How to buy second home with cryptocurrency?
By Malsha Khan

How to buy second home with cryptocurrency?

In recent times a single Bitcoin ringing up at a value of over $60,000 (as of October 2021), cryptocurrency investors are thinking big when it comes to the extraction of the power of their crypto stashes.

Can you use cryptocurrency to buy a second home?  

If you are considering using Bitcoin and Ethereum to purchase a home, you are not alone. It is becoming increasingly common, but there are some challenges to be aware of, and the volatility of the cryptocurrency market can make some transactions complicated. The value of Bitcoin has grown dramatically over the past years. In October 2017 the price rose to $6000 and today in October 2021 it has upscaled to $60,000. The first tangible good bought with Bitcoin was two pizzas by Laszlo Hanyecz in May 2010 and 2019 former child actor Brock Pierce, now an entrepreneur and director of the Bitcoin Foundation, is reportedly the first person who secured a property loan in Amsterdam with $1.2 million worth of Bitcoin to buy a home. While not everyone can be a “Bitcoin billionaire” like Pierce, you canconvert your cryptocurrency into real estate. Here’s how (and some downsides to watch out for).

How do you buy a second home with cryptocurrency?

There are a few options for using cryptocurrency to buy a home.

Convert cryptocurrency to cash

The basic idea is to sell your cryptocurrency holdings and use the earnings to purchase your second home. There are a few tax implications that you have to be aware of, however. When you sell cryptocurrency, it is treated as a capital asset and will be subjected to taxes. Be aware to check with your financial advisor or tax attorney before making any transactions, as a large transaction as such can be flagged by IRS. The rest of the process is simple and equitable. Using services like BitPay you can covert your Bitcoins and Ethereum to fiat money (USD), then use that money to buy a luxurious second home at the most desired destinations. One of the setbacks that need to be considered is that before making the final transaction of the purchase of a second home you will have to ensure that the fiat currency is kept in an account in your name for at least 60 days for it to be recognized as an asset that can be used to acquire a second home.

Borrow against cryptocurrency

Companies like Nexo allow you to use your cryptocurrency as a deposit to get a loan in fiat currency (USD), which can be used to acquire a second home. However, you will come across higher interest rates than you would with a typical mortgage (8% or more), and again, you might have some issues with the IRS flagging your account when such a lump sum of money is deposited. On the bright side, if you want to use your cryptocurrency as a long-term investment, it will remain in your account and its value can continue to follow the market trend. 

Why buy a second home with cryptocurrency?
The main advantages of acquiring a second home using Bitcoin and Ethereum is:
You will be converting a more vulnerable asset into a less vulnerable one.
The market value of Bitcoin and Ethereum can fluctuate significantly within and a very short period (e.g., even on an hourly basis). Real estate, on the other hand, is more likely to appreciate and depreciate over longer periods.
Drawbacks that you might face while using cryptocurrency to acquire your second home:
As tempting as cryptocurrency may be, it is still something of an unknown entity in the real estate industry. When considering buying a home with cryptocurrency, watch out for these drawbacks:
  • Cryptocurrency exchanges may be subject to capital gains taxes. The IRS considers cryptocurrency a type of property, property that must be sold for you to realize its value in dollars. Be sure to consult a tax professional to find out how using cryptocurrency to buy a home may affect your tax liability.
  • You may have fewer legal protections in a cryptocurrency transaction. For users of Bitcoin and Ethereum, two of its main selling points are security and anonymity. But that means transactions are difficult to track down, in case of a problem, you could be faced with a complicated legal situation. Ensure to consult a legal professional to learn how to protect yourself.
  • Mortgage lenders may not accept cryptocurrency-derived dollars for a down payment. Due to the anonymity of cryptocurrency, when it is sold and converted to cash, there is no paper trail that lenders can use to trace a sudden deposit of money in your bank account, and this might cause them to be hesitant to approve your loan due to lack of documentation of funds.
  • The value of cryptocurrency is constantly changing.
The bottom line
If you want to acquire a luxurious second home with Bitcoin and Ethereum, get your research done beforehand and be prepared to confront a few obstacles. If you are not sure you are comfortable being a cryptocurrency pioneer, consider giving the real estate industry a few years to get more comfortable with digital currencies before dropping any cryptocurrency on a second home. But if you don’t want to wait, consider using Bitcoin and Ethereum to buy a share of a Casaco second home. The process is simplified — no hurdles! Get the details.

Join the ride

Ready to own your second home?
Subscribe to receive our exclusive new listings & updates.

* I give Casaco permission to contact me & agree to the terms. This site is protected by reCAPTCHA and the Google privacy policy & terms of service.