If you’ve never heard of emerging global currency Bitcoin, don’t worry – you’re not alone. This volatile digital currency has only been around since 2010, and started at approximately $0.07 per coin. It later reached a peak of almost $1,200 per coin and now hovers just above half that, with the most recent value being quoted at $639.09 as of press time, according to the CoinDesk Index.
The reason that so much excitement has built around this crypto-currency is that it conveys certain benefits not had by other digital forms of money. Credit card processing, for example, requires a 2 percent to 5 percent charge for every transaction. Check purchases carry a small – but still present – fee for processing. Bitcoin, however, is completely free to use. In small transactions, the fees charged by credit card networks and the Automated Clearing Hours usually aren’t very much, but in high-value real estate sales, the fee-free nature of Bitcoin carries an appeal for some users. Could it be the future of all real estate transactions?
According to a study conducted by demographic research firm Quantcast, almost half of Bitcoin users have annual incomes above $50,000. More than one-third have incomes above $100,000 per year, and 26 percent have incomes above $150,000 per year. This means that users of the currency are on average significantly more wealthy than the average U.S. family, making them an attractive demographic to target.
Bitcoin Real Estate Sales
The growing interest in Bitcoin has caused a number of homeowners to market their homes in the crypto-currency. Perhaps the largest is one put on the market at the end of last year - when Bitcoin was at its value peak - for $7.85 million in Bitcoin by a Las Vegas commercial developer, according to The Associated Press. The developer, Jack Sommer, explained that the advantage of this strategy was to expand the market for the home and “add some notoriety.”
More recently, a villa in Bali sold for upward of $500,000 of the crypto-currency, according to CoinDesk. The sale took place on BitPremier, an online luxury marketplace that conducts business exclusively in Bitcoin. The marketplace currently lists five pages of properties of varying worth, including the Hotel DaFam in Semarang City, Indonesia.
Alan Silbert, founder and CEO of BitPremier, told the news source that this was by far the largest transaction ever completed on the site, which launched in May of 2013. He went a step further, suggesting that the purchase of the home demonstrated that Bitcoin users are willing to diversify their assets with new investment opportunities. The buyer intends to earn revenue from rent off the villa.
“This definitely validates the business model,” Silbert told the news source. “It shows that Bitcoin users want to buy things that are unique, and that are above and beyond t-shirts and electronics.”
Is Bitcoin the future of real estate? Probably not. Despite its advantages in terms of reduced transaction fees, there is still no legitimate way to take out a mortgage in Bitcoin, meaning that only cash buyers have access to payment on this scale. However, for real estate professionals working with high net worth individuals, it may be an intriguing topic to bring up that could pique their interest and help paint you as an authority on up-and-coming real estate trends.