Real estate: Crypto kings making ‘noticeable dent’ in luxury market, Ryan Serhant says

Ryan Serhant, SERHANT Founder and CEO, joins Yahoo Finance Live to discuss how cryptocurrency is disrupting the real estate market and property purchases newly minted crypto kings are making.

Video Transcript

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- Welcome back to Yahoo Finance Live, everybody. Newly minted cryptocurrency millionaires and billionaires are driving luxury real estate market right now. Here to fill us in is Ryan Serhant, CEO and founder of the Serhant Real Estate Firm. You also may know him as the star of Bravo's million listing.

Ryan, it's great to have you here on the show. So, I am curious what you are seeing, I mean, how much of your business is made up of these so-called Crypto Kings, and also, I hope you brought along some examples of what they're buying up right now.

RYAN SERHANT: I would say a very noticeable dent in our business. It's not going to be set off this year as a massive percentage, but it's enough so that we've really started to take count of the number of people who are either offering with a various form of cryptocurrency, wanting to purchase things wallet to wallet. If only to do it that way, because anyone who is in cryptocurrency to the millions of dollars really believes in how crypto is going to change the future. And so therefore, they want to prove that they can do anything with cryptocurrency instead of US dollars, for example.

And it will become more and more and more, more so as banks decide to lend against crypto, like you saw there's a company in Florida, I believe its [? Mirawes. ?] There's a company Genesis that's lending against NFTs now, and these aren't just fads, these are starting to take hold. And banks want to make money, right? They're incentivized to make a profit.

And if more and more people are coming to them to use cryptocurrency to invest in anything, including real estate, banks will take notice and they'll start to allow it and they will start to keep it on their books, and that's what you're going to start seeing over the next couple of years. So it's been very, very active this year, very top of mind.

- And then, Ryan, what sort of strategies are you seeing that brokers are using to sort of get up to speed and to be able to bring in people who are interested in using their crypto to finance buying real estate?

RYAN SERHANT: Well, I think-- I believe only it's 90% of Americans are aware of cryptocurrency, but only about 15% or 16% say they've actually invested traded or used it, which is up from 48% and 1%, right? Respectively just six, seven years ago. You know, there are 15,000 tokens in 484 global exchanges, but the two main currencies are still Bitcoin and Ethereum, which contain about 40% and 21% of the total market cap respectively, which means, though, that there is a growing effort towards using cryptocurrency, not just as a place to invest, which is what it's been for the last decade, but as a place to actually transact, you know.

And for us in the real estate space, I'm not just as excited to sell someone a home using Bitcoin or doing a wallet to wallet transaction or maybe selling an apartment for more money or a home for more money to somebody overseas because it's easier to do than doing a conventional purchase. I'm excited about disrupting an industry that really hasn't changed in the last 100 years. We still signed contracts the same way today for a home that you did in 1950. Sure. Now you do it maybe on DocuSign or you're going to do it on your phone, but it's still the same. There's no protection. There's no one. There's no saying that there's no forgery or any type of security. It is a photo of a piece of paper with no record attached to it.

If you drop the term NFT and just think about a title or deed, OK? And a contract of sale as a non-fungible token or a non-fungible contract, which you're going to start to see, so an NFC, then you put that out onto the blockchain, which is a massive cloud-based ledger where anyone can write to it and everything is recorded, that seems like a much safer place for me to transact a multi-million purchase. And that will come after the banks adapt and adopt crypto as a viable purchasing tool and solution.

I mean, you're already seeing it. You know, between there, you know, there was a penthouse in Miami at Arte Surfside that sold with full crypto cryptocurrency for $28 million. I sold the penthouse there at that same building for $33 million. You know, people who have this type of money are spending it, even at smaller dollar price points. It's an exciting time.

- Well, I mean, that's a lot of money to be putting down on a place. I know that Brian Armstrong, who's the CEO of Coinbase, you know, spent 133 million on a Bel Air Estate, but I'm curious if people like Brian Armstrong, like, the big names in crypto. Are ultimately making these purchases in their crypto of choice or are they still doing it in the US dollar?

RYAN SERHANT: Well, Brian is worth $10 billion in US dollars, because he created a company called Coinbase that went public and has done incredibly well and is the provider for all currency exchange, right? In crypto. And so I doubt that he bought that using cryptocurrency. Some of the major, major crypto founders that we're working with, you know, helping them buy property all over the world, they're still using US, in part because they want to maintain that kind of privacy, and they just-- they just have it you know. You have a billion in Bitcoin, you can kind of do whatever you want.

