Are there specific cryptocurrencies preferred for real estate transactions?

Top real estate cryptocurrencies include BTC, ETH and USDT — they are often used in such deals. There are also specific cryptocurrencies designed for the real estate sector. For example, PRO is the native token of Propy, a Web3 real estate transaction platform.

How do I handle tax implications when buying a property with crypto?

In most cases, you will be taxed as a real estate buyer if you buy a property for crypto. If you use tokenized real estate for investment purposes, you are supposed to pay crypto investment taxes . However, regulations are different in different jurisdictions, so we recommend you consult a lawyer.

What if the property's value and the crypto's value diverge during the transaction?

This is a legitimate concern, given the volatility of cryptocurrencies. To handle it, you should have a clear contract agreement about handling price divergences. Some parties might agree on a fixed value for the cryptocurrency at the outset, or they might decide to adjust the amount of cryptocurrency if its value changes significantly before the transaction completes. You can also set the amount in stablecoins to avoid volatility.

Is it safer to convert cryptocurrency to fiat before buying?

Converting to fiat can simplify the transaction and might be preferred by sellers unfamiliar with or unwilling to accept crypto . But in that case, it would be considered a regular deal .

How common is crypto fraud in real estate, and how can I avoid it?

There is always a risk of scams when it comes to large amounts of money. Fraud is common enough in both crypto and real estate markets. A banal but good advice here is to be careful and aware. And consult with a lawyer before making a deal.

How To Buy Real Estate With Crypto

WhitepayPosted 28.09.2023 • 10 mins read

Whitepay NewsHow To Buy Real Estate With Crypto

The growing popularity of cryptocurrency has led to the fact that crypto has even penetrated the real estate market. And while it is still a relatively new concept, there are a growing number of companies and individuals who are willing to invest in crypto real estate. The first question is: is it possible to buy real estate with crypto? The first answer is yes. And that's where more questions arise: why, where, how, etc. We are here to answer all these (and other) questions.

History of Crypto in Real Estate

In 2009, Bitcoin was created as the first decentralized cryptocurrency.
In 2014, a home valued at $1.6 million in Lake Tahoe, California, became one of the first and largest real estate transactions involving Bitcoin.
In 2017, a $60,000 flat in Kyiv, Ukraine, became the world’s first property to be sold using smart contracts.
In 2018, a $30,000,000 condo in Manhattan was tokenized.
In 2021, a Miami Beach penthouse traded for $22.5 million in crypto equivalency at Arte by Antonio Citterio, becoming the most known cryptocurrency real estate deal to date.
In February 2022, the first house was sold as NFT. Leslie Alessandra sold her home in Gulfport (Florida) for $650,000. The transaction was facilitated by the prop-tech company Propy.
In May 2022, the tokenized real estate market reached $194 million.

This timeline highlights some of the landmark trades. But that's not all.

Case Studies: Real World Crypto Real Estate Investments

Let's look at three successful examples and one bad example of buying real estate for digital assets.

Miami penthouse

The Miami penthouse that sold for crypto is an exclusive oceanfront condo in Arte Surfside at Miami Beach. It has four bedrooms, four bathrooms, a wraparound terrace, and a private rooftop pool. The buyer paid $22.5 million in an unspecified cryptocurrency in June 2021, making it the most expensive known residential crypto real estate transaction in the US.

Villa in Bali

The luxury villa in Bali that sold for 800 BTC in 2014 is a two-bedroom, two-bathroom property located on the southern coast of the island. The buyer was an anonymous person who paid about $500,000 worth of Bitcoins at the time of the transaction. The deal was facilitated by an online platform called BitPremier, which specializes in luxury items and real estate for crypto.

The Beverly Hills mansion

A 3,600 square foot mansion in Beverly Hills, California was sold for $65 million worth of Bitcoin in 2021. The marble-and-stone theme pervades the entire seven-bedroom home. The entire mansion is ultra-luxury. The buyer was a tech entrepreneur who wanted to make a statement about the future of money.

Tokenized Real Estate Scam — Lessons from Failures

In early February 2022, a real estate crypto project Realux vanished shortly after promoting and selling their digital tokens, leaving investors in the lurch. The company had proclaimed its mission to democratize the real estate industry using digital tokens backed by crypto real estate investing. However, after significant promotion by social media influencers and a surge in token sales, Realux abruptly shut down its online presence, including its website, Twitter, and Telegram channels.

Blockchain data suggests the company dumped 70 million RLX tokens at once for an approximate return of $24,000.

Some crypto real estate companies hide behind the tokenized real estate trend to perform classic rug pull scams. Therefore, you need to be careful and carefully check the information about the company before making decisions.

