Crypto and blockchain have disrupted multiple industries, and real estate is not an exception. Want to know how it happened? Let’s get down to it!
Each year, we learn of new exciting ways to invest in the real estate market. One of them is using cryptocurrencies such as Bitcoin (BTC) to invest in real estate properties at home and abroad.
There are various types of investment strategies at your disposal, each of them having its pros and cons. Despite the comparatively recent rise in demand for crypto in real estate, thousands of investors have long proved its efficiency and safety.
Using cryptocurrency to make investments is a digital future of the real estate business. A lot of investors have shown interest in this type of financing, as they consider it to be one of the most reliable for serious deals. However, there are several subtleties of crypto in real estate that every investor should consider.
What Is Crypto?
Сryptocurrency is a digital form of money that is usually based on blockchain technology. Many use these terms interchangeably, referring to the blockchain as crypto technology when talking about its impact on different industries.
Blockchain technology is perfect for business transactions, as it facilitates all financial operations by recording and tracking your assets. It is not necessary to know how the entire system works in order to use crypto operations efficiently.
The connection between crypto and real estate makes sense, as many investors resort to this type of transaction for various reasons. These days, crypto is a rather popular type of investment. The question is, how exactly to buy real estate with crypto? If you have a certain amount of cryptocurrency in your possession and wish to start investing in real estate, there are several ways to do this.
How You Can Use Crypto in Real Estate
According to the latest real estate market forecast, home prices may significantly increase in the months to come depending on the cost of construction materials. Waiting for the expected recession may take some time. Besides, the so-called 2022 housing market crash is being frequently predicted as well. Thus, investors may bump into the unpredicted leaps in the cost of properties they have their eyes on.
It would be a smart choice to consider using cryptocurrencies for your future real estate deals. Despite being a relatively new form of investment, crypto often functions as a fast and reliable way to conduct transactions.
Using Crypto to Purchase Real Estate
A lot of investors purchase homes with crypto primarily due to the high security level that the blockchain provides. Simply buying real estate properties with Bitcoin is currently the most efficient way to invest your crypto. You can do it either by using your crypto as collateral or by a direct transaction between you and the seller.
Related: Figure Lending and Other Platforms That Offer Crypto Backed Mortgages
If you prefer the first option, then you have to dive deeper into the conditions of your chosen crypto lender. These conditions may include annual percentage rates as well as the ratio between the loan and the value. Consider the risk that may occur, as the crypto value still remains volatile.
Bear in mind that the increase in the value of the crypto you’re using will most likely affect your profit positively. At the same time, the drop in value will lead to the so-called margin call. In the case of the margin call, you will have to deposit more of your cryptocurrency in order to stabilize the ratio’s level.
If you are not ready to take these risks, it would be wise to simply pay the whole cost of the real estate property at once. Most of the sellers won’t be against a direct wallet-to-wallet crypto transaction. However, in this case, it is better to consult a lawyer before planning out your agreement.
If you do find a seller that is fine with payment in Bitcoin or another cryptocurrency, this is amazing for your investment portfolio. While the world of crypto offers high returns, it comes with great risks. The currency’s price can always fall suddenly. Thus, if you’ve made money on crypto, converting the profits to real estate is one of the safest investments.
Investing in Tokenized Real Estate
If you are a fledgling investor and still not familiar with all the intricacies of the real estate business, you may want to minimize risks for your very first deal. In this case, buying a real estate property in the form of blockchain tokens is a reliable option for you. The algorithm is quite intuitive: instead of owning the whole property right away, you can purchase partitioned shares. In this way, you start your deal safely by investing in just a couple of square feet.
Buying tokenized real estate is beneficial for several reasons. The return you get from the tokenized property comes solely from the profit generated by it. This mainly includes the property’s rental income. Fractional real estate investing allows the prices of tokens to fluctuate, thus majorly expanding the market and making investments much more affordable.
Liquidity is another benefit you get from the tokenization of the property, since the real estate market tends to be rather illiquid. However, with the popularization of tokens which started in 2019, it became possible to exchange your tokens or convert your crypto into any desired currency. Besides, you can always resell your tokens on the specialized marketplace.
Tokenization of the real estate property significantly boosts your business. It is closely intertwined with blockchain technology that ensures a high level of security for all your transactions. This is a great way to start for beginners, as well as the perfect chance to multiply their income for experienced investors.
Investing in Virtual Real Estate
You’ve probably encountered or heard about virtual real estate investing at least once. This mainly refers to the Metaverse, an alternative digital reality that can be perceived as a virtual variant of the reality we live in. It is a completely new layer of the internet that blurred the boundaries between real life and our day-to-day digital activities. Consequently, the Metaverse has influenced all the spheres of human life and work, including the real estate business as well.
Digital real estate refers to an online real estate asset that you can buy, sell or rent in order to make a profit, exactly how you usually do it in real life. But what is the innovation behind virtual real estate? The thing is, it constitutes a perfect source of passive income for investors. The focus shifts from the physical properties to the ones existing in virtual reality. The assets an investor possesses in digital real estate can be traded as non-fungible tokens, or NFTs, thus enriching creative digital spaces.
