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It is 2018, the year that cryptocurrency will begin to takeover the world’s payment systems. In my last article, I explained what cryptocurrency is, how to buy it, and some of the hundreds of retailers that use it. In the second half of 2017, Bitcoin, Ethereum, Bitcoin Cash and Litecoin made incredible increases in price, and those who held it saw a huge payday. Of course, the moguls who have made significant profits from digital currency investment will need a way to cash out and avoid the tax burden. Therefore, we are now seeing several website startups where real estate sellers can list their homes or commercial properties, and buyers can purchase them with cryptocurrency. The sales have already started, and will continue to grow in the real estate market. Either that or the investors will just continue buying Amazon gift cards with Bitcoin profits.
As expected, the easiest way to conduct a sale in digital currency is for the buyer to purchase a property in full, with a seller who prefers to receive payment in cryptocurrency. This has worked well for a real estate developer in Manhattan, Benjamin Shaoul of Magnum Real Estate Group, who has clients who prefer to use Bitcoin over USD. Reasons for this could be due to taxes or the privacy of his clients.
Considering the fact that the majority of real estate buyers need to secure a mortgage in order to purchase a property, they may need to cash out their digital assets for USD in order to use as a down payment. As of today, I could not locate a mortgage company that is willing to take my cryptocurrency as payments. If you’re looking to change careers, “crypto-mortgage” is about to be a booming industry.
New websites dedicated to cryptocurrency-fueled real estate purchases are launching daily, for example, the site bitcoin-realestate.com has nearly four hundred listings in their database that can be purchased with Bitcoin (BTC), Litecoin (LTC), and Ethereum (ETH).
Purchasing a $415,000 home using Bitcoin Cash (BCH) worked very well for 23-year-old investor, Cary Kuo, of Seattle. Kuo used his earnings that he had made since June 2017 (from a $4500 investment) to fund the 10% downpayment on his home. This was the first cryptocurrency real estate purchase in Washington, and was a learning experience for all parties involved. Both brokers involved as well as the mortgage lender experienced cryptocurrency for the first time in this process. The lender also had confusion on how a paper trail could be traced for the payment, which can be complicated as it is a privacy feature for blockchain asset traders. Guild Mortgage had to consult with Fannie Mae to confirm the legality of the funds, and was given permission, provided Guild could prove the dollar amount processed. In the end, the process was seamless and the sale went through with ease. According to Oleg Tkach, branch manager at Guild Mortgage, as quoted in Seattle Times, “It was just like any typical transaction — people cash in their 401(k)s, or stocks” or other investments, Tkach said. “To me, it makes sense, as long as you can document the purchase of it.”
The irony that people are purchasing the most tangible asset with arguably the least tangible asset can be a shock to those outside of the digital currency space. With the mid-January Bitcoin plummet, you can expect that press will invite new investors in, as well as motivate older investors to take their profits and invest elsewhere. With the rapidly increasing rate of real estate investment by foreign capitalists, particularly those in China, it can be anticipated that the use of cryptocurrency will speed up the process of wiring money out of their country into other markets.
Disclaimer: I am not an expert on taxes, the legal system, or finance. I just spend my days watching my crypto-portfolio go up and down, reading crypto news, and participating in crypto forums.
Chase Cangelosi is an Associate Advisor & Marketing at SVN | Graham, Langlois & Legendre and is currently a full-time student at Southeastern Louisiana University, where he is studying Marketing and Economics. Chase specializes in growing businesses through using state-of-the-art marketing tactics to increase property visibility and, in turn, property revenue. He has a special interest in start-ups and small business and can be reached at [email protected].