In recent years, we have seen bitcoin's use cases grow significantly. The asset has firmly established itself as a store of value and a hedge against inflation. Many businesses, large and small, have started accepting the premier cryptocurrency as payment, including those in the real estate sector. So will it really be possible to purchase property using bitcoin? The short answer is yes! Let's find out how.
Real estate transactions done using bitcoin are seeing a steady increase, with several examples of real-estate developers keen to accept it as payment. While those buying properties with BTC can directly pay the value of the property, several platforms have also emerged, making it easier to transfer bitcoin between the buyer and the seller. The thought of buying real estate with bitcoin is enticing, and there are a couple of ways you can go about purchasing real estate using the cryptocurrency.
Let's understand the different ways through which you can purchase real estate using bitcoin.
Bitcoin-backed mortgages work similarly to traditional mortgages, with the key difference being that the collateral for these is your bitcoin holdings. If you want to take out a bitcoin-backed mortgage, the lender will first look at your holdings to assess your borrowing capacity. This is a significant factor because bitcoin-backed mortgages do not require a credit history. Once the terms are decided, you, the borrower, will have to lock the equivalent in your BTC holdings as collateral for the loan. For example, if you are taking a loan of $500,000, you will have to put $500,000 worth of bitcoin as collateral. Once the loan is approved and you have purchased your real estate property, you can start paying back the loan either in bitcoin or traditional currency. Several lenders offer bitcoin-backed mortgages, including Milo, a Florida-based startup, USDC Homes, Figure, and Ledn.
Two individuals willing to conduct a real estate transaction could simply make a private agreement to sell a property in exchange for bitcoin through a direct wallet-to-wallet transfer. However, a piece of sound advice would be to draft your agreement in writing after talking to a lawyer who is familiar with laws and regulations around real estate and crypto, specifically bitcoin.
Buying property using BTC has several advantages and disadvantages. Let's look at some of them.
If you invest in bitcoin and have made a significant profit, buying real estate is an excellent way to consolidate them.
Investing in real estate is an excellent way to diversify your assets.
Generally, real estate transactions heavily favor cash buyers. Using bitcoin is like being a cash buyer, as it gives you significant negotiating power.
Paying using bitcoin can also significantly speed up buying real estate, cutting out the excessive paperwork of a typical transaction and the mortgage process.
As a borrower, you would not be required to liquidate your BTC holdings to purchase a house through a bitcoin-backed mortgage. This is critical because liquidation of your assets would incur capital gains taxes.
There is a distinct lack of sellers in the market. This is due to the fact that buying property using bitcoin is in a fairly nascent stage. As a result, properties that are being sold for bitcoin are very limited, although this could change in the future. However, at present, you may have a little difficulty finding a property in your chosen location.
If you invest your bitcoin in property, you may miss out on any potential gains and returns on your asset.
Real estate transactions are complicated, and you may require the help of a tax expert.
As the world moves towards crypto and, specifically, bitcoin, the real estate space is increasingly warming up to the use of bitcoin to buy and sell properties. Bitcoin transactions offer significant advantages to both buyers and sellers, so it would come as no surprise if they are soon the norm in the real estate space. Property developers in Dubai such as DAMAC Properties have been quick to realize the potential of bitcoin payments and have made tremendous strides in that aspect.
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