Related: How to Invest in Digital Real Estate in 2022
Pros and Cons of Virtual Real Estate Investing
Among the advantages of this type of investment is its skyrocketing profitability. Metaverse is making huge leaps in popularity every single day, affecting the demand for virtual real estate as well. With the right investment strategy, you get a perfect opportunity to dive into self-employment and make digital real estate investments your stable monthly source of passive income.
Besides, this type of investment allows for considerable expansion of your portfolio. This is one of the most crucial facets of every real estate deal, as a diverse portfolio can ensure the trustworthiness of the investor. By getting involved in virtual real estate investment, you get the perfect chance to test the waters in a type of deal that is already dictating the future of the market.
However, be aware that despite its popularity, virtual real estate still remains a highly volatile and rather risky investment. Despite the fact that digital real estate investments are considered much cheaper than physical ones, the technology that comes along with it can pose a challenge for some investors. In order to avoid certain mistakes that can occur, it would be wise to get acquainted at least with the basics of blockchain and other similar technologies.
The fact that you may not get all the benefits from this type of investment right away can be a repulsive factor for many investors.
How Has Crypto Affected Real Estate in the Last 10 Years?
Cryptocurrency in real estate is, by all means, an innovative method of purchasing properties. It has facilitated all financial operations by making them highly secure and much less time-consuming. In recent years, the demand for operations involving cryptocurrencies has only increased, and consequently, the rank of opportunities for investors has been expanded as well.
Nowadays, there are plenty of marketplaces designed specifically for investors who wish to use crypto in their real estate deals. Such online-based trading platforms significantly simplify all of your crypto transactions. Besides, some of these marketplaces already provide their users with all the legal documentation, thus saving them from commissions on additional legal services.
Crypto in real estate can be equally profitable for both sides of a deal due to its liquidity. A buyer is able to convert their crypto into a fiat currency at any point in time. This process becomes even more convenient if you’re using real estate crypto tokens, as in this case, you don’t have to wait until you can afford the whole property. In the same way, your seller still gets an equitable profit from the tokenized parts of the property.
Moreover, blockchain also plays an important role in boosting your deals, as it allows for the fractional ownership of properties. Fractional ownership is a perfect option for investors who don’t want or don’t have the opportunity to purchase the whole real estate property in one transaction.
Through blockchain, you are able to make agreements on the tokenized property shares, buying and selling them using a specifically designed trading app. Besides, co-ownership simplifies the maintenance of your properties, as you no longer have to deal with all the costs yourself.
Related: What Are the Benefits of Blockchain in Real Estate?
What to Expect from Crypto Real Estate in 2022
As of 2022, the crypto value remains highly unsteady. As a real estate investor, you have to take into account the risks that come alongside investing with unstable currency. The high value of the crypto you’re using affects the profit you get from your deal. Thus, most experts suggest waiting until the expected balance is established.
In the meantime, with the mitigation of the COVID-19 restrictions, more inventory will come to the market. The home prices will continue to rise, but not significantly, and the experts expect this growth to come down a bit in the forthcoming months. Besides, the increase in prices of building materials is expected to impact the cost of real estate properties.
Despite some obstacles on their way in 2022, cryptocurrencies are expected to bounce back in the second half of the year. And since the price growth on the building inventory cannot possibly influence the sphere of digital real estate, so you may not worry about the negative tendencies while making these types of deals.
Is Crypto Real Estate Going to Last, or Will It Just Be a Fad?
If we were to refer to the latest year-to-date statistics, cryptocurrency has got a rather firm anchor within the real estate market. The demand for such operations only increases among investors, while the operations themselves become much easier due to innovative trading platforms and online marketplaces. However, is there any assurance that crypto real estate won’t fall flat in the nearest future?
A High Potential of Use Cases
First things first, paying for real estate properties with crypto will become more and more acceptable, in particular for purchases abroad. With the current pace of growth of crypto in real estate, investors can expect it to expand worldwide. NFTs used in purchasing virtual properties continue to gain their reputation among investors. This provokes the development of various trading marketplaces, each one of them designed to facilitate every step of your deal.
Besides, the existence of tokenized real estate breaks down the myth that every investor must possess a considerable sum of money in order to invest it in properties. By signing up for fractional real estate investing, you can start step by step, investing small amounts in order to test the waters. It is a perfect option for beginners in the real estate business.
Volatility and Other Risks Slow Down Adaptability
However, there are some potential risks to be aware of. With the current state of events on the market, BTC remains unstable and tends to fluctuate a lot. Sudden downfalls in the value of cryptocurrency have a rather negative influence on its investment potential. It is quite risky to invest in crypto while its value is still changing daily.
Despite all the advantages of tokenized and virtual real estate, these types of investments can also be tricky. The most important thing to know is that their reputation is currently not at its highest. Knowing that these crypto investments have a high potential for abuse and fraud among sellers, serious investors will most likely shy away from them. However, it is still possible to make a profitable deal; it just requires more caution.
Overall, the demand for operations that involve crypto is expected to grow within the real estate market. If you are to make your first investment with cryptocurrency, it is better to analyze all the tendencies in investing beforehand. In this case, Mashvisor comes in handy. With the help of this convenient online tool, you are able to analyze the latest changes in the market, as well as choose an appropriate investment strategy for your deals.
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