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Key takeaways
- Today, cryptocurrency and blockchain are changing every industry from banking to healthcare. But in front of it all, real estate is proving to be one of blockchain’s most popular applications.
- Whether it’s an apartment for rent, land for sale, or improvements on a property, blockchain has the power to optimize every facet of real estate transactions. Get in now — everyone will be talking about how buying houses with cryptocurrency will be mainstream soon.
By now, you’ve probably heard of the buzzword: cryptocurrency. Although formally introduced to the world in 2008, cryptocurrency wasn’t a mainstream term or financial concept until the 2020s. These blockchain-based digital currencies have disrupted every sector, including the real estate industry. And with digital real estate on the rise, now is the time to familiarize yourself with real estate cryptocurrency.
But what exactly is real estate cryptocurrency, and how do you get started with it? In this explanatory post, we’ll help you navigate the intricacies of real estate cryptocurrency: what it is, why now, and how to prepare for its effects on the industry.
Navigate this post:
- What is cryptocurrency in real estate?
- How the trend started
- How does cryptocurrency affect real estate?
- 4 ways to prepare for this crypto transformation in real estate
What is cryptocurrency in real estate?
Simply put, crypto real estate refers to people using cryptocurrency in real estate transactions. And these transactions occur both in the digital space — namely the metaverse — and in real life.
For starters, cryptocurrency is digital money that lives on the blockchain. You’ve probably heard of popular cryptocurrencies like Bitcoin and Ethereum. These cryptocurrencies have made a substantial impact on payments, remittances, and foreign exchange, including in the real estate industry.
Consumers have been making blockchain-based payments for everyday transactions in recent years. And the real estate industry is taking note and getting ahead of this latest trend.
But:
You might be wondering, what if this is just a fad that’ll die out?
Well, as you may know, many technological innovations seem far-fetched at first. For example, when smartphones and social media platforms were released in the early- to mid-2000s, the public was highly skeptical about their success. But look at the world of smartphones, smart devices, and social media now — 20 years later.
The same thing can very much happen with crypto and real estate.
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Can you buy real estate with cryptocurrency?
Yes, you can certainly buy real estate with cryptocurrency. Coupled with smart contracts, cryptocurrency-based real estate transactions are proven to be secure, efficient, and fast.
You can purchase properties with real estate-backed cryptocurrency by:
- Initiating the transaction directly with the seller. Some property owners have fully embraced the world of cryptocurrency and are comfortable with 100% crypto transactions. Meanwhile, others may want to split between crypto and cash.
- Using a third-party vendor. In some cases, the seller might require converting the buyer’s cryptocurrency into dollars to complete the purchase. This process is completed by third-party vendors that exchange the buyer’s crypto for real currency to be deposited into the seller’s bank account. The vendor invoices the buyer, who will then pay using their crypto wallet (in other words, their crypto real estate fund).
Note: Even if you complete a real estate transaction using 100% cryptocurrency, you might still need to make some cash payments to government agencies and intermediary parties.
How do cryptocurrency transactions work?
First of all, there are over 6,700 different cryptocurrencies — Bitcoin is just one of them — and transactions on each work slightly differently.
Simply put, each type of cryptocurrency has its own unique set of codes. And in a similar vein as casino chips, you’ll need to exchange actual money for cryptocurrency to purchase goods and services from a company. The information needed to verify each cryptocurrency lives on the blockchain.
Blockchain-based ledgers facilitate transactions with a particular cryptocurrency in the following ways:
- Confirms its value
- Manages and records transactions
- Facilitates the value conversions (i.e., USD to bitcoin rate)
Most important of all, heightened security is one of the biggest appeals of blockchains and cryptocurrencies. Buying and selling a good or service with cryptocurrencies eliminates the need for central banks, making it more of a direct payment system.
How the crypto for real estate trend started
Although NFTs (non-fungible funds) and cryptocurrency became popular only in recent years, the move towards blockchain-based technology has been on the rise for the past 15 years.
In late 2008, Bitcoin was unleashed to the world, and like a chain reaction, many organizations and individuals have been developing ways to complete transactions using blockchain transactions. And with it came bearing an entirely new financial system: decentralized finance (DeFi) programming.
Cryptocurrency developers and other enthusiasts realized the need for an always-accessible, open financial system separate from traditional banking institutions to process crypto transactions. These developers used smart contracts and blockchains to form a decentralized financial system, and DeFi was born.
DeFi services provide a way for crypto transactions to be monitored and facilitated. Instead of people managing transactions, DeFi uses a set of programmed rules called a smart contract to administer a transaction.
