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INVESTING borrowing against assets/financial prepping

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Anything related to investing, including crypto

Schonox

Contributor
Read Unscripted!
May 25, 2019
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Hi there!

Currently things are doing a-ok in my portfolio, and I hope to be reaping investment rewards kind of soon.
However end of year is nearing (taxes), and I'm kind of in line with what the likes of Michael Saylor are saying : never sell your assets, but borrow against them.

Currently I own two rentals with a mortgage on them and my own home with a relatively lowish mortgage on that as well.
I hope to have 2-4 times the cash by investments at the end of the year in comparison to the total worth of these mortgages.
Most of the people I follow concerning cryptocurrencies for example are hesitant to stake their cryptocurrencies at 3d parties like Blockfi or Nexo. Still, they make publicity for them and they say that borrowing against them is the way to go. Now I am wondering if there is a way to borrow against them without having to lend them out at these 3d party providers?

I am planning on paying off these mortgages, or paying them off partly.
Tbh I am afraid that in the event of a bank bail in or such the bank accounts wouldn't be accessible anymore and banks would want to have their mortgages paid within a week or so,... without the possibility of paying these off,...

What would you do in such circumstances, or what are you doing concerning this?
 
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IndolentFastlanr

New Contributor
Oct 6, 2019
4
5
14
The thing with blockfi (I have never heard of Nexo), is that you are at risk for rehypothecation, which opens up your digital assets to more risk (of losing it).

If you already have a mortgage, I would look into lowering your interest rates and check your time horizon. With interest rates at near zero, the constant money printing/inflation would work out in your favor.

Otherwise, if you absolutely want to have your rentals paid off with no risk of rehypothecation of your digital assets, you can look for a lender that uses 2-of-3 multi sig (you have one key, to verify your assets are there. Company holds one key, and a third party holds the other).

The company I have in mind has high rates compared to the numbers I have seen for home mortgages. 11.16% APR for a 3 month loan to 14.22% APR for a 3 year loan excluding origination fees. So unless you are making enough to cover these interest rates and are set on getting rid of your bank, I would just refinance your properties and see if you can get a super low rate.
 

TrillAmbition

Contributor
Jun 11, 2020
29
26
17
Texas
Hi there!

Currently things are doing a-ok in my portfolio, and I hope to be reaping investment rewards kind of soon.
However end of year is nearing (taxes), and I'm kind of in line with what the likes of Michael Saylor are saying : never sell your assets, but borrow against them.

Currently I own two rentals with a mortgage on them and my own home with a relatively lowish mortgage on that as well.
I hope to have 2-4 times the cash by investments at the end of the year in comparison to the total worth of these mortgages.
Most of the people I follow concerning cryptocurrencies for example are hesitant to stake their cryptocurrencies at 3d parties like Blockfi or Nexo. Still, they make publicity for them and they say that borrowing against them is the way to go. Now I am wondering if there is a way to borrow against them without having to lend them out at these 3d party providers?

I am planning on paying off these mortgages, or paying them off partly.
Tbh I am afraid that in the event of a bank bail in or such the bank accounts wouldn't be accessible anymore and banks would want to have their mortgages paid within a week or so,... without the possibility of paying these off,...

What would you do in such circumstances, or what are you doing concerning this?
I can offer you some guidance and direction on this.

Crypto is a bearer instrument. So if you hold the keys you own the ability to spend the asset. This is part of the crypto ethos which is about self sovereignty and being in control. With that comes a lot of responsibility. If you put coins on an exchange there is a risk the exchange runs off with the funds. There has been plenty of examples of hacks or exit scams by exchanges.


From a practical standpoint let me offer you the two ways you can go about it along with the pros and cons.

