How to buy a house with cryptocurrency

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Kasey Tross

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Cryptocurrency is proving to be less of a trend and more of a force that’s here to stay. And with a single Bitcoin ringing up at a value of over $60,000 (as of October 2021), it makes sense that cryptocurrency investors are thinking big when it comes to tapping into the power of their crypto stashes. 

Can you use cryptocurrency to buy a house?

If you’re considering using Bitcoin, Ethereum, Dogecoin, Litecoin or one of a number of other cryptocurrencies to purchase a home, you’re not alone. It’s becoming increasingly common, but there are some challenges to be aware of, and the volatility of the cryptocurrency market can make some transactions complicated. Former child actor Brock Pierce, now an entrepreneur and director of the Bitcoin Foundation, is reportedly the first person to use cryptocurrency to buy a home, using $1.2 million worth of Bitcoin as collateral to secure a loan for a property in Amsterdam in 2019. While not everyone can be a “Bitcoin billionaire” like Pierce, you can convert your cryptocurrency into real estate. Here’s how (and some pitfalls to watch out for). 

How do you buy a home with cryptocurrency?

There are a few options for using cryptocurrency to buy a home. 

Convert cryptocurrency to cash

One of the simplest ways to use your cryptocurrency nest egg to buy a home is to sell the cryptocurrency for fiat money (dollars) using a service like BitPay, then use that money to purchase a home. However, keep in mind that you’ll need to keep the fiat money in an account in your name for at least two months before it’s considered an asset that can be used to purchase a home, and a deposit that large may get flagged by the IRS. Any money you make from selling cryptocurrency may also be subject to capital gains tax, so check with your financial advisor or tax attorney.

Borrow against cryptocurrency

Companies like Nexo allow you to use your cryptocurrency as collateral to get a loan in fiat money, which you can then use to buy real estate. However, you’ll find higher interest rates than you would with a typical mortgage (8% or more) and again, you might have some issues with the IRS flagging your account when a big chunk of money appears. On the plus side, if you want to use your cryptocurrency as a long-term investment, it will remain in your account and its value can continue to follow the market trends. 

Transfer cryptocurrency directly to the seller

While it can be challenging to find a seller willing to accept cryptocurrency as payment for a home, many sellers are warming up to the idea. In fact, some sellers are looking to acquire Bitcoin, Ethereum and other cryptocurrencies. In those cases, offering cryptocurrency might push your offer to the front of the pack. 

What are the pros to buying a home with cryptocurrency?

While pros and cons of buying a home with cryptocurrency may be different depending on which method you choose, here are a few pros to consider: 
  • You’ll be converting a less stable asset into a more stable one. The market value of cryptocurrency can vary wildly from month to month, week to week, and even day to day. Real estate, on the other hand, is more likely to appreciate and depreciate over longer periods of time.
  • Direct cryptocurrency transfers can happen much faster than traditional home sales. Just like with a cash sale, a direct cryptocurrency sale from one party to another cuts out the hassle and paperwork associated with a traditional mortgage-funded home sale. 
  • You may get a better deal. Sellers who would prefer to pad their cryptocurrency accounts may accept a lower offer on a property if it’s in cryptocurrency. You may pay less than you would with a cash offer or mortgage-funded offer. 

What are the cons to buying a home with cryptocurrency?

As enticing as cryptocurrency may be, it’s still something of an unknown entity in the real estate industry. When considering buying a home with cryptocurrency, watch out for these drawbacks:
  • Not all sellers accept cryptocurrency. While trust is growing in Bitcoin, Ethereum and  their competitors, few sellers are ready to go all-in and accept cryptocurrency as payment for a real estate transaction, so it may limit your home-buying options. 
  • Cryptocurrency exchanges may be subject to capital gains taxes. The IRS considers cryptocurrency a type of property, property that must be sold in order for you to realize its value in dollars. Be sure to consult a tax professional to find out how using cryptocurrency to buy a home may affect your tax liability. 
  • You may have fewer legal protections in a cryptocurrency transaction. For users of cryptocurrency, two of its main selling points are security and anonymity. But that means transactions are difficult to trace, so if anything goes wrong, you could face a sticky legal situation. Be sure to consult a legal professional to learn how to protect yourself.  
  • Mortgage lenders may not accept cryptocurrency-derived dollars for a down payment. Again, because cryptocurrency is anonymous, when it’s sold and converted to cash, there’s no paper trail that lenders can use to trace a sudden windfall of money in your account, and they may be hesitant to approve your loan without documentation of funds. 
  • The value of cryptocurrency is constantly changing. Imagine offering four Bitcoin for a home, having the offer accepted, and then watching the value of Bitcoin double right before the contract is signed. Need we say more?

The bottom line

If you want to buy a home with cryptocurrency, do your homework and be prepared to face some hurdles. If you’re not sure you’re cut out to be a cryptocurrency pioneer, consider giving the real estate industry a few years to get more comfortable with digital currencies before dropping any cryptocurrency on a house. But if you don’t want to wait, consider using cryptocurrency to buy a share of a Pacaso second home. The process is streamlined  — no hurdles! Get the details.

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