PERSON OF THE WEEK: Could crypto investors help power the real estate market?
Put differently, could the real estate market play a role in crypto investors’ growth strategies?
To find out, MortgageOrb recently interviewed Michael Jansta, chief marketing officer for Altisource.
Q: Why would real estate investors be interested in crypto?
Jansta: The most obvious reason a growing number of real estate investors are interested in digital currencies is the return on investment. But perhaps the better question is why a growing number of cryptocurrency investors are buying real estate. Real estate news outlet The Real Deal had a story this past summer about how 20-somethings who became rich investing in the crypto markets were buying luxury apartments and homes across the country. They’re not alone, of course—many investors prefer to diversify their assets, and real estate is a great option. The challenge for crypto investors who want to buy property is that they need a simpler process for converting their digital currency into real estate. Currently, it takes too many steps, but there are efforts in place to change that.
Q: If crypto is going up so much, why should investors diversify?
Jansta: For the same reason that most investors choose to diversify—it reduces their exposure to risk. That’s particularly good advice for the average crypto investor because the markets for digital currency are still young and fairly volatile. Digital currency values can and do rise and fall just like stocks do.
Most serious crypto investors, for example, keep a close watch on Elon Musk’s Twitter account, because the markets shift every time the billionaire tweets about Bitcoin or Dogecoin. If some sort of event were to occur that brought crypto prices down, having a diversified portfolio that includes precious metals, stocks, bonds, or real estate can help hedge against that volatility. Real estate in particular remains one of the most stable of all investments over the long haul. So, while owning crypto is a great opportunity, smart investors usually don’t want all their eggs in one basket.
Q: How can price volatility be addressed in the real estate buying process?
Jansta: Because the cryptocurrency markets often shift rapidly, you want to be able to convert your digital currency into real estate quickly. A system is needed to lock the cryptocurrency conversion rate for three to five minutes, convert a very specific amount of crypto into exact dollars and cents, and then wire funds directly into an escrow account. This wasn’t possible until recently. Before, you had to first convert cryptocurrency into dollars, transfer the money to your bank account, and then wire the money into escrow, which could take as long as five days. In fact, in most cases, it still happens that way.
Q: Do crypto investors have entrepreneurial spirit like, say, real estate investors?
Jansta: Absolutely. Investing in digital currency is not much different than investing in rare coins, metals, or any other asset, and having an entrepreneurial mindset is definitely a plus. The smartest people I know who invest in both the real estate and crypto markets are able to make firm decisions, accept risk, overcome difficulties, and learn from their experiences. They also do their fair share of homework and due diligence. This is key to being successful at cryptos or any other type of investment.
Q: For crypto investors who are new to real estate, which type of real estate do you recommend?
Jansta: If you don’t already own a home, buying a primary residence to live in is usually the best option. There are a number of tax breaks and deductions involved with owning a home that many non-homeowners aren’t aware of, such as the ability to deduct your mortgage interest payments as well as property taxes and private mortgage insurance. If you own your own business and work from home, you can claim a home office deduction as well.
My personal preference for a crypto investor who is diversifying into real estate is to buy a one-to-four-unit residential property that you can rent out to generate cash flow. You can use profits from the rentals to invest in more real estate or in more cryptocurrency. There are many more options, too. With both cryptocurrencies and real estate doing so well, it’s a pretty exciting time to be investing in both.
Q: Given United Wholesale Mortgage’s suspension of its offering to enable borrowers to make mortgage payments using crypto just two months after it launched, what needs to change to make crypto a permanent fixture in mortgages?
Jansta: More price stability is needed. While there is enormous interest in cryptocurrencies, the current market for individual digital assets is still highly volatile. When it comes time for a borrower to make their mortgage payment, the value of their cryptocurrency could have dropped. That is not an issue when paying in dollars.
That being said, most experts believe the cryptocurrency market will stabilize over time. Plus, the blockchain technology that underlies most digital assets is a far safer and secure means of exchanging currency than wiring money. I believe it’s only a matter of time before the crypto markets mature and the housing industry embraces cryptocurrencies.