1. DEFI p2p loans
AAVE is a good example of this. You basically have an overcollateralized(Your collateral is $100k to borrow $50 k) loan and can borrow up to x amount of that asset in a stable coin (dollar denominated token $1 equals 1 usdc etc). This is done on a smart contract and there is a floating and stable interest rate. There is a certain price which will automatically liquidate your collateral and you lose it all. You don't have to trust the platform as the borrowing and repay happens in a trust-less matter.
Pros:
Trustless
p2p always available
No account needed. Deposit and go
Quick and fast
Cons:
Gas costs for transferring into smart contract
only works with native ethereum assets or wrapped assets like wBTC
price crash can liquidate your collateral.
Requires a higher collateral % than Centralized exchanges
You get a stable coin so you still need an exchange to be able to convert to dollars in your bank account

2. Centex (Centralized exchange)
First off if you go this route make sure it is a really trusted exchange. For example coinbase has a way lower chance of really f*cking up and running with your funds than UnkownSketchExchange.realsite.
This route is similar to the defi route but you physically deposit your crypto into an exchange's wallet instead of a smart contract. Then you can borrow money against it and get cash to your bank account. You also overcollateralized your loan like you do in defi but Ithink the amount neededis not as high. You also have lower limits you can borrow compared to defi no limit. Coinbase just upped their amount to some users up to $1 million.
You can also get liquidated if your reserve amount in collateral market value falls under a certain % of loan to total value. They sell of a small % to cover the amount needed to be in good graces.
Pros:
more assets available
Cash quickly sent to bank account
some offer smaller % rates
Cons:
you have to trust the exchange
Bank runs happen then you can't get your funds out
Not your keys not your coins



I also want to make sure to touch on the importance of security if you hold your own funds. Hardware wallets are important since they hold your private keys in a specialized device so even if your computer gets compromised you don't have your funds stolen. The most popular ones are trezor and ledger. I strongly recommend trezor as they are open source with their hardware and were the original creators of hardware wallets.



Let me know if I need to clarify anything of if you have any questions. I have been in the space since 2015 and can offer you some background. I am considering making a thread for answering any crypto questions
 

Schonox

Contributor
Read Unscripted!
May 25, 2019
56
46
48
The thing with blockfi (I have never heard of Nexo), is that you are at risk for rehypothecation, which opens up your digital assets to more risk (of losing it).

If you already have a mortgage, I would look into lowering your interest rates and check your time horizon. With interest rates at near zero, the constant money printing/inflation would work out in your favor.

Otherwise, if you absolutely want to have your rentals paid off with no risk of rehypothecation of your digital assets, you can look for a lender that uses 2-of-3 multi sig (you have one key, to verify your assets are there. Company holds one key, and a third party holds the other).

The company I have in mind has high rates compared to the numbers I have seen for home mortgages. 11.16% APR for a 3 month loan to 14.22% APR for a 3 year loan excluding origination fees. So unless you are making enough to cover these interest rates and are set on getting rid of your bank, I would just refinance your properties and see if you can get a super low rate.

Thanks for your insights! I actually prefer Nexo to Blockfi for several reasons, albeit that I changed my mind concerning these platforms, as I am indeed afraid of the rehypothecation risk. In case the dollar goes down soon the funds would be lost I believe, although they say it's 'insured', but still.

The big thing why I keep most in cold storage is because I'm afraid that when a bank bail-in happens, mortgage lenders would still try to collect their monthly payments from me, and I am not sure whether I will always have access to my bank account - due to glitches, bank holidays, bail ins, corona measures etc), so I pln on growing my cash supply a little bit so to be able to bridge at least one month of payments,... I have read about a Dutch entrepreneur who was once in the Quote 500 (richest 500 people in the Netherlands) who lost it all and went bankrupt due to not being able to pay a bill of €8,000, despite having like a billion € or such,... What's real about that story and if the story is one-sided I don't know... But I like to minimize such risks if possible.

I will probably walk the middle road, pay some off but not all so to still profit from the difference in intrest rates.

Concerning taxes I was looking for a solution to not getting taxed on the non-realised profits, through a holding structure of some different solution? But the easiest way I think is to just make it 'disappear' in a 'boating accident' , if you have any ideas next to that, feel free...
 

