More than just a store of value, crypto can also help celebrities diversify portfolios
Think celebrities like pro athletes are swimming in cash? Most of them are like you and me, and we all need solutions that make investment easier and more accessible
Many people make and store wealth through real estate investment, but it’s undeniable that some areas of the world attract far more investment than others. HSBC bank recently recommended investing in Paris, Berlin, or Dubai, while Telegraph lists Hong Kong as their number one real estate investment spot.
Many locales in Southeast Asia have attracted significant real estate investment. The Urban Land Institute and PwC rated Singapore the third best Asian real estate market of 2018, beating out major cities such as Tokyo and Shanghai. Vietnamese hub Ho Chi Minh City ranked fifth place on the same list.
The Business Times reports that Singapore is a favorite investment spot (and place to call home) among the ultra-wealthy. Writing for Forbes, Asian real estate expert Alex Frew McMillan recommends investment in Southeast Asian countries that are investing heavily in new infrastructure to aid urbanization — Thailand, for example, plans to spend $US 58 billion between 2015 and 2025 on roads and railways.
Home purchaser rosters for real estate investment hubs feature plenty of unremarkable names, but the lifestyle decisions of the rich and famous, including their property decisions, have always been interesting to the general public. Professional athletes feature prominently in that list. Basketball superstar Lebron James owns a $21 million mansion in Brentwood, CA and a $9.2 million mansion in his hometown of Akron, OH. Tiger Woods’ estate in Jupiter Island, Florida is worth $60 million. Athlete homes can feature heated pools, endless bedrooms, unique art, and other luxurious attributes.
Also read: 2 ways cryptocurrencies are disrupting the stock market
While it’s fun to ogle pictures of star athletes’ mansions, the reality is that the majority of athletes, like most investors and home purchasers everywhere, have a limited amount of income and must manage their money and assets wisely to get the most out of it. Average career earnings in the NBA are $24.7 million, but average career lengths are only 4.8 years. For every LeBron James, there are dozens of players who make a few million for a year or two, then lose that income stream after an injury or a fresh young face pushes them off the team.
Pro athletes, many of whom are only in their early twenties when they receive their first real paychecks, frequently become broke once their athletic careers are over. 78% of NFL players, 60% of NBA players, and many MLB players file for bankruptcy within their first five years of retirement. Real estate, unfortunately, can be part of the problem: Athletes may rush into glamorous property purchases for themselves and family members without fully processing the short lifespan of their high salaries.
Luckily, there are also plenty of success stories from athletes who didn’t necessarily become billionaires from their careers but did parlay their early salaries into a steady income (often in a second career after their pro days are over) and maintain a comfortable lifestyle thanks to careful investment and spending choices. There are plenty of professional athletes in this category who purchase and enjoy homes in major real estate investment hubs. Luck, good advice, and financial education have made these property purchasers sensitive to the necessity of minimizing unnecessary costs and making reliable transactions.
High real estate agent fees can significantly add to the cost of property purchases made by athletes, celebrities, and ordinary home sellers and buyers. In the U.S. the home seller usually pays fees for both the seller’s agent and the buyer’s agent. Typical fees are around 6%, a figure far higher in the U.S. than in many other countries (U.K. agents usually charge 1.5%). Tom Brady sold his $40 million estate in Brentwood, CA in 2014 (to Dr. Dre), which means he could have easily paid $2.6 million, 6% of the property’s value, in agent fees.
NFL players have average career earnings of $6.7 million and average career lengths of just 3.5 years. Which means that when Brady sold his mansion, he might have paid more in real estate agent commissions than many of his NFL teammates made in an entire year. High fees don’t just affect sellers–buyers often wind up covering the higher fees because sellers inflate the property price to mitigate them.
Six percent of a new luxury home’s value might not seem like that much cash to throw away to a 22-year-old pro athlete who’s just gotten their first NBA paycheck, but statistics on post-pro-career athletes’ finances show that these kinds of expenditures enormously impact their long-term financial health. In fact, they impact most home purchasers’ long-term financial health. High fees aren’t just a problem in the U.S. Commissions are as high as 6% in Japan and 5% in Italy. Southeast Asia hotspot Singapore features a more reasonable typical rate of 2%, but it can balloon to 5% when sellers are particularly urgent to close a sale quickly.
Also read: Is real estate tech disruption the end of the property agent?
Deedcoin uses blockchain to solve the problem of high agent fees. They already have partnered with brokers in 150 cities and 50 states across the U.S. and plan to expand internationally to global real estate investment hubs. Deedcoin agents accept part of their commission in Deedcoin tokens rather than cash. U.S. home sellers can pay as little as 1% of their home’s value in broker fees, covering the other standard 5% with 50 Deedcoins (10 Deedcoins represent 1% of a home’s value).
The startup screens potential partner agents only accepts enough to serve their local property market, which means Deedcoin agents can spend the majority of their time and resources closing deals rather than competing for clients. The National Association of Realtors (NAR) dominates the U.S. real estate world, and similar lobbying groups in other countries have also created distorted market conditions that drive up consumer prices. Deedcoin uses blockchain’s ability to hold value and document transactions to circumvent those distortions, providing an alternative model to exploitative real estate transactions.
Bitproperty is another cryptocurrency-based solution that offers a new avenue to claiming real estate property through decentralized transactions. In addition to the platform allowing buyers to claim new property opportunities, it also allows buyers to trade from properties seamlessly, creating a dynamic and flowing real estate environment.
Propy is also a decentralized solution aiming to re-energize the international real estate market. The platform is designed to offer a solution to the headache of purchasing property across international borders through the creation of a unified property store and asset transferring solution.
Professional athletes buying and selling multi-million-dollar homes still need to beware of overspending on fees and exploitive property markets. The same can be said of ordinary, non-famous home purchasers and sellers. These blockchain-based tools can bring consumer control back into the situation.
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