend to be very careful and conscientious buyers who take every nickel into account, from the estimated maintenance costs over the life of their property to the fees they will pay at closing to transfer the property. They are not the kind of people who are willing to risk a 15% loss at closing.
Sometimes real estate companies need to read the room and get to know their audience a little better. Miami luxury condo? It's ripe for crypto millionaires to pick up: totally in the right place (Miami) and absolutely the right type of property (luxury housing, so the price isn't too much of a concern).