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How To Buy Real Estate With Cryptocurrency
Buying real estate with cryptocurrency is becoming increasingly popular, as more and more real estate companies and property owners start to accept cryptocurrency as a form of payment.
Before we get into how to buy real estate using crypto, let's first start with defining what cryptocurrency is.
Key Takeaways
- Cryptocurrency is a digital or virtual currency that uses cryptography to secure and verify transactions and to control the creation of new units.
- With the increasing popularity of crypto, more and more real estate companies and property owners are starting to accept cryptocurrency as a form of payment
- You can be able to buy real estate using crypto, with Bitcoin being the most commonly used digital currency for such transactions
- The steps to follow when buying real estate using crypto are: Start by identifying a seller who accepts crypto as a form of payment, identify a real estate agent or company that has experience in handling Bitcoin when it comes to handling real estate transactions, exchange your real money for an equivalent amount of Bitcoins online and then find title insurance and escrow companies that handles cryptocurrency transactions
Disclaimer
The contents of this article are for educational purposes only. They are not intended to be a source of professional financial advice. You will find experts on financial planning, financial management, and real estate here. More on disclaimers here.
What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography to secure and verify transactions and to control the creation of new units. All verified transactions and records are maintained by a decentralized system and therefore, it's almost impossible to double spend or counterfeit.
Many cryptocurrencies are supported by blockchain technology, a distributed ledger that maintains records of transactions that have been made as well as keeps track of ownership of the cryptocurrencies. The records cannot be tampered with.
A unique feature of crypto is that it's not issued by any central government. Cryptocurrencies are usually generated through a process known as mining. The process involves downloading software that contains a partial or full history of transactions that have occurred in its network. Due to this, cryptocurrencies are not subject to government manipulation or interference.
Can I Buy Real Estate Using Cryptocurrency?
YES. You can!
Whether you're looking to acquire your own home, a rental property or a vacation spot, it is very possible to buy and sell real estate using cryptocurrency. The digital currency continues to grow in popularity among buyers, sellers, real estate companies and investors.
Similar to how you pay money and receive a good or service, crypto can be used in the same exact way. It is estimated today that more than a third of small businesses accept crypto payments. However, it is important to note that not all merchants in business accept crypto as a valid mode of payment.
The real estate industry is slowly but surely catching up to this trend. The use of fintech platforms like Coinbase and Bitpay have eased the process of transferring crypto peer-to-peer and even between consumers and businesses. In fact, some mortgage lenders have begun experimenting with crypto. They have given consumers the option of using crypto as a mode of payment.
In August 2021, United Wholesale Mortgage, the nation’s second-largest mortgage lender began piloting crypto payments but scrapped the program shortly after citing high operational costs and regulatory uncertainty in the crypto space.
Buying Real Estate With Cryptocurrency
There are many types of cryptocurrencies but Bitcoin is by far the most commonly used. It is reported that Bitcoin is used in approximately 330,000 transactions daily. Mind you, this number is on the rise as more merchants embrace the use of the digital currency.
Steps to Follow when Buying Real Estate Using Cryptocurrency
Step 1: Start by identifying a seller with real estate property that you're interested in purchasing, who accepts crypto as a form of payment.
Step 2: Identify a real estate agent or company that has experience in handling Bitcoin, when it comes to buying and selling real estate properties.
Step 3: Next, you will need to exchange your real money for an equivalent amount of Bitcoins online. You will need to have a digital wallet which you can fund using your credit card or through a mainstream Bitcoin broker.
Step 4: After that, you'll also need to find title insurance and escrow companies that handle cryptocurrency transactions.
Throughout this process, be sure to work with a real estate agent who has handled cryptocurrency transactions in the past as this is a new territory for some.
Great thing is that the real estate business is becoming more accepting of Bitcoin transactions. This is a real game changer in the real estate industry.
Why is Bitcoin the most popular cryptocurrency for conducting real estate transactions?
Bitcoin is considered as the most stable coin by market analysts. Over the years, Bitcoin has grown in popularity and today, it is considered as the most popular cryptocurrency in the market. Its value grew from $0.003 in 2010 to approximately $71,400 with a market cap of approximately $1.4 trillion as of March 2024.