Advantages of Crypto Real Estate Transactions

Privacy.
You can buy property without revealing your identity or personal information, as crypto transactions are anonymous and encrypted.
Easier international and overseas transactions.
You can avoid the hassle of currency conversion, fees and intermediaries when buying a property in another country, as crypto is a universal and borderless form of payment.
Reducing the cost of real estate transactions.
You can save money on commissions, taxes, escrow fees, and other expenses, as crypto transactions are peer-to-peer and decentralized.
Gaining attention in the press.
Sellers can attract more buyers and publicity by listing your property for crypto. As crypto real estate is still a novel and innovative concept, that generates local media attention and curiosity.

However, it is important to take into account the laws of the countries in which you buy property. In crypto-friendly countries like Malta or the UAE, this will be easier to do. In others, the benefits of blockchain transactions may not be offset by legal restrictions.

Potential Pitfalls of Buying Real Estate with Crypto

Daily fluctuations in crypto prices impact buying power.
Suppose we are talking about "normal" cryptocurrencies such as BTC (and not stablecoins). In that case, you may end up paying more or less for your property depending on the market value of your crypto at the time of the transaction, as crypto prices can change dramatically within hours or even minutes.
Fraud risks.
You may lose your funds or property if you are not careful with smart contracts. Crypto transactions can’t be canceled, so you need to make sure that you will not get scammed.
Legal uncertainty.
You may face legal challenges or disputes over the ownership or transfer of your property, as such deals are not well-regulated by many authorities.
Risk of new regulations.
You may face new taxes, fees, restrictions, or bans on your crypto transactions if the government decides to intervene or regulate the crypto market more strictly. As crypto is still a new and evolving phenomenon, that poses many challenges and uncertainties.

We would recommend that you refrain from buying properties for crypto in countries with ambiguous regulations. Luckily, crypto payments are legal in many countries, including the US.

The Mechanics of a Crypto Real Estate Deal

How can I buy real estate with crypto? First things first, not all crypto deals are the same. Basically, there are two options. The first option is to simply buy a house with a cryptocurrency (for example, BTC). The second is to buy tokenized real estate using a smart contract.

Enable seamless crypto processing in your business and reach a wider audience. Offer your customers the convenience of paying with over 150 digital assets

Try Whitepay

Purchasing Properties for Bitcoin

In countries where crypto is recognized as a legal form of payment, purchasing regular real estate with Bitcoin is not much different from a regular transaction. You still use the official real estate registries, you still use notaries, and generally do everything the same as when you buy a house for fiat. The only difference is that the contract specifies the amount in BTC or another cryptocurrency convenient for the parties to the transaction.

From a legal point of view, this is absolutely fine, as cryptocurrencies are accepted as a legal means of payment in most countries.

However, not all sellers are ready to sell real estate for cryptocurrency. You can find houses for sale for crypto on the Crypto Emporium website.

Advice: find insurance and escrow companies that handle cryptocurrency transactions to protect your deal.

Tokenized Real Estate

Buying tokenized real estate involves splitting a house into a certain number of tokens and selling the house piecemeal. For example, a house with an area of 1000 square meters can be split into 1000 tokens of $1000 each.

Special platforms like RealT and HoneyBrics handle the sale of tokenized real estate.

The advantage of this approach is that you can diversify your portfolio by buying stakes in different properties. However, the big downside is that a tokenized share does not give you full rights to use the property.

Advice: in most jurisdictions, tokenized real estate is classified as a cryptocurrency, so such investments should be considered as investments in crypto, not as real estate investments.

How to Buy Real Estate With Cryptocurrency

Step 1.
Consult with a lawyer and notary in the country where you want to buy the property. Find out if authorities recognize the purchase of real estate with bitcoins as a legal transaction.
Step 2.
Choose a purchase method (two mechanics are described above).
Step 3.
Find a suitable property. You need to find a seller willing to accept crypto for real estate.
Step 4.
Complete the transaction in a legally compliant manner.

The future of Crypto and Real Estate Collaboration

The global real estate market was valued at $600 trillion in 2022, which is more than the global crypto and stock markets combined. The integration of crypto and real estate will be a huge plus to the reputation of cryptocurrencies in general, and will be accompanied by general mass adoption.

So far, only a small percentage of homes are sold for cryptocurrencies, and this is the exception rather than the norm. Still, it is possible in the future. According to Zippia, there are already more than 15,000 businesses accepting crypto today. For example, Whitepay provides crypto payment solutions for various online stores, restaurants, charities, and many other businesses. One day, this trend may affect real estate as well.