Then entered NFTs and the metaverse
As you’re probably aware, NFTs made a big splash among tech and art enthusiasts alike in early 2020. Digital art started to become NFTs that were irreplicable and indestructible for record-high prices in cryptocurrency.
Then another phenomenon shook the public discourse: the rise in popularity of metaverses. Amid the long social isolation spurred by the global pandemic, people turned to metaverses to socialize and engage with current events. During this time, people of all kinds — but specifically tech junkies and real estate enthusiasts — sought solace by investing and engaging in these virtual worlds with digital real estate cryptocurrency.
Adding to the momentum was Facebook’s unveiling of its new Meta platform. Meta is pinned to be a virtual reality version of the popular social media platform. Users will be able to create avatars and engage with the world around them, but the only difference from the real world is that this virtual world lives online.
Big companies and brands are already getting ahead of the game by opening stores and selling merchandise — from clothes for avatars to virtual houses and pieces of art — in these virtual worlds.
How does cryptocurrency affect real estate?
Crypto real estate investments impact both the virtual and real world.
In the virtual world, investors can purchase parcels, which are like acres of land in the digital space. And just like in real life, there’s a limited number of parcels available at any given time in metaverses. So if you buy a parcel early on in that particular metaverse’s development, the value will increase over time, and you can sell it when it’s most valuable. This process is very similar to stock investments.
But wait, there’s also a use for cryptocurrency in real-life real estate.
With cryptocurrency, multiple people can buy tokens of a particular property and co-own the building. This occurs after the tokenization of a property, which divides the property into multiple “tokens” on the blockchain, allowing fractional or partial ownership of the asset.
Additionally, tokenization also allows real estate to be a more liquid commodity, meaning that owners can easily buy or sell their shares cheaper and faster. As a result, this process attracts more potential investors and buyers in the real estate market by democratizing and decentralizing it.
4 ways to prepare for this crypto transformation in real estate
Despite cryptocurrency’s tendency to fluctuate in value — which sometimes causes havoc — people still believe in it, and it’s posed to be the future.
Although the mass adoption of cryptocurrency and other blockchain technologies is still at its nascent stage, it’ll inevitably be the future of how we work, live, and play. And as a real estate tech enthusiast or investor, you’ll want to be at the forefront of it all.
But, don’t worry: You don’t need to start big. Small steps can go a long way.
Here are four ways to prepare for the crypto real estate revolution:
- Accept and send payments in crypto
- Embrace the world of proptech
- Diversify your portfolio with digital real estate
- Process property transfers and title changes with smart contracts
1. Accept and send payments in crypto
Believe it or not, property owners and managers have only been collecting rent payments online for the last decade. But the next disruptor in real estate transactions is approaching at full speed: buying, selling, and renting properties in cryptocurrency.
Completing transactions online will become more of the norm as we continue immersing ourselves in the digital world. So as a result, people will want an extra layer of security for their liquid assets to prevent fraud by financial institutions.
Accepting and sending payments in cryptocurrency will safeguard your and the recipient’s assets and identities. More importantly, it’ll also put you at a competitive advantage when crypto becomes the norm.
2. Embrace the world of proptech
The most significant benefit of proptech is its ability to integrate with other technologies. Cloud-based proptech devices like smart locks and video intercoms are already internet-connected.
And most data that lives on these devices can easily be transferred onto a secure blockchain database. In crypto-equipped building infrastructure, nearly all processes will be completed on the cloud — with all proptech data and workflows encrypted and safeguarded in blockchains.
So, installing proptech throughout your property will put you ahead of the game.
And who knows? There might be a day when you can modify your live-in home with a few clicks on the metaverse. Embrace the future by adapting all the features and automation that proptech can bring to your building.
3. Diversify your portfolio with digital real estate
There are multiple ways to diversify your real estate investment portfolio with cryptocurrency.
For one, buying one or a few units of a cryptocurrency can lead to high ROI, which you can later use to, say, buy a parcel in the metaverse. Increasingly popular real estate crypto coins are tokenized digital assets that you can use to purchase real estate in real life.
Another way to emerge yourself in cryptocurrency and digital real estate is to buy properties in the metaverse. Some property investors and developers are using metaverse platforms to gain real-time insights on the latest trends before investing in them in real life.
4. Process property transfers and title changes with smart contracts
Arguably, the most important aspects of cryptocurrency and blockchain technology are automation and transparency.
Along with payments, blockchain — specifically smart contracts — can also streamline documentation and processing of listing agreements, letters of intent, and offer documents, to name a few. And since each transaction made using blockchains lives on a public ledger online, there will be absolute transparency.
All this eliminates the need for intermediaries — such as brokers, bankers, and lawyers — and speeds up various real estate transactions.
