Would you buy a home with bitcoin?
Would you buy a home with Bitcoin? Would you sell your home and accept a Bitcoin offer?
This is a guest post written by Alejandra Roca from Redfin that will help you weigh the decision.
Cryptocurrencies like Bitcoin, Litecoin, and Ethereum have created fast fortunes for investors, and now they’re beginning to make waves in real estate.
In December, Real estate company Redfin reported that 18 Bitcoins would buy the average American home. A Miami penthouse sold for 33 Bitcoins after the seller stated they would only be accepting cryptocurrency.
While it’s still not exactly mainstream to buy a home with Bitcoin, or any cryptocurrency, more sellers are marketing listings with “Bitcoin accepted” to appeal to a younger and more international market of buyers.
As buying property with cryptocurrency becomes more common, both buyers and sellers need to know the pros and cons.
Pros and cons for buyers
- Diversification strategy: Every smart investor knows not to put their eggs in one basket, and buying real estate is a great way to diversify their holdings.
- Lock in profits: Buyers who have profited from cryptocurrency may wish to lock in those profits through investment in real estate, a relatively safe investment compared to the volatile crypto market.
- Negotiating power: Like cash buyers, crypto investors who make are prepared to make a full offer will have an edge in competitive markets.
- Limited inventory: The number of sellers willing to accept a crypto offer is relatively low.
- Opportunity cost: While it’s rare for a property to depreciate in value, buyers who trade their crypto for real estate could miss out on unprecedented appreciation of the coin.
- Tax implications: Since cryptocurrency is unregulated, exchanging coins can present a huge headache come tax season. In general, trading or selling coins is subject to a capital gains tax.
Pros and cons for sellers
- Future appreciation: It’s not a guarantee, but if the past has taught us anything, it’s that cryptocurrency markets can experience unprecedented growth – appreciating much faster than real property. Sellers with a high risk tolerance may enjoy the profits from future crypto appreciation.
- A wider audience: As more buyers bring Bitcoin and other cryptocurrency to the table, sellers are getting more creative at marketing their listings. Increasingly we see “accepting bitcoin” included in seller’s listings – increasing visibility to both a younger and international audience.
- Potential losses – The crypto market is extremely volatile, and selling at the wrong time could limit profits, or worse, lead to a big loss.
- Learning curve – Bitcoin and other cryptocurrencies must be stored in a “wallet” or virtual exchange. If you don’t already have an account, you’ll have to make one, which may present a challenge for the less tech-savvy. Many online exchange services let users create an account and manage their crypto for free, but be warned that accounts are susceptible to hackers. Always take precautions to ensure security.
- Tax implications. Again, Bitcoin and other cryptos present a complicated tax situation for both the seller and buyer. Make sure to consult an experienced CPA who is familiar with cryptocurrency to avoid a visit from the IRS.
Cryptocurrency has the power to transform the real estate industry through the deep technology of the blockchain. The inherent security and transparency of blockchain makes it suitable for mortgage, title, and real estate transactions.
In reality, cryptocurrencies are already influencing the way people buy and sell homes, with more sellers accepting bitcoin and more buyers ready to cash in. Of course, using crypto as payment comes with pros and cons, so make sure to do your research before investing.
Would you ever buy a home with Bitcoin? Let us know in the comments!