Are Cryptocurrencies Taxed?
Yes they are.
As a peer-to-peer electronic monetary system without a central regulatory body, Bitcoin has been widely accepted by merchants worldwide. Bitcoin in many states is considered as a digital property or commodity. This therefore means that when your property is sold through a Bitcoin real estate transaction, you have to pay capital gains tax.
Therefore, it is important to consult with your financial advisor before you make a real estate investment with Bitcoin or any other cryptocurrency.
Things To Consider Before Making Cryptocurrency Real Estate Transactions
When looking to buy real estate property, you need to find out if the seller accepts Bitcoin. If they don't, you must convert your crypto into traditional currency using a third-party broker exchange and then make payment that way.
When purchasing a property using Bitcoin, it's important to note that mortgage lenders may not accept Bitcoin as a form of down payment. Instead, buyers may opt to pay the seller using a combination of cash and Bitcoin. The remaining amount needed for the purchase can then be obtained through a mortgage that typically requires a cash down payment.
Once you're done with the property negotiations, find out the payment method that you will use when paying your real estate agent's fees. This is because the realtor might prefer being paid in cash or maybe through Bitcoin. Just find out to avoid any inconvenience.
Why Purchase Real Estate Using Cryptocurrency?
People purchase real estate using crypto for a variety of reasons. Here's why you should consider purchasing real estate using Bitcoin, Ethereum or any other type of cryptocurrency.
Diversification of investments - If you want to diversify your investment portfolio, purchasing real estate using crypto is a good and stable way to go about it.
Discounted prices for cryptocurrency payments - As compared to sellers who only accept cash, those that accept crypto as a form of payment are more likely to give you a discount on your real estate purchase especially if they are particularly bullish on crypto.
Time efficient - Use of smart contracts and the absence of middlemen when making real estate transactions makes the processing of transactions much faster.
Pros & Cons Of Cryptocurrency Real Estate Transactions
Pros
- Diversification. Buying real estate properties using crypto can greatly help in the diversification of your assets.
- Better bargaining power. Use of crypto when making real estate transactions can give you more bargaining power, as compared to cash buyers. When transacting using crypto, sellers may accept a lower offer as compared to when you're making a cash or mortgage-funded offer.
- Conversion of a less stable asset to a more stable one. When purchasing real estate using crypto, you are converting your asset(s) from a less stable one to a more stable one. While crypto assets can be quite volatile, real estate is a more stable investment that is likely to appreciate over time.
- Transaction speed. Faster processing of transactions as transferring crypto from one user to another isn't as hectic as processing paperwork during a traditional mortgage-funded sale. The presence of smart contracts also greatly fastens and simplifies the process.
Cons
- Lack of sellers. Among the biggest challenges when it comes to use of crypto in real estate transactions is the lack of sellers. Currently, not too many sellers for example accept bitcoin real estate transactions, and so your selection pool might be quite narrow.
- Volatility. Cryptocurrencies are highly volatile, and their value can fluctuate rapidly. This can create uncertainty for both buyers and sellers, and can make it difficult to price real estate accurately.
- Legal and regulatory challenges. Cryptocurrency transactions are still relatively new, and the legal and regulatory landscape surrounding them is still evolving. This can create uncertainty and risk for buyers and sellers.
- Payment of capital gains taxes. As much as cryptocurrencies are digital forms of virtual currency, Bitcoin in particular is still subject to capital gains taxes. Navigating real estate transactions in terms of taxes might be quite complex and so it would be prudent to seek the help of a tax expert.
Summing Up
The real estate landscape is gradually changing to accommodate cryptocurrency transactions. It is therefore very important that buyers, sellers and real estate agents become familiar with the process of handling cryptocurrency transactions.
If you are looking for an experienced real estate agent to help you with your next real estate transaction, you're in the right place. Get in touch with us today and we'll help you find the property of your dreams!
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Sources
https://bitpay.com/blog/buy-a-house-with-cryptocurrency/
https://www.pacaso.com/blog/buy-home-with-cryptocurrency
https://migronis.com/blog/how-to-buy-real-estate-with-cryptocurrency
https://www.coindesk.com/learn/how-to-buy-a-house-with-crypto-us-edition/
