OK, I know this is ridiculous but I had to share.
It's a confession of sorts...
Although I pride myself on my steak skills on the BBQ I have never seared a steak in a pan.
That's a pic of me this weekend with my first ribeye pan sear with lots of butter, garlic, and thyme.
Somehow it came out amazing.
The tasty butter just made all the difference. And I managed to get a good crust on the steak.
So there's work to do but I'm excited for the possibilities here, LOL!!
Next, I'm going to try the "cold sear" method...where you don't use any cooking lard in the pan, no butter, and just start searing the steak off a cold pan.
Let's see how this goes.
At 52 I'm still learning new things apparently.
And before I get roasted for the pan...no, that was not a cast iron pan. I got some Hexclad pans as a gift and I was testing them out.
So calm down you cast iron fans out there! I have one!
I'll also be testing out stainless steel shortly, don't have any much experience with stainless steel. We'll see how it goes.
Anyway, on to much more important matters.
We know a bunch of investors who are fortunate enough to have a couple cash flowing properties.
And the typical strategy has always been, when the time is right, you refinance to fund the purchase of your next property.
But not all banks like that, you have to qualify for another mortgage etc...it can be a pain.
But we've never liked the idea of not maximizing our asset returns.
And then last year I discovered that the lowest 4-year rolling compound annual growth rate of Bitcoin was 24%.
Yes, that's correct. The LOWEST rolling 4-year average compound annual growth rate of Bitcoin is 24%.
The lowest is 24%!!
I couldn't believe it...so I checked it out and it is in fact true.
So we did a little exercise...
Current rates on credit lines are 5.7%.
And when you have equity in a property, it's often much easier to get a credit line to access some of your equity than it is to access ALL of it or to buy another property.
So imagine you have a rental with $475/month of positive cash flow.
At 5.7% interest on a credit line, you can borrow $100K off that credit line for $475/month.
The $475/month covers your entire credit line payment.
If you then take that $100K and put it into Bitcoin your real estate returns go astronomical.
Here's the summary if we were to use a $750,000 rental property cash flowing enough to cover $100K in credit line payments at 5.7% interest:
Property Value Year 1: $750,000
Bitcoin Value Year 1: $100,000
Combined Value: $850,000
So let's roll this forward 10 years.
Are you ready?
No, seriously, are you ready?
We're going to use a 7% compounded annual growth rate for the property. Which is fair according to TRREB data as far back as we can get.
And we'll use the lowest Bitcoin compound annual growth rate over 4 years (any less and it's volatile, but 4 years smooths out the rate nicely)...and that rate is 24%.
Property Value Year 10: $1,378,844
Bitcoin Value Year 10: $693,098
Let's recap...
You took your cash flow from the rental property to pay for $100,000 that you took from that rental property's credit line.
It did cost you $475 a month, yes.
But in exchange you got $693,098 worth of Bitcoin.
Combined Value After Year 10: $2,071,943
If you just held the real estate it would have been worth $1,378,844 after ten years.
But with this strategy the property now has the real estate value AND the Bitcoin value.
And you didn't pay anything out of your own pocket for that extra $693,098.
Please re-read that.
You did not pay for anything out of your own pocket to pick up an extra $693,098 on that property investment. You just added some Bitcoin to it.
For $475/month you created $693,098.
Yes, mind blowing, we know.
Want to know the values after 20 years?
No?
Too bad, here they are...
Property Value Year 20: $2,712,395
Bitcoin Value Year 20: $5,956,786
Combined Value Year 20: $8,669,181
Insane?
Yes.
The Bitcoin value is worth MORE than the property value!
You created $5,956,786 worth of Bitcoin for $475 per month.
And look, I did make some assumptions, that the 7% real estate CAGR and the 24% CAGR for Bitcoin would continue.
But I did use the lowest 4-year rolling CAGR for Bitcoin, so give me that, LOL!
I did all this today so I'll go back and re-check these numbers but for real estate investors this is something to consider.
Look, the capital markets are changing in real time right now.
You could be staring at the opportunity of a lifetime.
Or maybe not. It's up to you.
Please don't take our word for it. Do your own homework, do your own research, decide for yourself.
We could be 100% wrong.
Share this with your smart financial planner buddies and debate it.
But don't ignore it.
This week I was on a real estate podcast talking about both real estate and Bitcoin with Ralph Fox.
You can check that out right here:
That's it for this week!
Tom & Nick