Schonox

Contributor
Read Unscripted!
May 25, 2019
56
46
48
I can offer you some guidance and direction on this.

Crypto is a bearer instrument. So if you hold the keys you own the ability to spend the asset. This is part of the crypto ethos which is about self sovereignty and being in control. With that comes a lot of responsibility. If you put coins on an exchange there is a risk the exchange runs off with the funds. There has been plenty of examples of hacks or exit scams by exchanges.


From a practical standpoint let me offer you the two ways you can go about it along with the pros and cons.

1. DEFI p2p loans
AAVE is a good example of this. You basically have an overcollateralized(Your collateral is $100k to borrow $50 k) loan and can borrow up to x amount of that asset in a stable coin (dollar denominated token $1 equals 1 usdc etc). This is done on a smart contract and there is a floating and stable interest rate. There is a certain price which will automatically liquidate your collateral and you lose it all. You don't have to trust the platform as the borrowing and repay happens in a trust-less matter.
Pros:
Trustless
p2p always available
No account needed. Deposit and go
Quick and fast
Cons:
Gas costs for transferring into smart contract
only works with native ethereum assets or wrapped assets like wBTC
price crash can liquidate your collateral.
Requires a higher collateral % than Centralized exchanges
You get a stable coin so you still need an exchange to be able to convert to dollars in your bank account

2. Centex (Centralized exchange)
First off if you go this route make sure it is a really trusted exchange. For example coinbase has a way lower chance of really f*cking up and running with your funds than UnkownSketchExchange.realsite.
This route is similar to the defi route but you physically deposit your crypto into an exchange's wallet instead of a smart contract. Then you can borrow money against it and get cash to your bank account. You also overcollateralized your loan like you do in defi but Ithink the amount neededis not as high. You also have lower limits you can borrow compared to defi no limit. Coinbase just upped their amount to some users up to $1 million.
You can also get liquidated if your reserve amount in collateral market value falls under a certain % of loan to total value. They sell of a small % to cover the amount needed to be in good graces.
Pros:
more assets available
Cash quickly sent to bank account
some offer smaller % rates
Cons:
you have to trust the exchange
Bank runs happen then you can't get your funds out
Not your keys not your coins



I also want to make sure to touch on the importance of security if you hold your own funds. Hardware wallets are important since they hold your private keys in a specialized device so even if your computer gets compromised you don't have your funds stolen. The most popular ones are trezor and ledger. I strongly recommend trezor as they are open source with their hardware and were the original creators of hardware wallets.



Let me know if I need to clarify anything of if you have any questions. I have been in the space since 2015 and can offer you some background. I am considering making a thread for answering any crypto questions

Thanks for your insights as well, though I have somewhat of a different view on some points?
I really like like the Trezor model T as well. I plan on adding a Blockstream Jade wallet sometime soon. Hope it's easily useable. It's also opensource as is Trezor T. I dislike both 1 and 2 because of the following reasons.
Most DeFi projects are on the Ethereum blockchain and like any ICO there is a team and, ironically, thus a not-so-decentralised way of doing things. Next to that, regulation and legislation in the US will highly influence if not crush DeFi in the near future. The blockchain appliances will probably be used however, on the Bitcoin blockchain or on the liquid sidechain network.
I stay away from centralised exchanges because of the KYC. If push comes to shove they will take your money from you, just like a confiscation, legalised theft.
Certainly Coinbase. They willingly shared info with Facebook for instance concerning Novi. Facebook is not the most trustworthy company concerning privacy and data to say the least. Hence, they will screw everyone over I'm afraid.
 

Schonox

Contributor
Read Unscripted!
May 25, 2019
56
46
48
Anyone in the know : can you lend against physical gold, art or other assets?
Apparently it's a running practice with high net worth individuals to go to a bank and ask for a loan backed by some of their assets. I just can't see myself doing such a thing you know? My bank is a small regional office with 2 employees,... I highly doubt they offer such things?
 

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