Cryptocurrencies are making waves in the real estate market. Long-time bitcoin fan and entrepreneur Jeremy Gardner recently put his nearly $4 million in bitcoin into three different real estate properties in the US. He says that the move was inspired by the growing number of bitcoin-related investments.

Cryptocurrencies might be a major focus for investors but their real-world utility is rarely used. In the real world, real estate is the biggest sector to date where cryptocurrency is being adopted for real estate transactions.

With the continued rise of cryptocurrency prices, investors are beginning to turn their attention to other asset classes that can be bought with Bitcoin, including real estate. Today, some investors are using Bitcoin to buy real estate, with U.S. property market website Zillow recently announcing it has partnered with real estate firm Redfin to accept Bitcoin as a payment method for its Real Estate Marketplace. The property listings on Bitcoin.com also allow for payments in Bitcoin.. Read more about bitcoin in real estate transactions and let us know what you think.

Bitcoin payments for real estate gain traction as crypto holders seek monetization

 

As the cryptocurrency industry continues to expand, crypto investors are betting big on real estate this year. According to a recent study done by the New York Digital Investment Group (NYDIG), 46 million Americans, or 22% of all adults, hold Bitcoin. While most cryptocurrency investors are enthusiastic, others have raised worries about the security, custody, and volatility of digital assets.

Nickel Digital Asset Management, for example, a licensed European investment manager focused on the crypto market, polled institutional investors and wealth managers from the United States and Europe with a combined $275 billion in assets under management. According to the findings, 76% of these people are worried about the protection of their digital assets. The same proportion answered the same thing about market size and liquidity, followed by 71 percent who view the crypto market’s regulatory framework as a significant problem.

With this in mind, many Bitcoin (BTC) and other cryptocurrency investors have begun investing in less risky assets such as real estate. Magnum Real Estate Group managing partner Ben Shaoul told Cointelegraph that the firm has been getting more inquiries to sell real estate to cryptocurrency users lately. Magnum started using cryptocurrency for real estate deals approximately three years ago, according to Shaoul:

“We hadn’t addressed this previously since most real estate developers were unfamiliar with cryptocurrency payments. However, we had a good understanding of what it represented and how we might arrange a bitcoin sale. We found out how to execute crypto transactions with regulators’ permission with the assistance of our legal staff. We initially sold a few residential units, and then three years ago, we sold a retail condominium in New York for cryptocurrency.”

According to Eric Hedvat, chief operating officer of Jet Real Estate and a special consultant for Magnum, BTC payments for real estate are more important than ever before, given the fast-paced growth of today’s crypto market, because it allows crypto investors to grow with cash flow: “The cryptocurrency market has created a vast network of new wealth that wants to fintech.” There are very few commercial properties for sale that may be purchased using Bitcoin.”

Specifically speaking, Shaoul noted that the income generated from the retail condominium building that Magnum sold for $15.3 million in BTC during 2019 is all credit. “M&T bank has been a tenant in this building since it was built. They are a multi-billion-dollar bank.” This is an important detail, as Shaoul further commented that individuals who have created new wealth with cryptocurrency don’t have a way to monetize it or create a steady income stream:

“This property generates over a million dollars in free cash flow each year. This is a highly appealing proposition for someone who has accumulated bitcoin riches. This provides them the ability to successfully monetize and collect a bond in the future.”

This has become particularly true as a result of rising interest rates in the United States. To put this in context, a recent poll conducted by the Financial Times and the University of Chicago’s Booth School of Business showed that rising inflation may force the Federal Reserve to increase interest rates twice by the end of 2023. “You can’t monetize into cash and put your money in the bank and convert in an environment where interest rates are where they are now,” Shaoul said, adding that as a consequence, Magnum has seen a lot of capital flow out of both the crypto and stocks sectors and into physical assets like real estate.

Crypto for real estate transactions is becoming increasingly frequent, according to Piper Moretti, CEO and creator of The Crypto Realty Group. Moretti said that her company now has Bitcoin real estate listings in Tulum, Uruguay, Puerto Rico, and Costa Rica.