What I'm actually seeing, though a lot of, is not the billionaires, right? It's not the billionaires looking to buy something in Bitcoin, it's the person who has a regular job, a W-2, 9-5 who five years ago, a friend told them about cryptocurrency, they put 25,000, $50,000 as a bet on Bitcoin, and today, that's worth a lot more money.

Now, that person no because their job doesn't allow them to qualify for an incredible loan, let's say JPMorgan or Wells Fargo, but they have amazing assets with crypto, now has to go to either a crypto lending firm, OK? Like Milo, right? The crypto mortgage company that's based at Miami, that's doing well, or they're liquidating and they're paying the tax on it, right?

So, you know, you're not paying tax on the cash that's sitting in your bank as long as you've already paid the income tax, right? Or as long as you've already paid the capital gain tax. And so those questions are coming up for a lot of these people and saying, hey, I can't use my regular ordinary income and my W-2 tax return to afford a $2 million apartment or a $3.3 million house, but I have that in Bitcoin, because I believed in it for a long time and I've invested in it, what do I do? I do drive to cash it out, pay the tax, and then go buy something? That's not fun.

How do I get around that? How do I-- how do I-- how do I-- I've to do this in an intelligent way and maybe use the currency and pay the tax to actually buy, right? Without having to pay a mortgage recording tax. You know, in New York City, for example, there's a nearly 2% tax on the mortgage amount. New York City taxes you for your right to get a loan.

So, if you are going to get a million mortgage, you're now paying nearly $20,000 to the city to say thank you for allowing me to get a mortgage in New York City. If you have that already in crypto, why would you want to pay that additional tax?

So it's about being tax efficient and basically just being financially efficient, you know, and moving the process forward, like, how long are we going to do things the same exact way? We're not.

- And, Ryan, you are definitely an innovator. And so many people look up to you and admire you. You really built an empire in the space of just about a decade. I want to talk about more broadly what the market is looking like you opened your namesake brokerage back in 2020 during the peak of COVID. Why was that the right time to do it, and how did you know that the luxury market would bounce back and has it bounce back? Is it pre-pandemic levels, specifically in the luxury space?

RYAN SERHANT: It definitely was not the right time. The city was on fire. Everyone had left, but I say that kind of, you know, tongue in cheek, because it was the right time for us. The last thing I wanted to do was start a real estate firm in a city where it would be an obvious choice to do so.

Like today, the market's high, $30 billion in residential transactions were done in 2021, the most ever spent on real estate in New York City-- in New York City history. So if I started a firm today, then obviously, of course, you did, right? When markets are high, everyone is doing everything.

I chose that time because it was a once in a lifetime opportunity to go against the grain in every single way possible, and I'm a marketer at the end of the day. You know, because I was the only person doing it, and because I was one of the only people out there talking significantly about the success of New York and how quickly it was going to come back and how it wasn't going to be an L shape or a U shape, it was going to be a straight V-shape recovery, and everyone said Matt, I don't know, I don't know, I don't know. Florida's great. Wyoming is good.

We were able to make a lot of noise for the company and the brand, and I had the biggest year of our entire career last year in part because of that, and I work with great people. I have a great team I have great publicists. I have great staff and great agents around us. Even Brooklyn last year, if we're talking about New York, it's $16.6 billion in transactions. Long Island City did a billion six in transactions in 2021.

There is massive optimism for major market real estate transactions and for the entire nation, I mean, the United States as a whole and the planet right now. But the United States as a whole, the average days on market for a home is 22, and that's long in a lot of markets. And so it's a great time to be a seller of real estate. It's a tough time, but also I think it's still a good time to be a buyer, because interest rates are still low.

The Fed is predict, you know, the Fed has said that they will do an uptick, which isn't directly correlated to mortgage interest rates, but they will have a residual effect. And you still have opportunity pricing as a whole hasn't recovered to 2015 levels, which was the top of the last peak as we track it. So even if things are tough out there and you're a buyer, you can still find a great house, pay less per month for it, and get what you want.

- All right. Ryan Serhant, we can go on and on, but thanks so much for your unique perspective. CEO and founder there of Serhant Real Estate Firm. Thanks so much for your time.