Cryptocurrencies and Real Estate
Cryptocurrencies & Real Estate Investing
It sounds like an imaginary tale, but it could be a very exciting prospect. Let me explain exactly what's going on.
In case you don't know, cryptocurrencies (digital money) are very much like regular money, in that you can use them to pay for many things. A cryptocurrency is a digital asset that uses a new technology called BLOCKCHAIN to generate the currency and ensure security. Think of it as a VIRTUAL MINT.
The best-known cryptocurrency right now is Bitcoin. You can use Bitcoin to buy items online, or even to withdraw actual (paper) dollars from a number of Bitcoin ATMs around the world.
The value of Bitcoin (click to see chart) grew explosively over the past 12 months, and it crossed a symbolic threshold: At the beginning of 2018, one Bitcoin was worth more than an ounce of gold! However, its price has been very volatile due to massive investor speculation.
At the same time, cryptocurrencies and regular money are also very different, because cryptocurrencies are not issued by a national government nor backed by any real asset (like gold). This worries many investors that believe that Bitcoin and other cryptocurrencies aren't well regulated and therefore open to price bubbles.
Well, several startups, such as Brickcoin and REcoin, are trying to tackle this exact problem by making Bitcoin-like currencies, which are backed by a very real asset: REAL PROPERTY.
Here's how it works.
First, these startups make an initial coin offering (ICO). This is similar to the way traditional companies offer stock (IPO), and it's a way of raising money publicly while putting a certain (limited) amount of the cryptocurrency into circulation.
Second, the startup invests this (real) money in a real estate investment trust (REIT).
The value of the currency is then a reflection of the actual value of the underlying real estate investments (per currency unit), as well as of the usefulness of the currency in making financial transactions easier.
In theory, this means you get the best of both worlds: the flexibility and liquidity of cryptocurrencies like Bitcoin, as well as the steady returns, the security, and regulatory oversight of a real asset such as property.
In practice, it's still too early to say whether this idea will work, and if it does, which of the real estate cryptocurrencies will emerge as the winner.
In addition, buyers can already use BITCOIN to purchase high-end, luxury real estate. In Los Angeles, a luxure Realtor called Piper Moretti has sold a handful of multimillion dollar homes to buyers who pay for them using Bitcoin.
In any case, this is certainly an interesting development that's worth keeping an eye on.
However, even if these real estate coins do not take off, there will always be room for traditional real estate investing.
After all, people love investing in real estate because property is a tangible asset less prone to volatility and market manipulation. Also, real estate allows for greater leverage than just about any other type of investment.
If you are interested in investing in real estate, check out some of the great homes that have recently come on the Charleston SC market. Click the link below to get started.
And if you're looking to sell your home, you can get a good estimate of what it's worth right now with our state-of-the-art APC Home Pricing Chart:
Finally, if you've got any questions about current conditions in the Charleston, SC real estate market, or if you want to talk about cryptocurrencies and how they connect to real estate, give me a call at 843-900-0155. I'm always ready to help.
Have a great day,