Although still in the very early stages, a growing number of real estate transactions are finalized using cryptocurrency every month. As utilizing cryptocurrency to purchase or sell property becomes more frequent, it is important to understand what it is and how it may affect rental real estate investors like you.
Cryptocurrency Defined
Cryptocurrencies, like Bitcoin and Ethereum, are digital currencies. These currencies vary from other sorts of currency in that they do not rely on a central bank or administrator – they can be transferred directly from one user to another. These transfers take place on a cryptocurrency network that verifies each transaction through incorruptible network nodes and are then recorded in a digital public ledger called a blockchain.
The idea behind cryptocurrency is to improve a transaction’s efficiency and safety and reduce the risk of fraud. Since all cryptocurrency transactions are open to the public, there is enhanced transparency. And, since the data in the blockchain isn’t predisposed to corruption, information can be verified faster and more securely as compared with past methods.
Automating Real Estate Transactions
No doubt that the potential of cryptocurrency already has captured the imagination of many real estate investors. And, several can see how that cryptocurrency could change nearly every stage of a real estate transaction. Anyone could simply verify the status of deeds, access the comprehensive history of a property, and more when using blockchain. Banks, real estate agents, buyers, and sellers would all have access to the same verified information.
Transmitting data between all parties in a transaction would be faster and safer, and transfers of funds would occur directly. All of this could significantly reduce the amount of time between a preliminary sales agreement and finalizing the transfer of title.
The Power of Three
The real advantages of using cryptocurrency to invest in real estate come into focus when mixed with the affordances of smart contracts and blockchain. Smart contracts are digital agreements programmed to conduct transfers once certain conditions are met automatically. So, using a smart contract and cryptocurrency, all the parties involved could receive the fund due to them the moment a property is sold. Attorneys, appraisers, real estate brokers, and so on would all be paid through an instant transfer of funds. Every transaction would have been automatically recorded in the blockchain, generating a transaction history that is both publicly accessible and stored indefinitely.
Title deeds, surveys, ownership information, and other information would be accessible in real-time to all parties, allowing instant validation. It is not difficult to see how carrying out real estate transactions this way will eventually change almost everything about real estate investing.
The Future is Now
While buying and selling investment properties using cryptocurrency is still not that popular in the Lewes rental market, there are examples where properties have already changed hands via digital currency. One noteworthy example is the recent sale of a penthouse in Miami Beach, which sold for $28 million in cryptocurrency. The deal took less than ten days to close, which is essentially unheard of via traditional methods, even for a cash buyer.
Would you like more expert advice about purchasing investment rental properties? Contact us online or by phone at 302-313-7700.