If you happen to have made boatloads of money in crypto (which sadly isn't me), one sensible thing you could do is put some of that money into luxury residential real estate. You know, to diversify your portfolio.
According to this recent WSJ article, it is already happening, with some developers and some homeowners now accepting cryptocurrencies in lieu of US dollars and other fiat currencies. This is helpful if you've managed to accumulate a bunch of crypto and don't want to convert it. It can also be easier when it comes to moving the funds around:
Avi Dabir, vice president of business development at FTX US, said he sees real estate as a growing sector for the company because crypto transactions are faster and more efficient than traditional deals, which rely on an often-cumbersome banking system.“If I want to send a wire transfer today using my traditional bank account, it’s got to be banking hours, I need to make sure I hit that wire cutoff time and I can’t do it on the weekends,” he said. “That’s not a problem with cryptocurrency. It’s open 24/7.”
But of course it is still early days for crypto. The article suggests that most developers and owners are arranging for any crypto received to be immediately converted into US dollars at closing. This is presumably because of how volatile cryptocurrencies tend to be -- at least right now.
To accept crypto, PMG had to partner with a regulated exchange that could quickly convert crypto to U.S. dollars, then convince an escrow agent to accept down payments from the exchange, rather than directly from the developer. Mr. Shear said most escrow agents looked at him like he was crazy, but “20 lawyers, one year later, and a lot of brain damage, everybody got comfortable.”
There are also tax considerations (that I am really not an expert on). If you bought $100 worth of Ethereum and it is now worth $10 million, you are responsible for paying tax on this gain if/when you sell, trade, or otherwise dispose of the crypto. And it is my understanding that if you were to use this $10 million in Ethereum to buy something like a condo in Miami, it would also be considered a taxable event.
Maybe all of this becomes commonplace or maybe it doesn't. But it sure is interesting to see crypto already starting to flow into hard assets like real estate.
Back in 2008, I toured the then new Mondrian Hotel Residences in Miami. At the time, the condo units were starting at around $700 per square foot. They came furnished (design by Marcel Wanders). And you had the option of putting it in the hotel pool so that you could earn revenue on it when you weren't using it. I can't remember what sort of ROI was being quoted at the time.
After reading this WSJ article today on fractional second home ownership, I decided to pull some listings in the Mondrian to see how values have fared over the last 11 years (even though the business models are different). Here is one: a 694 square foot 1 bedroom on the market for $295,000 (or about $425 psf). The HOA fee is $1,260 per month and, according to Zillow, the last recorded sale was on September 25, 2007. It sold for $630,400 (or about $908 psf).
Most people probably like the idea of owning a second home that makes money when they're not using it and that requires absolutely no work or effort. But frankly, I have yet to come across a highly successful condo-hotel project (where the units come and go from a hotel pool) and I have yet to see any data supporting fractional ownership (or private residence clubs) as a solid long-term investment.
If you disagree, feel free to prove me wrong in the comment section below.
Today, Google is celebrating the famed Iraqi-born British architect Zaha Hadid, who died last March (2016) in Miami of a sudden heart attack.
She was the first woman ever to receive the Pritzker Architecture Prize, which is the prize of all prizes for architects.
Here is Google’s front page:
The building that is featured is the Heydar Aliyev Center in Baku, Azerbaijan. It’s an extraordinary piece of architecture. And in case you aren’t familiar with it, below is a Red Bull video of Maksim Kruglov skateboarding the building and its grounds. The building is just screaming to be skated. (Click here if you can’t see it below.)
[youtube https://www.youtube.com/watch?v=J7lEGbAIU6M&w=560&h=315]
I’m not exactly sure why Google chose today to feature Hadid. Initially I thought it might be the anniversary of her death, but she died in March. Whatever the case may be, a quick search revealed that her Miami condo was just listed for $10,000,000. That’s probably not what they are celebrating.
It’s located at 2201 Collins Avenue (Unit 730) in the W Hotel Miami Beach. It’s 2,299 sf and features a totally separate guest apartment, which itself has one bedroom. The main suite was initially 2 units, but Zaha had them combined into a generous one bedroom.
Only $4,350 per square foot.
Below is a quick video prepared by the broker. You don’t need the sound on for this one. (Click here if you can’t see it below.)
[youtube https://www.youtube.com/watch?v=9CD_xwYPbf8&w=560&h=315]