Cryptocurrency is becoming increasingly popular and mainstream, resulting in more landlords investing in and holding cryptocurrency. This has led to a relatively new question: can you purchase property with cryptocurrency?
The short answer is yes, in certain circumstances it’s possible. However, there are some key considerations to keep in mind and some clear pros and cons involved in this type of transaction. To help you determine whether it’s a good idea for you to purchase property with cryptocurrency, here’s an overview of those considerations and some important details about this type of transaction.
When and How Can You Purchase Property With Cryptocurrency?
The first key for purchasing real estate with cryptocurrency is that the seller has to be on board. There are more and more sellers that are willing to accept cryptocurrency for their homes – in fact, some online listing platforms include an option where sellers can indicate that they will accept cryptocurrency. You can search for properties with this filter on or, if you already have a property in mind, it never hurts to ask if the seller is willing to accept cryptocurrency.
If the seller is okay with this type of payment, the next step is finding title insurance and ESCROW companies that deal with cryptocurrency. Once you have these, you’re ready to move forward. In a way, you can think of this process kind of like you think of Tenant Screening – before you move forward with a deal, you have to gather some key information from the parties involved.
Pros and Cons of Purchasing Investment Properties with Cryptocurrency
Once you’ve determined whether or not you can purchase a property with cryptocurrency, the next question to ask yourself is whether it makes sense to do so. Every deal is different but here are some standard pros and cons of purchasing with crypto:
- Investors get to trade a volatile asset (cryptocurrency) for a stable asset (real estate)
- Sellers that are also investors in cryptocurrency might give you a discount
- It’s faster than going through the mortgage process; it’s similar to cash in that it can speed up the closing process.
- Cryptocurrency’s volatility means that the value could change substantially between the time that an offer is made and a deal closes; this can create problems for both buyers and sellers
- There are fewer legal protections if there are problems with the deal. This is a very real consideration. Think of it like this, you’d never rent out a unit without the full protections of a Great Lease, so do you want to purchase a property without full legal protections for the transaction?
- There are a limited number of sellers willing to accept cryptocurrency
- Because gains on cryptocurrency are taxed as capital gains, there can be tax complications with this type of transaction
Tips for Investors Looking to Convert Cryptocurrency to Real Estate
While purchasing a property with cryptocurrency isn’t always easy, there are still plenty of ways that crypto investors can invest in real estate. Here are a few practical tips for doing so:
- Take advantage of online search features that make it easy to find sellers that accept cryptocurrency; in addition, there are some real estate groups that accept cryptocurrency – for example Pacaso and Condos.com. If you’re set on this type of transaction, you should prioritize connecting with the right seller.
- If you’re dealing with a private seller that is unwilling to accept cryptocurrency, you can always cash out your crypto and make a cash purchase. If you do so, make sure you consider any capital gains taxes you will incur.
- There are some lenders, for example, Nexo, that allow you to use cryptocurrency as collateral for a loan. They generally have higher interest rates – 8% or higher – but offer another way to use cryptocurrency to acquire an investment property.
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