Bitcoin: What role will it play in real estate?

Question

Hi BP,

I’m interested in hearing personal opinions and reasons why/why not Bitcoin in real estate will be “a thing”, but would also appreciate any good reads on the topic.

Thanks!

Joe Splitrock · Answer

@Andrea DiPerna the issue with Bitcoin is severe fluctuation in value. Let's say I list a house for sale today in Bitcoin. I list the property for 15 Bitcoins, which is around $283K as of right now. A few days ago that 15 Bitcoin would have been equivalent to under $270K dollars. You could get it under contract today and by the time you close, Bitcoin value could change drastically. Also keep in mind the majority of real estate transactions use bank loans, so wouldn't involve Bitcoin. You could use Bitcoin for a down payment, but it would need to be converted to dollars first. The number of companies directly accepting Bitcoin is growing, but even if they accept Bitcoin, the value of the goods is tied to USD and they convert at time of sale to Bitcoin.

It is worth watching the trends as crypto and blockchain evolve, but ultimately this is a way to secure transactions, a payment method and currency, not a replacement for real estate agents. If you talk to someone who is crazy for crypto, they will tell you it is set to change the world after the US dollar implodes. What they fail to understand is that if the US dollar implodes, it means the government and country implodes. BItcoin will implode right along with everything else.

Alexander Szikla · Answer

I have issues with BTC in general. People claim it is a great hedge against inflation / fiat currency, but what about gold or silver which have been used as mediums of exchange and stores of value since ancient times.

Also, Bitcoin can't be "hacked" but the exchanges can and value can disappear or be stolen. There is no FDIC or SIPC for Bitcoin.

Moreover, what is Bitcoin really backed by? Trust - much like the US Dollar. However, we need to remember that the US Dollar is backed by the US economy and military! Bitcoin is basically just "internet points" .

Lastly, Bitcoin isn't even the "best" cryptocurrency available from a technology perspective - there are much better alternatives - it is just the "household" name.

We are real estate investor here at Bigger Pockets, not speculators. We invest in properties that YIELD. While real estate, companies, bonds, stocks, farmland, etc. all do Bitcoin, Gold, Silver, etc. do not! Something crucial to remember.

Steve Morris · Answer

BitCoin is one us of blockchain )which I think will be a bigger deal for transactions).

As far as sales in BitCoin, I think  you're going to get real blow-back from govt, since (like with large amounts of cash), the two large reasons it happens are:

1) Avoiding tax accountability and

2) Illegal activity

Seth Gerber · Answer

There are already home loans and mortgages that being denominated in BTC. Wealthy crypto investors can also loan against their bitcoins in USD. I know Blockfi offers this service. Some people also think that block chain technology will also be used for smart contracts which would help add transparency and efficiency to the home buying process. We will only see more influence with bitcoin and other technologies in this space

Andrea DiPerna · Answer

@Seth Gerber interesting, thanks. I wonder where that would put someone like me (the agent)! Out of a job, I bet.

Amedeo M. · Answer

@Andrea DiPerna

I am answering taking into consideration most of the other comments.

Bitcoin is not anonymous. It stays anonymous if you receive it or use it without linking it to a transaction related to one person, one exchange, or one, for example, real estate transaction.

Every transaction is recorded in the ledger and there is history of everything.

Even if you deal with someone using black money into bitcoin, a crypto real estate transaction can’t be anonymous. This person or his LLC will need to pay taxes and eventually justify the purchase, buy insurance, pay contractors and mix bitcoin with USD etc etc.

The volatility of the bitcoin can be a problem in real estate.

But you Don’t need bitcoin to buy and sell houses can easily use a Stable Coin (you can google it, but basically is a coin that represents 1$ always or 1 euro always).

Someone with Bitcoins can buy a stable coin and buy a house. And who receives it can exchange it to USD, keep it in Stable coin or exchange to any other cryptocurrency. A stable coin is a Cryptocurrency and his value is stable. So it’s like having the amount in USD and you don’t need a bank to use it or store it.

Crypto can kill escrow where a smart contract (google it) can regulate what happen and when in a real estate transaction.

And crypto is faster. Can receive the funds in 1 minute and less, transactions are irreversible, and the cost is much more cheaper than a bank transfer and than using a escrow.

I believe the agent can’t be replaced.

Andrea DiPerna · Answer

Lots of interesting feedback. Thanks!

Steve Morris · Answer

You're right, I forgot about BTC volatility also.  It's been on a rocket the past couple of weeks,

Matt Hurley · Answer

I don’t think it’s going to put real estate agents out of the job, you still need professionals to evaluate, price and actually show the property. Where we might see a change is in the escrow process. One of the biggest points of having an escrow officer, is that they act as an impartial third party that tallies fees and accepts money, which then gets distributed to the appropriate parties. There will be less of a need for this person as Bitcoin is about as impartial and transparent a money transfer you can get. You’ll still need someone to do the tallying, but the role will change as crypto becomes more relevant in traditional financial investing.

Bitcoin: What role will it play in real estate?

Most Popular Reply