Real estate is a sound investment. People will always need a place to live. In the past several years cryptocurrencies have become more mainstream. In 2021, Bitcoin's value hovers around $60,000 US. While the value of Bitcoin is unquestionable, the question remains, what can you use Bitcoin for?
Bitcoin was designed as a digital currency to be used just like cash. However, the cost of Bitcoin transactions combined with its volatility means that it is not ideal for small purchases. But what about real estate? Can you buy a house with Bitcoin in 2021? The short answer is YES! There are several ways that you can buy a house using Bitcoin.
Loans and Mortgages and the Crash of 2008
Satoshi Nakamoto, the pseudonymous creator of Bitcoin created the cryptocurrency in response to the 2008 American mortgage crisis. The 2008 recession resulted from the irresponsibility of traditional American financial institutions and the Bush Administration, which caused ripple effects that were felt around the world.
In 2008 major American financial institutions including Lehman Brothers, Morgan Stanley, Standard & Poor's, Bank of America, JPMorgan, and Goldman Sachs were at the center of the crisis. The wealthiest institutions in the world found themselves with a significant lack of liquidity, in large part due to over-lending mortgage loans. That year, the Federal Reserve took on hundreds of billions of dollars of debt, while an estimated 10 million Americans lost their homes.
Satoshi sought to create a decentralized global currency that would create more wealth for a new demographic, eliminate middle-men, and most importantly, remain unforgeable.
Buying A Home
Cryptocurrency has successfully created a new demographic of wealth. And while you may not want to buy toilet paper and toothpaste with Bitcoin, investing in real estate is often a wise way to diversify your portfolio.
Presently there are several ways that you can purchase a home using Bitcoin, including the following methods:
Licensed Real estate brokerages that accept Bitcoin as payment
Sellers accepting Bitcoin
Bitcoin-funded down payments
Much like selling BTC on an exchange for fiat currency, there are now many licensed brokers that will accept Bitcoin on behalf of the seller. Some brokers will even offer a price freeze on the price of your BTC until the sale is complete. A price freeze is very helpful, as it is possible that in the several weeks it takes for the sale to go through, the price of BTC could drop. However, the reverse is also possible of BTC as it is notoriously volatile. Either way, a price freeze on your BTC at the time of purchase is very helpful.
Some sellers will accept Bitcoin for the sale of their house. These sales work much like private sales. For private sales, you will still need legal contracts, and you may need lawyers and agents as well. But in this case, the price of the property is listed in BTC.
In the case of the brokerage, they are acting as the exchange. In contrast, private sales function as a peer-to-peer transaction.
Credit Ratings and Down-payments
For some Bitcoin holders, it may be possible to pay for the cost of the house upfront. That means that there will be no need for a mortgage. Whether this takes place through a brokerage or private sale, if you have enough to cover the entire cost of the property, that is certainly an option.
But let's assume you only have 20% of the cost for a down-payment on the property. This means that you will need to be approved for a mortgage through a bank or broker. Simply owning $100,000 of Bitcoin may not be sufficient. That is, if you still require a loan, then you will also need to have good enough credit, as well as proof of income.
If you do not have either of these, that is, your credit is low, or you do not have records of your income for the past several years, you will likely need a co-signatory. A co-signatory is a second person on the loan that agrees to be held partially responsible for the repayment of the loan.
As with buying any real estate, there are many moving parts and various ways to make it work. Finding the best one for you is the real work.