Despite this, Moretti said that many purchasers using cryptocurrencies to purchase real estate are taking out loans against their cryptocurrency. “People are taking out loans against their crypto because of capital gain problems and the assumption that Bitcoin’s price would hit $100,000 by the end of the year. They may retain their bitcoin and yet make money this way,” she said.

According to Joseph Kelly, CEO of Unchained Capital, a Bitcoin financial services business, approximately 30 percent to 40 percent of the company’s loan originations are for real estate.

However, for sellers, cash is still king.

While Bitcoin and other cryptocurrencies are being used to buy real estate, it’s essential to remember that sellers frequently prefer cash to crypto in these deals. “If a seller gets several offers, 99 percent of the time they will put the cash bids to the top of the pile, even if it is a crypto conversion, since they will most likely be getting the cash at closing,” Moretti said.

To put this in context, Sonny Singh, the chief commercial officer of BitPay, a Bitcoin payment processor, told Cointelegraph that in the last five years, BitPay has enabled $100 million in real estate transactions. Crypto transactions may be readily converted to US cash, according to Singh:

“The first step is for the title or escrow firm to agree to participate in this procedure. Sellers may also utilize the businesses with whom BitPay has previously partnered. The buyer may then pay in Bitcoin, which we will convert to cash. The Bitcoin is now sent to the escrow firm at a cash-pay spot rate. The transaction takes one day to complete, and there is a 1% charge to start it.”

Despite the fact that this isn’t always the case, Shaoul said that Magnum retains a portion of bitcoin acquired via real estate deals in its treasury. “We retain a part of this to maintain the same crypto proportion we’ve been balancing for the past six to seven months.” To do this, Shaoul said that the business is collaborating with Galaxy Digital, a crypto investment firm, to assist handle bitcoin generated from real estate deals.

Is the use of Bitcoin to pay for real estate simply a fad?

While it’s undeniable that crypto investors are finding more chances to buy real estate with their digital assets, some industry professionals think the movement has been overhyped.

For instance, Natalia Karayaneva, CEO of Propy — a real estate transaction platform powered by blockchain technology — told Cointelegraph that many of the stories in the media today focus on crypto payments for real estate as if this is a new development. But to Karayaneva’s point, accepting crypto payments dates back to 2014, when BitPay helped facilitate the sale of a Lake Tahoe property that sold for $1.6 million in BTC. In 2014 , a tech entrepreneur also listed his Tiburon, California home for sale for $3.6 million, which was payable in Bitcoin.

The use of blockchain technology to enable crypto-to-crypto transactions, according to Karayaneva, will be a game-changer for the real estate sector. A real estate deal may be completed completely in Bitcoin, with no need for currency conversion. Both the buyer and the seller save time by conducting transactions this way, according to Karayaneva:

“Blockchain crypto transactions are 100 percent transparent and immutable, saving up to 1% in exchange costs. They also support smart contracts, which enable users to produce, audit, and authenticate documents in real time from anywhere on the planet. Because the transaction is completed only if all criteria are fulfilled, it removes the need for intermediaries and reduces the possibility of payment disputes.”

Many escrow firms today still do not want to be associated with crypto transactions, which is why a smart-contract framework is a more appealing alternative, according to Karayaneva.

Moretti, on the other hand, disagrees, claiming that utilizing a blockchain to handle real estate transactions is challenging since it bypasses the traditional escrow procedure. “I know it’s possible, but it’s clumsy. In California, we have good funds rules, and it may be difficult to get regulators on board with such a solution.”

While it’s too early to say if blockchain technology will be the missing link in real estate transactions, it’s obvious that more cryptocurrency investors are utilizing Bitcoin to buy homes today. “People want to transfer their assets from an unstable state to a stable one. And nothing is more stable than real estate?” says the narrator. Singh made a comment.

On the heels of bitcoin’s meteoric rise, many luxury global residences are investing in cryptocurrency-based property and technology payments as a means to tokenize their properties.. Read more about blockchain for real estate and let us know what you think.

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