Are you interested in cryptocurrencies like Bitcoin? You’re not alone. Bitcoin and other forms of cryptocurrency are some of the most talked-about forms of investment and technology today. Bitcoin has a fascinating history, and it has become a mainstream way of conducting business and making transactions in our modern society.
If you’re considering investing in luxury homes in St. Matthews, Kentucky, you might be interested to know that you can use Bitcoin to make your real estate purchase. Want to learn more? Here’s what you need to know about using Bitcoin and the pros and cons of making a real estate purchase with it.
What is Bitcoin?
An Internet-based currency created in 2009, Bitcoin allows two parties to make a transaction with no bank or other type of middleman involved. Much of the press about Bitcoin is about how you can make money investing it, but it can be used for many different types of transactions. You can use Bitcoin to buy products, book hotels, and, yes, purchase various real estate properties.
Due to Bitcoin’s anonymity and the ability for those who use it to remain nameless, this currency has its own challenges. However, it has become popular as an inexpensive way to make international purchases. These payments are not subject to any forms of regulations in the countries where they are used. Another widespread usage of Bitcoin is for small businesses to make purchases and avoid credit card fees. Buying Bitcoin as an investment is also still popular, as investors continue to bank on the expectation that the value will increase over time.
Using Cryptocurrency to Invest in Real Estate
As noted above, Bitcoin can be used to conduct a transaction between any two entities or individuals. All those who use Bitcoin have an anonymous address and utilize the cryptocurrency’s blockchain technology to complete a transaction. This technology is a shared database in several locations at once, making it more difficult to compromise as there is no one central location. One of the reasons Bitcoin has remained popular is due to the security of the infrastructure.
If you are using Bitcoin to make a real estate purchase, the process is relatively simple. You need only purchase the amount of Bitcoin needed to cover the purchase, then find a seller willing to accept it as a payment option. The final step is to locate a broker, escrow provider, and title insurance company that will support a cryptocurrency transaction. Depending on where you are located, it may be difficult to find these service professionals; however, as cryptocurrency continues to gain popularity, more and more pros in the real estate industry will start to accept these types of transactions.
The Benefits of Cryptocurrency
There are many different reasons why real estate buyers elect to use cryptocurrency instead of traditional loans or cash. Here are some of the most common:
◾ There is less volatility for Bitcoin investors. If you’ve already invested in Bitcoin or other types of cryptocurrency, you know that it is a volatile vehicle as prices tend to increase and drop at unpredictable intervals. When you use your Bitcoin investment to purchase real estate properties, you reduce the volatility by transferring it to the stability of a real estate investment.
◾ It’s fast. When you use traditional mortgages to buy property, you need to wait for the banking system process. When you use cryptocurrency, the entire process takes less than ten minutes after all parties have signed the necessary paperwork. Everyone involved in the transaction also gets paid at the same time.
◾ It gives you negotiating power. Once you find a seller who accepts cryptocurrency, you will have much more negotiating power with him or her than those who are buying through traditional mortgages. To find these sellers, look for ads that say “accepting cryptocurrency” or ask your real estate agent to help you identify those who will take Bitcoin.
◾ There is a reduction in fees. Fees are kept to a minimum with cryptocurrency transactions because they are made directly between buyers and sellers with no intermediaries. Not only are there fewer fees, but the entire process is also streamlined.
The Drawbacks of Cryptocurrency
Of course, using any type of new technology has its drawbacks. The key is to weigh them against the benefits and decide which comes out on top. Here are some of the cons of using cryptocurrency to buy real estate:
◾ The cost of opportunity. If you’re investing in cryptocurrency, you’re likely doing so in the hopes it will increase in value. When you spend it on real estate, that opportunity for growth is gone.
◾ Cryptocurrency transactions are not reversible. If you choose to buy a home with Bitcoin, the purchase cannot be reversed. That means the buyer and seller must both trust each other to follow through on the transactions.
◾ It may be difficult to find sellers and other real estate professionals who will all accept cryptocurrency to complete the transaction.
◾ There may be tax issues. Cryptocurrency is a new, unregulated form of currency, and the tax situation surrounding it can be confusing at best. The general rule of thumb is that trading, spending, or exchanging Bitcoin is considered a capital gain and subject to tax.
If you plan on investing in and spending cryptocurrency, look for a CPA who is experienced in this type of currency to help you navigate the tax implications and other issues.
If you have already invested in or are interested in investing in cryptocurrency, it might pay off to use it to buy homes for sale in St. Matthews, KY. Work with knowledgeable Louisville real estate agents like those at the Beckman Group, who are experts at conducting real estate transactions.