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EP102 - Can Cryptocurrency Be Leveraged Into HCRE Property Investments? with Josh Rhodes

Today’s interview is with Josh Rhodes of Crypto Y’all, discussing the cryptocurrency markets – an emerging financial market for investors to consider – and how it can be leveraged into commercial real estate investing.  As this market continues to develop, I thought it was timely to discuss how cryptocurrency and the established commercial  and healthcare real estate markets can intersect. After speaking to Josh, we learn how to use assets in cryptocurrency markets with lenders in these markets that offer investment property property loans.

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In this episode, we talk about…

[2:16] Josh’s background and business

Josh is the owner of Crypto Y’all, based in Alabama. He loves cryptocurrency, but he recognizes there can be a lot of scammy stuff out there (as there is in any business sector). Josh envisioned a warm, hospital, trustworthy brand in the crypto space – the greatest financial technology in history. He enjoys helping investors navigate their cryptocurrency wealth-building journeys.

 

[3:36] The basics of the cryptocurrency market

Josh explains that we are moving into a place where money is basically a technology. The advent of the internet is challenging the status quo not only around how we exchange value, but also the store of value. Bitcoin, for example, is the largest market cap in cryptocurrency. 

What physicians, medical practice owners, and commercial real estate investors need to understand is that the cryptocurrency market is the sixth emerging asset class. Traditionally we have real estate, government bonds, equities, businesses, and insurance. Cryptocurrency is now emerging with a $3 trillion market cap, depending on when you look at the charts. Gold has a $10 trillion market cap. So by 2030, Bitcoin itself could have a $10 trillion market cap. Right now it is being adopted at a faster rate than mobile phone technology and the internet. It’s something you can’t ignore, and it’s happening right under our feet. If you’re an opportunist, Josh wants to help you make the most of it.

 

[6:04] How cryptocurrency fits into property investment portfolios

An investment portfolio is subjective to the outcome that the investor wants to have, and therefore Josh hesitates to say that every single investment portfolio on the planet needs vast exposure to crypto. If you were a professional trader, you would likely view it as a speculative asset or investment. As the market cap increases, however, the less speculative it will become. Josh shares that around 16-20% of Americans currently own a cryptocurrency, so there are many people yet to adopt it in the United States – let alone in the rest of the world.

Depending on your desired outcomes and time horizons, Josh suggests increasing your exposure to, at minimum, Bitcoin and Ethereum. This can store value, especially if you’re one of those people that just keeps a ton of cash sitting in a bank account. It’s like having it sit in the closet with the moths of inflation, and it’s getting holes eaten into it. It’s losing 15-20% of its buying power. Bitcoin averages 148% since it was launched 13 years ago. It’s a better year over year store of value than cash sitting in your bank account. Josh does that for his businesses as well as in his personal investment portfolio.

 

[8:08] Using cryptocurrency to purchase property for a private practice

Cryptocurrency is an emerging asset class, and it has value in the way a piece of real estate, whole life insurance, or universal whole life insurance policy might have value. You can use the cash value of a property or of the Bitcoin, for example,  as collateral to take a loan and buy more cash-flowing assets. You could be very unwise with that and buy something that depreciates, like a new car. In this case, however, there are plenty of lenders (typically in the form of a centralized exchange online) that will allow you to buy Bitcoin or Ethereum and give you the opportunity to borrow against it. 

Josh has had this experience, and he sees this as an example of how times are changing. Typically, you would be looking at a multi-week underwriting process for real estate financing. Getting a deal done takes a long time, and as our pace of life becomes faster and faster we are seeking innovation. Now, even the lending industry is being underwritten and collateralized by cryptos (primarily the blue chips like Bitcoin and Ethereum). They are stable coins, and they are pegged to the U.S. dollar.

