Buying Real Estate With Crypto - How Practical Is It?

Pioneer cryptos like bitcoin came to provide a decentralized virtual payment system. But, crypto has metamorphosed and has picked up many use cases including governance. Today, a third of SMEs accept crypto payments. 

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Even with markets tumbling, many are still betting on crypto-assets. As a result, digital tokens have penetrated various sectors, and the crypto disruption has spilled over into real estate.

Crypto in the Real Estate

For years, cash transactions have domiciled real estate transactions. But the blockchain and smart contracts have introduced real estate tokenization, enabling investors to buy and sell properties using cryptocurrency.

How to Buy a House with Crypto 

Crypto mortgage payment is becoming common as more Fintech platforms such as Binance Commerce (BNB-X) and BitPay accept peer-to-peer crypto payments. For instance, United Wholesale Mortgage piloted a bitcoin payment in August, although they did away with the program. Most companies use Bitcoin (BITCOMP) for transactions. That’s because it is the largest by market capitalization (around $500 billion at the time of this writing). Ethereum (ETH-X) adoption in real estate is also growing. Many widely consider it the silver to bitcoin’s gold.

Below are the top three ways investors and real estate agents use crypto to buy and sell properties. 

  1. Using NFTs 

Using NFTs is an interesting way to invest in real estate. It acts as a means of payment and proof of ownership. For instance, in May 2022, Propy real estate firm sold NFT-backed property in Florida for 210 ETH. 

Remember, NFT are non-fungible and uses smart contracts. It documents the records well and, hence, is superior to physical deeds. It eliminates cases of lost records, property size, and value ambiguity. The whole transaction is transparent, allowing the participants to view bidding and counter-bidding in real-time. 

  1. Crypto as Collateral 

You can also use crypto as a down payment for real estate. Since you don't have to liquidate your crypto assets, you avoid the taxations that would come with cashing out the digital assets.

The good news is that you can leverage crypto-assets to get crypto-backed loans. Platforms like Blockfi and Celsius offer loans to unbanked populations and high-net-worth individuals by leveraging crypto assets. For example, Adam Masato, a renowned real estate investor, took out a crypto-backed loan to finish his property project.

With the surging crypto price in 2021, the Milo mortgage firm started offering borrowers mortgages using bitcoin as collateral. Currently, the company offers mortgages at 5.95 -6.95% for both bitcoin and Ethereum. Other companies offering crypto mortgages include Ledn, Abra, and USDC Homes. The downside of using crypto collateral is determining the actual loan to value. To put this into perspective, you could stare at a loss if you sell a property for bitcoin and the crypto price plummets. But if the price increases, you laugh all the way to the bank.

  1. Direct Transfers 

This method involves wallets to wallet crypto payments. However, you might encounter headwinds if the real estate agent is not ready to accept crypto as commission. The Title Partners of South Florida, for example, helps clients discuss the title and closing processes using Bitcoin and Ethereum, the top two cryptos. 

How It Has Changed the Real Estate Space

Tokenizing real estate means you can trade real property on exchanges like stocks. As a result, listing properties might become a thing of the past. Blockchain platforms like ATLANT are using blockchain to facilitate real estate trading. 

Today, several realtors have closed many crypto-backed real estate deals. Here are some examples.

  • The first biggest crypto real estate transaction involves the purchase of a Miami penthouse for $22.5 million in Bitcoin.  
  • Celebrated music executive Scooter Braun sold a mansion for $18.5 million for his mansion in Austin, Texas. 
  • A two-bedroom house in the Louisville Iroquois neighborhood, Kentucky, was sold for $31,000 in bitcoin. (around 1 bitcoin). 
  • A T3 apartment in Braga, Portugal, for 3 bitcoin

Real Estate Companies Accept Cryptocurrency

Realtors, buyers, and sellers are adopting crypto coins as a medium of exchange. See these three that accommodate digital currencies. 

Manage Go 

Five years ago, this New York-based company enabled tenants to make rent payments in Bitcoin through their mobile app. ManageGo said that when a tenant paid with bitcoin, it would convert the digital assets into dollars using Coinbase. Then, the landlord would receive the money in dollars without a hassle.

Kuper Sotheby's International

In 2017, the first brokerage in Texas closed a deal involving a home purchased entirely in Bitcoin. Sheryl Lower, a KSIR associate together with the agent who represented the buyer, were impressed at how unique and smooth the business ran.

Sheryl noted the deal closed in 10 minutes, unlike regular transactions in her 33 years of experience, which usually take days, even weeks, to close. 

Glen Oaks Escrow

Glen Oaks started accepting Bitcoin payments in 2018. What excited them was to see a lender use crypto for a refinance, something that was a first for their organization. They believe that the technology will continue being prominent, which is why they’ve pioneered ways to implement systems and processes that will allow them to accept crypto payments.

Using Bitcoin to Buy a Property

If you wish to use bitcoin instead of using traditional fiat currencies to pay for a house, ask the seller and your agent if they are willing to accept the cryptocurrency. If they don’t, use a third-party platform like Binance to convert your crypto into the currency that the seller accepts.

But, if you’re lucky enough, you will find parties that accept bitcoin. Negotiate and make payment via their crypto payment address. All the while, involve a realtor who will ensure all the legalities are sorted. Note that banks are quite hesitant to accept crypto, mostly because of its volatility.

Advantages and Disadvantages of Doing Property Business with Crypto

Closing real estate transactions with bitcoin come with some good:

  • It is an excellent way to diversify profits, especially if you have crypto gains you want to reinvest in another asset class.
  • Also, crypto is like cash, and you know that real estate agents favor cash buyers. That gives you negotiation power that you would otherwise not have.
  • You could see a significant ROI if you sell your house for bitcoin. Even though the market may trade sideways, the long-term trend for bitcoin is upwards, and you’ll eventually be on the greener side of things.

But, it may not always be a good thing:

  • Flipping a property for your bitcoin means missing out on future gains. Imagine the Portuguese buyer who facilitated a Bitcoin real-estate purchase. The crypto he exchanged, worth $75,000, could go up in value to $192,000 if the markets shoot back to 2021 highs.
  • Dealing with crypto is not straightforward, and you could easily send money to the wrong address if you’re not careful.
  • Also, mainstream adoption of bitcoin and other cryptocurrencies isn’t wide enough, meaning selling or buying a house with crypto could take a long time. For example, this Greenwich mansion, which was listed for $6.5 million last month, may not get a crypto buyer sooner than it may get a cash buyer. Similarly, it can be difficult finding a seller.
  • High volatility- cryptos are highly volatile. In May 2021, bitcoin lost 30% of its value in one day. 

The Future is Bright 

Even though bitcoin and other cryptocurrencies are young, they have shaken the entire financial system. According to Forbes, virtual currencies have become real estate’s hottest new thing, and their implications are enormous.

Early builders and developers who realize crypto isn’t going anywhere and its deals are legit will stay ahead of the curve, and those that are still skeptical may lose their place and command in the industry. All the while, seek the services of a realtor experienced with crypto transactions. You won’t have a bumpy ride, and the expert will ensure you check all the boxes.

Conclusion

Cryptocurrencies are now used to buy virtual real estate. Investors are paying millions of dollars for virtual land in the metaverse. That should tell you that real estate is skyrocketing, and more of that crazy is coming. Be on the lookout. 

Disclaimer: This article is not investment advice.

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