Cryptocurrency vs. Private Real Estate Lending: Which is the More Secure Investment?
Cryptocurrencies — digital or virtual “monies” — are being hawked as the “latest, greatest” investment. Cryptocurrencies operate through the use of connected computers — “peers” — in which every peer has a complete record of all transactions relating to a particular cryptocurrency. This multiplicity of computer records is relied upon to verify account balances and prevent fraud.
The supply of a cryptocurrency is determined, and controlled, by a schedule that was written into the computer code which created the particular crypto-currency.
The primary methods of acquiring a cryptocurrency are: mining and purchasing (either for use as a currency or for investment).
In a (very small) nutshell, “mining” a cryptocurrency involves using powerful (e.g., expensive) computer hardware and software to find, “assemble,” and attach “blocks” to the “blockchain” which constitutes a particular cryptocurrency. Attaching a newly-assembled (“mined”) “block” to the blockchain results in the creation of a new amount of the cryptocurrency. The person who “mined” the newly-created amount of cryptocurrency can then spend or sell the amount that has been mined.
Mining a cryptocurrency is a time-intensive endeavor, at least for persons other than those who wrote the computer code for the cryptocurrency that is being mined.
Cryptocurrencies can also be purchased, either for use as a currency or as an investment. Purveyors of cryptocurrencies seem more than willing to extol what they claim to be the almost unlimited profit-potential associated with their cryptocurrency.
It’s easy to understand why people like to create their own cryptocurrencies: they understand — as do the various governments of the world — just how wonderful it is (at least for them) to be able to create “money” out of thin air.
Just like the United States dollar, and other government-issued currencies, there is absolutely nothing of intrinsic value — notwithstanding the misleading term “mining” that is used to describe the method of creating virtual monies — that backs any cryptocurrency. Just as one cannot compel the United States government to exchange gold or silver (or anything else of intrinsic value) for U.S. dollars, so too, one cannot compel the creator of a cryptocurrency to exchange the cryptocurrency for anything of real value.
Private Real Estate Lending, on the other hand, is an asset-backed method of investing that investors can use as an alternative, not only to cryptocurrencies, but also to traditional investments such as stocks, bonds, and other non-asset-backed investments.
Private Real Estate Lending, as that term is used here, refers to an investor who loans investment capital for use in one or more real estate transactions.
The way it works is simple: “Real estate deals” are a real estate investor’s “Inventory.” A Private Real Estate Lender loans the Investor money to purchase Inventory; the Investor gives the Private Real Estate Lender a fully-collateralized, first position lien against that Inventory, as security for repayment (as compared to the fully unsecured investments in cryptocurrencies or the stock market); the Investor sells the Inventory for more than the purchase price; and the Private Real Estate Lender gets repaid.
Both the Private Real Estate Lender and the Investor make money: the Private Real Estate Lender earns interest on the amount loaned and receives a return of the invested capital; the investor earns a profit on the sale of the inventory.
If you would like more information on becoming a Private Real Estate Lender, including how you can use your Individual Retirement Account (IRA) or similar source of funds, please click the link below to contact us.
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The material contained in this communication is for educational purposes only; it is not, and shall not constitute investment advice; and is not a representation, guarantee, or promise of the results you may experience. Please consult with the independent professionals of your choice, should you need or desire legal, tax, investment, or other professional advice.
The material contained in this communication is not, and shall not under any circumstance or for any purpose, be considered as a solicitation or offer to buy or sell any security or security-related product, instrument, service or investment, and is not intended for distribution or use in any jurisdiction where such distribution or use would be contrary to, or in violation of, the law of said jurisdiction, or where such distribution or use would subject The Note Company or any related entity or person to any registration requirement of, or personal jurisdiction in, said jurisdiction.
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The Note Company is a Texas-based national Real Estate Note Investment Firm that helps Private Lenders and other investors reposition investment capital from under-performing uses to investments that are secured by real estate.