The rise of cryptocurrency and the pros and cons of using it to buy real estate
Those who enjoy learning about the newest and most talked-about technology and investments are likely familiar with Bitcoin. Though Bitcoin has a bit of a shadowy past, it’s now become a more mainstream way of conducting transactions. Those who invest in Palo Alto real estate may be interested to know they can purchase real estate with Bitcoin. Here’s what you need to know about Bitcoin and the pros and cons of using it to buy homes for sale in Palo Alto.The Rise of Bitcoin
Bitcoin is an Internet-based currency that was created in 2009 that allows two parties to conduct transactions with no bank or other middlemen involved. You can use Bitcoin to book hotels, buy merchandise, and make other types of purchases, though much of the press surrounding this cryptocurrency revolves around how to get rich trading it.Due to the anonymity involved in Bitcoin transactions, the currency has gotten a bad rap in the past. However, its reputation has improved in the past few years as users have realized it’s an easy and inexpensive way to make international payments since Bitcoin payments are not subject to the regulation of any country. Small businesses have also been using Bitcoin more regularly due to the lack of credit card fees. Of course, there are still plenty of people who buy Bitcoin as an investment, banking on the expectation that the value of the currency will continue to increase.
How to Use Bitcoin to Buy Real Estate
Bitcoin can be used for any transaction between two individuals or entities, including the purchase of Palo Alto real estate. Those who use Bitcoin have an anonymous address. The currency uses blockchain technology, which is a database that is shared by a community and exists in several locations at once. This is a strength of Bitcoin as there is not one central location that can be attacked or compromised by hackers. Many Bitcoin users do so because of the security of the infrastructure.
You can use Bitcoin to buy homes for sale in Palo Alto or to make commercial real estate transactions. To complete a real estate transaction using Bitcoin, you simply need to purchase Bitcoin and find a seller who is willing to accept it as currency. You will also need to find a title insurance company, escrow provider, and broker who will support a transaction involving Bitcoin. While this may be difficult now, as the use of Bitcoin continues to gain popularity, more professionals in the real estate industry will begin accepting these types of transactions.
The Pros of Using Bitcoin to Purchase Real Estate
Why would you want to use Bitcoin to invest in Palo Alto real estate rather than traditional cash or mortgage loans? Here are some of the pros:
- It’s quick. Once all parties have signed the necessary paperwork in a real estate transaction, the entire process can take as little as ten minutes to complete. Buyers and sellers don’t need to wait for the banking system process, and everyone involved in the transaction can be paid at the same time.
- Bitcoin investors experience less volatility with real estate. Those who have already invested in Bitcoin have experienced the volatility of their investment with the prices of their Bitcoin increasing and dropping at unpredictable intervals. When investors use their Bitcoin to buy Palo Alto real estate, they reduce the volatility of their assets.
- Reduction in fees. A Bitcoin payment is made directly between the buyer and seller. Since there is no need for intermediaries, the fees on the transaction can be kept to a minimum, making it a more streamlined and less expensive process than traditional real estate transactions.
- Negotiating power. If you can find a seller who is interested in completing a Bitcoin transaction, you will have more negotiating power than those who want to buy with more traditional means. Keep an eye out for ads that say “accepting Bitcoin” to identify sellers who will work with you if you want to use cryptocurrency.
The Cons of Using Bitcoin to Purchase Real Estate
There are plenty of pros to using Bitcoin to buy homes for sale in Palo Alto—especially if you are already a Bitcoin investor. However, there are some cons that you should be aware of as well. They include:
- They are not reversible. Those who play to invest in Palo Alto real estate and use their Bitcoin to make purchases need to make sure they trust the seller. Both parties need to be compliant if a transaction has to be reversed. If one party is not compliant, the transaction is irreversible.
- It can be difficult to find a seller, real estate agent, and other necessary industry professionals who all support Bitcoin transactions.
- The cost of opportunity. Many of those who buy Bitcoin are doing it as an investment. They are banking on the hope that the price of Bitcoin will increase, thereby increasing the value of their investment. When they spend their Bitcoin on real estate, the opportunity for growth is gone.
- Tax issues. As with any new, unregulated currency, the tax situation with Bitcoin can be confusing. In most cases, exchanging, spending, or trading Bitcoin is viewed as a capital gain and subject to tax. Those who invest in Bitcoin need to work with an experienced CPA who can help them navigate the taxes involved in transactions.
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