Real estate and Crypto?? How to leverage your crypto to invest in real estate deals.

Written by Norfolk Capital

March 21, 2022

Cryptocurrencies like Bitcoin, Ethereum and Ripple, have hit the mainstream in the last few years. Once only used by extreme technology enthusiasts, cryptocurrencies can now be used at major retailers, such as Home Depot and Whole Foods, as well as tech companies like Microsoft. You can buy a Tesla vehicle with Bitcoin. You can even use your cryptocurrency to leverage your new real estate purchase.

What is a cryptocurrency?

Cryptocurrencies are digital assets that are created using blockchain technology and secured by cryptogography, which makes it impossible to counterfeit or double-spend them. Unlike dollars, pounds and marks, there is no physical cryptocurrency to hold in your hand. The value exists virtually.  

Ways to use your cryptocurrencies to leverage real estate deals

Some lenders and individual property sellers will accept cryptocurrencies like Bitcoin for the entire purchase price or a down payment on real estate. The tricky part is determining a value that both parties can agree on. Cryptocurrencies tend to be more volatile than traditional currencies and thus carry a greater degree of risk to the lender or seller. However, in a boom market, where the lender/seller sees an opportunity to make money on your cryptocurrency, you might be able to negotiate a  better price on the property by paying with Bitcoin or a similar virtual currency.

If you are planning to finance your property purchase, using Bitcoin or other cryptocurrency as a down payment, be advised that most traditional lenders have yet to accept virtual currencies for rental estate transactions. If you do find a lender willing to deal in cryptocurrency, you’ll also need to find a title and escrow company that is familiar with this type of currency. You are more likely to find these companies in large markets than in smaller, rural areas.

One thing you don’t want to do is exchange your Bitcoin or other cryptocurrency for traditional currency like dollars and use that currency to purchase your home or make a down payment. That’s because the IRS treats cryptocurrency as an asset, like stocks or art work. That means you’ll have to pay capital gains tax on any profits you make on the sale of the currency. 

While using cryptocurrency to purchase a real estate property presents unique challenges, it can be done. To learn more about buying property by leveraging your cryptocurrency, contact Norfolk Capital today. We’ve been helping real estate investors like you make their investment dreams a reality for more than 20 years.

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