Show Me the Bitcoins! Can You Invest in Commercial Real Estate With Crypto?

Investing in cryptocurrency is a curious thing. After all, it’s selling itself as a sort of digital currency, but at the same time, just a few vendors will accept it in place of legal tender. United Wholesale Mortgage, for example, recently announced that it was considering taking some type of cryptocurrency for mortgage payments, but you still need a traditional mortgage to take advantage of this. But what if you could skip the middleman and just pay for your next commercial investment with the Bitcoin in your wallet?

Magnum Real Estate Group, a New York-based commercial real estate company, is hoping to make it possible for a lucky investor. It has put the retail condos that make up the bottom floor of its CODA building in Gramercy Park up for sale, valued at approximately $29 million. The property features approximately 9,000 square feet of turnkey rental space, with three long-term tenants classified as “essential” already in place. All you have to do is show them the money — well, the Bitcoins.

Cryptocurrency in real estate transactions

This won’t be the first time a bit of real estate has been sold for cryptocurrency, though it may be the first commercial real estate in that situation. On May 27, 2021, a $22.5 million new construction condo located in the Surfside neighborhood of Miami sold for cryptocurrency. Although the details of the transaction have been kept close to the chest, it is known that this particular property went under contract and closed in just 10 days (being positioned in Miami, a city that desperately wants to be known as the crypto capital of the country, didn’t hurt the condo’s sale any).

So far, 385 First Avenue hasn’t had quite the swift sale as the Miami condo, but hope, as they say, springs eternal. If a lucky Bitcoin buyer manifests, they’ll be able to close the transaction using BitPay, without so much as cashing out their crypto or having to bring a paper cashier’s check to the escrow table.

“Acquiring stable real estate assets with Bitcoin has never been easier,” chief commercial officer of BitPay, Sonny Singh, was quoted as saying in a press release. “This landmark offering at 385 First Avenue is a remarkable step forward in proving that crypto is a viable alternative to fiat transactions. We’re thrilled to provide the integration for companies like Magnum Real Estate to quickly and seamlessly process cryptocurrency payments.”

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The price of 385, day by day

There’s a lot going on here with the retail condo package at 385 First Avenue and its crypto hopefuls. Let’s start with the pricing.

The day it was listed, Sept. 14, 2021, a single Bitcoin was valued at $47,096.02, as of 11 p.m. that evening. By Sept. 21, 2021, at 3 p.m., the same coin was worth $39,600.00. As of the writing of this article on Oct. 7, 2021, at about 4:22 p.m., the very same coin is worth $54,375.01.

So, let’s say the property was put under contract the day it was listed. At $47,096.02 per coin, this would bring the contract price to about 615.76 Bitcoins. However, if it were put under contract on Sept. 21, it would be around 732.32 Bitcoins. If it was under contract today, the price would be 533.33 Bitcoins.

So, in more basic pricing terms, if the property had gone under contract the day it listed at 615.76 Bitcoins and closed today, that transaction would be worth $33,481,956.16 — $4.48 million more than the price on the day of contract (this is completely legal, since the contract would be written for Bitcoin, not U.S. dollars).

On the other hand, if it had gone under contract on Sept. 14 and had closed on Oct. 7, it would have actually closed for $24,384,096.00, $4.6 million less than the asking price. Because of the nature of cryptocurrency and its volatility, someone is taking a 15% hit, more or less, and no one could have guessed who it would be until the documents were all signed.

The Millionacres bottom line

I’m not surprised that people looking for a commercial turnkey rental aren’t ready to jump feet-first into this. Commercial real estate investors tend to be very careful, fastidious buyers who have every nickel accounted for, from the estimated cost of maintenance during their property’s lifetime to the fees they’ll be paying at closing in order to transfer the title. They’re not the sort who are willing to take the risk of a 15% loss at closing.

Sometimes a real estate firm needs to read the room and get to know their audience a bit better. The Miami luxury condo? It was ripe for a crypto millionaire to pick up: totally in the right place (Miami) and absolutely the right kind of property (luxury residential, so price is less of a concern). This buyer is also the same kind of person who would buy art NFTs or digital real estate on platforms like Decentraland.

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A person who invests in crypto and a person who invests in real estate don’t tend to be the same kind of person. These are totally different investment styles. Very few intend to hold crypto over 10 or 20 years — most buy a dip, ride it to the top, and cash out. Commercial real estate investors, on the other hand, are looking for property that cash flows, will be a stable income source (and to its credit, this one does seem stable), and will have naturally appreciated over a decade or more, without any timing of the market required.

I don’t foresee commercial investors scrambling to get on the crypto purchase train any time soon. Instead, this will likely be a flash-in-the-pan experiment that ends up being sold to someone for fiat currency, in the very traditional, predictable way of doing business that makes it easy to project cash flows prior to making an offer.

You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why. But those barriers have come crashing down – and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate – and have made it available for FREE today. Simply¬†click here to learn more and access your complimentary copy.

The Motley Fool has a disclosure policy. Editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Editorial content from Millionacres is separate from The Motley Fool editorial content and is created by a different analyst team.

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