Cryptocurrencies have been around for years and interest in them appears to come in waves. When you delve deeper, you find that cryptocurrencies and blockchain has permeated all kinds of sectors, industries and professions, with real estate being no exception, You may be wondering how cryptocurrencies could possibly be present within the real estate sector. I mean, when was the last time you saw a house listing in Bitcoin rather than dollars? Well, I was as surprised as you to find out that Bitcoin has indeed made its way into property listings! Apparently, both sellers and agents have been using this offering as a means for differentiating their listings and standing out from the crowd. Some have asked for payment in full via Bitcoin, whereas others have asked for a split payment between Bitcoin and US dollars. In fact, a house in Essex, UK was sold entirely for Bitcoin in 2017. It cost the new buyer 63 Bitcoin, which was worth around £350,000 ($445,000).
Obviously, this would make sense in circles where individuals who have invested in cryptocurrencies have enjoyed significant gains. This was certainly the case for early adopters of Bitcoin and the more seasoned investors who have been able to profit from its rise to popularity in recent years. And given the perpetual uncertainty of cryptocurrencies, it would make sense that some individuals would want to balance their portfolio by converting some of the crypto assets into physical real estate.
Property rentals which accept bitcoin is now a thing too, thanks to sites like Expedia.com which started accepting Bitcoin payments in 2014. However, it has been reported just last week that the site has now ceased accepting Bitcoin payments, but that they will continue to constantly review payment options. Such investments may well be attractive for those who have perhaps dabbled in smaller amounts of bitcoin and can use it as a means of paying for their lease and rental properties.
Another area which has experienced growth is real estate fundraising via ICOs. This is a process whereby individuals or companies create new currencies and tokens for buying, renting, trading and investing in real estate. This is a bit like buying shares in a company that owns real estate. Recent news reports by the Youcan Times reports that MountX Real Estate Capital has licensed transfer agent Vertalo to design and launch tokens for at least 15 digital real estate projects in Mexico and Canada through 2020 and early 2021. The same report reveals that 2020 has indeed seen a rekindled interest in the sector, with commercial real estate platform Red Swan partnering with the token platform Polymath to tokenize $2.2 billion in real estate assets. Vertalo has also signed a deal with trading platform tZERO to tokenize a real estate portfolio worth an incredible $300 million.
So given the huge fluctuations in cryptocurrencies over the years and the fact that the market remains largely unregulated, you may wonder why people would take the risk when it comes to real estate investment. Well, the benefits to such a process include a greater element of privacy when buying property, easier international and overseas transactions and greater liquidity in real estate investing. It also works to reduce the cost of real estate transactions and avoids the tax which is applicable when transferring property rights. It also allows those who wish to diversify their portfolio with crypto to do so in a manageable way.
However, as previously alluded, there are a great many downsides to these kinds of investments, including insurmountable losses, risks of theft by hackers, scams, no protection and absolutely zero hard collateral to show for your trouble The market is extremely volatile and those who create ICOs related to property don’t necessarily have any credible real estate experience. In addition, there is always the risk of new regulations being introduced that cannot be met by those you are invested with or that the price of your invested currency could alter dramatically, given that the entire crypto market is influenced by a small but powerful circle.
If you are thinking of dipping your toes into the crypto waters, it may be advisable to keep these investments separate to your real estate investments. This way, you can practice and perfect your crypto strategies without it having any impact on your real estate assets. As with any investments, the advice is always to ‘only invest what you can afford to lose’ and clearly, losing real estate is not something most are willing to gamble with. Should you be lucky enough to win big with your crypto investments, you can always convert the money into dollars and use it to make additional payments against your mortgage. Whilst combining cryptocurrencies and real estate may be a thrilling proposition for some more risk-averse investors, for the vast majority it is likely to be a step too close to the financial cliff edge.