Cryptocurrency has been steadily infiltrating the world of consumerism when it comes to buying electronic devices, software, and other items for some time now. More recently, though, it has become possible for consumers to purchase real estate property with digital currencies.
Not only that, but Bitcoin becoming more mainstream has opened investors' minds to the possibility of investing in both real estate and Bitcoin as a means of diversifying one's portfolio.
The opportunities for using cryptocurrency in real estate transactions are growing all the time. The applications for cryptocurrency and associated blockchain technologies are vast for the property industry. These include:
Some sellers and agents use this strategy to attract more attention to their listings. For example, some sellers want to sell their property solely for Bitcoin, while others opt to offer their asset up for sale in exchange for a payment split between bitcoins and traditional money.
Higher-end property listings tend to have the most success with this approach, as wealthier buyers are more likely to own bitcoin and are open to using it for real estate. Real estate is an excellent way for anyone who finds themselves rich in cryptocurrency to convert these digital finances into tangible assets.
Bitcoin is becoming an increasingly popular way to pay for rent and leases. For example, Expedia.com is a giant in online travel booking that accepts bitcoins in payment and has recently begun taking on more and more Airbnb-style rental/vacation listings.
Earlier in 2021, billionaire Rick Caruso announced that his Los Angeles-based business would accept bitcoin for its residential and retail property rent payments. This includes both luxury apartments and shopping malls, signaling an ongoing trend towards a significant infiltration of cryptocurrency into the commercial real estate sector.
A blockchain is a ledger of recorded data that is distributed amongst parties in a highly secure way. Blockchains make essential data more trustworthy, as it is all independently verifiable when compared to each copy distributed, instead of being compared to a third party's separate recording of the data. This system greatly reduces the risks and costs associated with fraud, double spending, and real estate data manipulation.
Just as online Multiple Listing Services (MLS) like Zillow and Redfin have been repackaging their MLS services and making them more accessible, the potential for blockchain to streamline the real estate transactional process is significant.
An MLS that is blockchain-secured can offer more reliable and efficient property search information. The extent of human intervention and risk of error involved in the traditional method of creating online listings can result in highly problematic inaccuracies that a blockchain-enabled MLS could avoid.
A blockchain-enabled MLS would allow for a transparent database in which all agents and brokers can access an unbroken chain of reliable property information.
Herein lies one of the risks associated with bitcoin transacting large assets – bitcoin's value fluctuates daily, and sometimes significantly during relatively short periods of time.
For example, the value of Bitcoin peaked at approximately $63,000 per bitcoin back in April 2021. At the time of writing, however, according to Markets Insider, the current value is $47,916 per coin.
That said, the value of Bitcoin has historically trended up overall. For example, it is currently more than 500% greater than it was in 2018 when it was trading at just $6,500 per coin.
The pros of using cryptocurrency for real estate include:
The cons of using cryptocurrency for real estate include:
Despite some issues with recent value fluctuations, cryptocurrency remains highly popular and touted by experts as the future of finance, including real estate.
Digital currencies present many valuable applications for the real estate sector, with agents, investors, buyers, sellers, and renters all benefiting from the reliability and flexibility it offers.
Nevertheless, businesses and individuals must be cautious. That said, it will be fascinating to see how the market continues to evolve as the era of cryptocurrency continues to seep further into the real estate landscape. Lots of changes on the horizon, with plenty of upsides predicted.