If you're buying a house to expand your family, a vacation home, or an income-generating investment, you can use Bitcoin to close the deal. The future of real estate is changing to accommodate cryptocurrency as it offers increased transaction speeds and lower costs and can attract more investors. If you have embarked on buying a virtual property in the metaverse with your crypto funds, you should better translate your wealth into your physical life. You can transact Bitcoin directly with the seller, qualify for a mortgage, or convert your crypto holdings to cash.
The Rise of Cryptocurrency in Real Estate
During the COVID-19 pandemic, people have tried to diversify their investment portfolio into digital assets like cryptocurrencies to achieve short-term gains. To be more specific, many rushed to buy Bitcoin with a credit card as prices skyrocketed, thinking they would make quick gains. Building wealth is possible through cryptocurrency, so it should come as no surprise that many have earned huge sums of money. Investors who struck gold found themselves with the funds to buy property for the first time. In June 2021, a Miami Beach Penthouse was purchased for $22 million in cryptocurrency, one of the most expensive transactions completed using digital assets.
The use of cryptocurrencies, especially Bitcoin, has exploded in recent years in the real estate industry. Bank transfers are not only expensive, but they also take weeks or even months. The simplicity with which cryptocurrency can be transferred using a digital wallet streamlines the buying (and selling) process. Fraud can be avoided in real estate transactions through the use of cryptocurrency; The blockchain technology, on which Bitcoin is built, is an immutable database, so it is impossible to manipulate the data. In other words, a transaction that has been added cannot be edited or deleted.
Reasons why you might want to buy real estate with Bitcoin
You can buy a house with Bitcoin or other digital assets, such as Ethereum and Litecoin, as many real estate companies offer their listings in cryptocurrency. The current system is opaque, paper-intensive and insecure, not to mention stressful. Buying a house with Bitcoin has many advantages, as follows:
Smart contracts eliminate mountains of paperwork
When buying a property, you receive two things: the house itself and the documents. As you may already know, it takes an overwhelming amount of paperwork to buy a home, from income verification to copies of tax forms. Smart contracts can replace conventional contracts in real estate – some companies are even using them to automate the transfer of property. Information is stored on the blockchain network for transparent record and in escrow services until agreed terms are met.
There are fewer intermediaries
Intermediaries play an important role in shaping the microstructure of the real estate market, connecting sellers and buyers. Thanks to blockchain technology, the dream of disintermediation could finally come true. Bitcoin excludes intermediaries within the ecosystem, so savings will be generated which will cause the seller to charge less. Needless to say, completely removing third parties is not possible at this time, so don't expect to avoid real estate agents or lawyers even in a Bitcoin transaction.
You could get the lowest price available
When a house is on the market, it's easier for the seller than for the buyer. The buyer promises to buy the property using Bitcoin, and if this offer is accepted by the seller, the transfer is completed in about 15 minutes or less. If the seller thinks the cryptocurrency market will see an upward price move, they can offer a discount on the house. Buying activity has declined due to the current economic outlook, high inflation and affordability concerns, so you can take advantage of seller concessions.
It's up to you to decide if buying a house with Bitcoin is the best approach for you. Buying a home can still be done the old-fashioned way.
How to buy a house with bitcoin
It's not the best time to sell your Bitcoin as the market is stabilizing, but it's time to think about how you might benefit from your crypto holdings. Once the sale has been negotiated, you can select the technique best suited to your needs. If you are considering investing in real estate using Bitcoin or another cryptocurrency, there are several options available to you, as follows:
- Transact Bitcoin directly with the seller. Provide payment to home seller in Bitcoin. Buying a home with cryptocurrency through a private seller varies from person to person. While some accept 100% crypto transactions, others prefer a split between Bitcoin and cash. Have a conversation about the terms of the exchange so that problems do not arise in the future.
- Use your bitcoin as collateral for a mortgage. You can get a mortgage by putting up bitcoin as collateral. Since this practice is relatively new, lenders' guidelines are constantly being updated. The lender decides the terms, i.e. how much you can borrow and at what annual interest rate. You repay monthly.
- Convert your bitcoins to cash. For now, there are still very few people and businesses that are comfortable with bitcoin payments, so you may have no choice but to convert your cryptocurrency to species. Before selling your Bitcoin, document the process from start to finish for tax purposes. Crypto assets are similar to property, so they are subject to tax on capital gains and losses.
Every real estate transaction works differently, which can alter the preferences of buyers and sellers.
It will be interesting to watch how cryptocurrency will affect the real estate sector in the long run. The process of buying a house with Bitcoin is simple, but it could become simpler as blockchain technology evolves; there are difficulties and restrictions to consider, such as the regulatory framework and the volatility of cryptocurrency. Last but not least, you can use NFTs to own real estate, although it adds an extra step to the process. The Bitcoin blockchain does not support NFTs, but they can be minted on Layer 2.