Has anyone taken an equity loan out at home loan rates and 30 odd year terms to buy BTC at these prices?
Wanting some pros and cons from the SN community
5 sats \ 3 replies \ @pillar 7 Oct 2022
Not a home loan, but what I'm doing is close to what you describe.
Operation Saylor - Episode 1/120
You can look for all the episodes in my post history.
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0 sats \ 0 replies \ @User21000000 OP 7 Oct 2022
One of my other questions was if as the loan is for investment can you claim the interest you pay like a loan for stocks
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0 sats \ 1 reply \ @User21000000 OP 7 Oct 2022
I see and you’re averaging in I see as well.
Anything you would do differently if you had your time again?
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0 sats \ 0 replies \ @pillar 7 Oct 2022
Sorry, I don't understand what you mean with the highlighted bit.
Being only 4 months into it, I think I didn't even have time to make a mistake yet D: . Seriously, not really so far. Sometimes I do see an ad for some loan with better conditions than mine and I'll wish I had been able to snatch the lower interest. But I think that's inevitable, and given the expectations of the operation, 3% vs 6% shouldn't make much of a difference.
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0 sats \ 5 replies \ @pillar 7 Oct 2022
For the ones declaring that this a stupid idea:
- I think it would benefit everyone if you could structure your arguments against doing this.
- Since we have a very notable case of doing this, performed by the well-known gentleman Michael Saylor, you might as well provide your opinion on his course of action. I would assume you believe he is a completely mad man.
If anyone is curious, here you can see a different point of view on the topic.
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0 sats \ 4 replies \ @F 7 Oct 2022
-What if the price is halved in the next few months?
-What if the person loses their job and cannot pay the loan back?
-What if they are forced to sell their bitcoin at a loss for some unexpected reason?
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0 sats \ 3 replies \ @pillar 7 Oct 2022
Bear in mind when reading my answer that I'm thinking on a plan where you get a loan, buy BTC with it and then slowly sell BTC each month to get in fiat strictly the amount of the loan installment. So, you build a "loan stack" at the start and then slowly "shave your stack" to face the installments.
This could happen and you could still earn money. You will have to shave more BTC that you would have if the price didn't halve. But that doesn't necessarily mean that you will have to sell your entire stack (it depends on the behaviour of the price during your entire loan payback period). In my case, I have a 10 year loan, and I am fully aware that it's almost sure that, at some point in that time, Bitcoin's market price will drop +80%. Maybe even more than once.
This is only a concern if you deplete your loan stack completely. Otherwise, you just keep on shaving, regardless of your job situation. If you deplete it, you will struggle. How much, depends on your loan and situation.
The loan stack should be separated from your personal life. If you use the loan stack to face personal expenses, things get tangled up. In the end, it would be the same as if you faced some unexpected problem and got a loan to face it, but you are not hedged against Bitcoin's volatility. You might come up extremely lucky or extremely unlucky.
Some final comments:
- Your concerns are super valid, and I think anyone thinking about doing this should dive into them. I certainly did.
- It is also important to ask the same questions but negated. What if it doubles? What if they don't? What if they aren't?
- The magnitudes of figures relative to your personal financial situation are also important to answer these questions. Things are different for a 30yo earning six-figures that borrows $20K at 2.5% APR on an 8 year period vs a 60yo soon to be retired with a $40K pension that borrows $30K at 6% APR on a 4 year period.
What's your take? Do you think we are missing anything important in our judgement?
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120 sats \ 2 replies \ @F 7 Oct 2022
Hmmm... Was not thinking you would be selling bitcoin every single month to pay off the loan. Depending on your country, what about taxes? Every single sale of bitcoin may be subject to capital gains tax, so that could be cutting into your profit margin.
If you continue selling bitcoin to pay off the loan, won't you end up with less and less bitcoin in the end..? I know you will still have more than before you took on the loan, but the same can be said for just buying bitcoin with dollars you already own.
I'm just playing devil's advocate. Historically, taking out a loan to buy bitcoin has been a great idea. But who knows what will happen in the next few years.
There is risk involved, more risk than just buying with dollars already owned. Whether it is worth the risk is up to the individual, but generally I'd advise against it as most people will not think it through as well as you seem to be doing.
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25 sats \ 1 reply \ @pillar 7 Oct 2022
If you report under a negative tax regime, that will definitely take a dent off your profit.
You are 100% guaranteed to see your loan stack get reduced from its initial size, yes. But any amount you have left after paying the loan is benefit.
Agreed, anyone should give plenty of thinking to something like this, but people often don't. To that matter, people even do it with mortgages, as history has proven time and again. It always blows my mind when someone close to me gets into a mortagage without having ran a single spreadsheet to analyze things. So yes, I concur that this idea is not fit for most.
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0 sats \ 0 replies \ @User21000000 OP 7 Oct 2022
Another thing depending on country you could have fiat in an offset account that reduces interest while it sits waiting to be turned to btc
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0 sats \ 0 replies \ @nullama 7 Oct 2022
Debt is not your friend.
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0 sats \ 2 replies \ @F 7 Oct 2022
Don't do it, it's way too risky.
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120 sats \ 1 reply \ @User21000000 OP 7 Oct 2022
Hear people talking about it as digital property then why wouldn’t you buy it like physical property?
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0 sats \ 0 replies \ @F 7 Oct 2022
Fair point.
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0 sats \ 1 reply \ @AJ1992 7 Oct 2022
Jesus Christ that's an awful idea for so many reasons..
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120 sats \ 0 replies \ @User21000000 OP 7 Oct 2022
Give us 21 of those reasons lol 😂
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