You can get approved for a loan against 35%, 50%, 75% loan to value. Get liquidity, not lose your Bitcoin assets, and go buy another asset. If you are a good manager, you can pay off the loan and then own two assets. The wealthy never sell their assets; they borrow against them. A lot of people use whole life insurance that way, or maybe they do a cash out refinance of a commercial property or take out a line of credit on a personal residence. Josh says interest rates with crypto are getting ot be on-par with 30-year fixed mortgages, and he currently borrows against his cryptocurrency.

 

[12:00] Staking cryptocurrency and becoming your own lender

Ultimately, Josh explains, it is the idea of leverage. If you own an asset, you can leverage that asset. In the case of crypto, you can get approved for the loan instantaneously. Not because of your credit score, other assets under management, or your personal financial statement, but because you own X amount of Bitcoin. Lenders are just looking at how much Bitcoin on the open ledger is assigned to your private key and your ownership, and that is what they are loaning against. There are no underwriters because it’s all done on the blockchain. 

That is the key, as Josh says this blockchain technology is going to make things faster, better, and easier. The idea around decentralized finance, which is a genre of cryptocurrency, is to become bankless. Some of us remember when you could get 3%, maybe 5% interest on your checking account. Josh remembers his 3.3% interest rate on his checking account, and he thought he was the smartest investor on the planet letting his cash sit there. Now, because of the algorithms, he can make a $1000 deposit and earn 1% per day on his capital.  Einstein said it best: “The eighth wonder of the world is compound interest”. These blockchain currencies are now able to be more efficient investors than we are, algorithmically speaking, and they can make better use of your dollar than if it sits in a bank.

 

[14:33] Getting started in Bitcoin

If you want to create passive income, learn the ropes, and make cryptocurrency a substantial part of your life, then Josh suggests you engage with him and Crypto Y’all. If you have never invested in crypto before, his biggest encouragement would be to just get some exposure to Bitcoin and Ethereum. Make an investment, and open a central exchange account like Coinbase, Gemini, or Binance. There are plenty of trustworthy central exchanges you can use to get some exposure. You can watch the assets go up and down. The market is very volatile because the market caps aren’t as big as those in traditional equity markets.

Once you get the training wheels off and see how valuable cryptocurrency is, the more you will appreciate your investment. Josh points out that we are watching governments print money and centralized banks are taking advantage of us. Once you watch your crypto investments grow, you are going to want more. Josh shares that he does not teach “crypto slot machines stuff”. Rather, he teaches sophisticated investing.

He also wants you to know that you haven’t missed out on Bitcoin. It’s still early. Ten years ago, Bitcoin was worth $2.70. Now we’re above $40,000 a Bitcoin and as Bitcoin goes, so goes the rest of the market. It kind of acts like a “canary in the coal mine” for the rest of the market, making it pretty easy to be a crypto investor right now. You only have to watch Bitcoin, and you can sell high and buy low.

Depending on the exchange, they can list whatever they want in terms of what they are willing to put in front of their clients. Then it’s just like opening an equity trading account. The central exchanges get paid their fee for allowing us to trade our degrading currencies for cryptocurrencies. That’s the name of the game.

 

[18:05] What cryptocurrencies invest in to increase their value

There are hundreds of thousands of cryptocurrencies indexed, and they have various purposes and existences – just like any other business sector that has various verticals and niches. One thing Josh wants us to know is that there is Bitcoin, and everything else. Bitcoin is the largest computer network on the planet, and it’s a peer-to-peer network. This is where people get confused, because they try to think of it as a currency. It’s really a network that has a currency that manifests or acts as the token of value based on your activity on the network. 

Then you have Ethereum and all its step-brothers and -sisters in the cryptocoin galaxy. Ethereum is famous for being programmable money, whereas Bitcoin is really more like the digital gold or the store of value. Ethereum acts like the platform that everyone else builds their cryptos on top of. There are competitors with Ethereum that are called “layer ones” like Avalanche, Salona, or Phantom. 

