How To Buy Real Estate With Cryptocurrency

William Huston, AIF®, AIFA®

by in Published on May 09, 2022

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How To Buy Real Estate With Cryptocurrency

Cryptocurrency is a buzzword that you've probably heard in different settings before. But what exactly is it and how does it work?

Cryptocurrency is a digital or virtual currency that is secured by cryptography. 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 about 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 make real estate transactions using cryptocurrency. The digital currency continues to grow in popularity among buyers, sellers, real estate companies and investors.

You see the way 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, Bitpay, among others 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 are embracing the use of the digital currency.

Here are the steps that you should follow when buying real estate using cryptocurrency

  1. Start by identifying a seller with real estate property that you're interested in purchasing, who accepts crypto as a form of payment.

  2. Identify a real estate agent or company that has experience in handling Bitcoin, when it comes to buying and selling real estate properties.

  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.

  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?

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 $40,515 with a market cap of over $770 billion as of April 2022.

Bitcoin is also considered as the most stable coin by market analysts.

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

If the seller that you're working with accepts Bitcoin, find out if they are willing to negotiate the selling price in Bitcoin. This is because when using Bitcoin to purchase property you don't need to take out a mortgage, the way that cash buyers do. Banks and traditional financial institutions are usually hesitant to accept Bitcoin because of the unstable nature of the currency and its association with money laundering.

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 Bitcoin Real Estate Transactions

Pros

Buying real estate properties using Bitcoin can greatly help in the diversification of your assets.

Use of Bitcoin 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.

If you have made profits while investing in Bitcoin, buying real estate is a great way of consolidating your profits.

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

Among the biggest challenges when it comes to use of Bitcoin in real estate transactions is the lack of sellers. Currently, not too many properties are selling for Bitcoins and so as a buyer, your selection pool might be quite narrow.

Unwillingness of sellers of real estate properties to accept Bitcoin and other crypto payments due to the daily fluctuations which affect buying power.

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.

Bay Street Capital Holdings

Bay Street Capital Holdings is an independent investment advisory, wealth management, and financial planning firm headquartered in Palo Alto, CA. They manage portfolios with the goal of maintaining and increasing total assets and income with a high priority on managing total risk and volatility. Although many advisors may focus on maximizing returns, they place a higher priority on managing total risk and volatility.

Our founder, William Huston founded Bay Street after 13 years of supporting the United States' largest retirement plan ($650B) Thrift Savings Plan. He is recognized as Investopedia’s Top 100 Financial Advisors for 2021. In California, only two black-owned firms out of nineteen firms received this recognition. In Scottsdale Arizona, Ekenna Anya-Gafu CFP, AAMS is recognized among the Best Financial Advisors for his responsiveness, friendliness, helpfulness, and detail. Bay Street was founded to advocate for diverse and emerging fund managers and entrepreneurs. In 2021, Bay Street was selected as a finalist out of over 900 firms across the US in the category of Asset Manager for Corporate Social Responsibility (CSR).

If you are looking for an experienced Black-led investment advisory firm to partner with, you're in the right place! Get in touch with us today and we'll help you get started on your investment journey.

Sources

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https://www.coindesk.com/learn/how-to-buy-a-house-with-crypto-us-edition/

https://bitpay.com/blog/buy-a-house-with-cryptocurrency/

https://www.benzinga.com/markets/cryptocurrency/21/09/22858999/how-to-buy-real-estate-with-cryptocurrency

https://rockethq.com/learn/home-buying/how-to-buy-a-house-with-cryptocurrency

https://titlepartnersofsofl.com/blog/bitcoin-real-estate-transactions/

https://www.pacaso.com/blog/buy-home-with-cryptocurrency

William Huston, AIF®, AIFA®
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