To conceptualize all of this, Josh thinks about the railroad system or the cell phone towers that we use. If you have an AT&T iPhone, it won’t work on the Verizon network. There are these different networks, and they provide the platform or the railroad system that all the other crypto trains are running on. Another example would be to think about the fact that we all host our websites through Amazon Web Services. Ethereum is like the AWS of crypto. They are bringing utility and value, and the adoption is what is bringing value to most of them – not their exposure or investment portfolio exposure to other parts of the world.

 

[21:00] How Josh got into cryptocurrency

Josh describes seeing a FOMO headline about cryptocurrency five years ago. He felt like he was missing out, and he bought some Bitcoin and Ethereum just to get in the game. A few years later, and they are developing cryptocurrency games where you can play to earn cryptocurrency. That really hooked Josh, because he grew up playing video games in the 80s. He realized, though, that it’s not just video games. There are entire networks of crypto that are happening right now.

Josh provides an example, as there is one network called Helium. There are little wifi router looking things you can put in your window seal, for about $500 a piece. If you have one, they will mine Helium coin, and it rewards you for literally just using your power costs and having it plugged into the wall. 

All these networks are being built, like Helium, where we can all track stuff. Right now, Helium is worth $15 a coin. If you earn 300 Helium a quarter, you’re getting paid just for having that device sitting in your window. The next thing they are going to do with that particular network is to rent – to Verizon, AT&T, T-Mobile, and Sprint – bandwidth on their 5G wifi network and all these miners are going to get paid by the cellular companies. All that utility coming down the pike is what people need to be ready for and willing to participate in.

 

[23:51] Investing with cryptocurrency

Especially in the decentralized finance world, you could buy some Bitcoin on your Coinbase account and just ride the price action. You might buy it at 40,000 and it goes to 80,000. Great, you’ve doubled your money. Or, you can buy it and take it to a decentralized exchange, application, or protocol, and you can stake it. That is where you can start earning the additional APR or the APY on top of the price action.

You have negative and positive price action, but you might also earn 100-2000% a year APY on top of that and the native token of the project that you’re staked in. It’s so dynamic now that the options are through the roof. 

Josh shares the example that on January 2nd, he invested around $2,000 on a speculative new project. He did his research, and he got in. Four months later, it is worth $18,000. That’s nice – 9X so far. The really fun part, Josh says, is that it’s paying $347/day in income. That’s way more than any of his rental properties are paying. Algorithmic money is happening, and Josh feels like we are starting to leave the industrial age as the ability to create income passively is becoming easier and easier and the ability to use collateral has never been easier.

 

[26:18] Wealth building and taxation

Josh shares that people can start investing in cryptocurrency to accumulate some wealth, and they can always get out of it for some cash. They could also go to lenders that would lend against cryptocurrency value. The taxation would be the same as for capital gains.

 

[26:56] Josh’s first job

Josh grew up in northwest Alabama, and his father was a lumber salesman and furniture shop owner. Josh ran the drill press for eight hours a day, drilling holes into the backs of chairs.

 

[27:34] What Josh would do for a living if he was not involved with cryptocurrency

Josh also owns a real estate marketing agency for residential real estate agents. He has a real estate portfolio and invests in e-commerce and technology. He started Crypto Y’all because people kept asking him how to get into crypto. He leads cohorts of around 15 people per month through a four-week session showing them the ropes.

 

[29:08] What Josh listens to for news, information, or inspiration

Josh loves listening to the Joe Rogan Show, and he’s also a huge YouTube fan. He has a YouTube channel, and he goes through 30-50 different channel subscriptions on a rotation. Anytime he’s driving or has some downtime, he enjoys listening to folks in the crypto world. 

 

[30:34] What Josh does for self-care

Josh enjoys going for walks. He believes that is an underrated form of exercise and mental clarity.

 

[30:48] Whether leaders are born or trained

Josh believes that everyone can lead. The format in which they lead is behavioral and can be learned, but you can lead from the middle of the pack as effectively as you can from the front.

Links to resources:

Josh Rhodes

Crypto Y’All

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