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Investing in real estate in the cryptocurrency era

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investing in real estate

Ever since the rise of cryptocurrency in the world, nearly every industry is looking to take advantage of it. For this reason, if you are considering investing in real estate in the UAE, you have to know how you can use this tool to benefit you. The commercial real estate industry could face a complete transformation if blockchain technology starts gaining more popularity among investors.

In this article, you are going to learn how cryptocurrencies are driving innovation in commercial real estate investing. Consequently, you will gain insight into the pros and cons of using digital currencies for buying property. Let us observe:

  1. What is cryptocurrency?
  2. How are cryptocurrencies being used in the real estate industry?
  3. What do you have to keep in mind before investing in cryptocurrencies?
  4. How will cryptocurrencies change the real estate industry?
  5. What are the applications of cryptocurrencies for the property industry?
  6. What are the pros and cons of using cryptocurrency for real estate?
  7. Connect Property can help you with real estate investment

1. What is cryptocurrency?

Cryptocurrency is a very popular term nowadays. Although people have heard of it, most of them do not understand how it works. Everywhere on social media and the internet, you can find information and news about digital currencies, but what exactly are they?

On the other hand, many tend to believe that Bitcoin is the only cryptocurrency there is. But this is not true. There are several digital currencies, one most popular than the others. Thus, Bitcoin is just one type of cryptocurrency. A cryptocurrency is a digital currency that can be used as an investment possibility. However, they differ from other types of digital currencies in the fact that they are bound by cryptography. Thus, a cryptocurrency cannot be forged or replicated.

It is a type of digital asset that is part of a blockchain. A blockchain is a network that records transactions and is dispersed across many computers. The main feature of a cryptocurrency is that it has a decentralized nature. This means that no government or central authority has control over it.

Since it has become a popular method of investment, many industries are starting to adopt it. In this regard, real estate investing is also looking for ways to implement this technology in their transactions.

2. How are cryptocurrencies being used in the real estate industry?

The real estate market was very popular a few years ago since financial institutes were giving many incentives and opportunities to potential buyers. However, nowadays rental property investment has lost support from the biggest capital sources.

Since banks are no longer giving credits or options to individuals considering real estate investing, people are looking for alternatives that allow them to purchase or rent the home they desire.

Some of the private sources people are opting for in real estate are the following:

  • Crowdfunding platforms
  • Real estate funds
  • Hedge funds
  • Corporate Bonds
  • Fixed Deposits
  • Direct Investment
  • REITs (Real Estate Investment Trusts)
  • Digital currency systems

Although there are plenty of options, when it comes to property investment for beginners, people tend to look for the easiest one. And these are the digital currencies.

2.1 Digital currencies on real estate

We are living in the cryptocurrency era. From the most renowned billionaires up to simple workers, they are all starting to use digital currencies for their transactions.

The real estate industry is facing a process of adaptation where investors are starting to consider using cryptocurrency for purchasing a property. In fact, some international marketplaces are starting to use digital currencies for their transactions. Some examples are the following:

  • Use blockchain currency to transfer the deed and close a deal
  • Use digital currency to purchase or sell property in a different country without having to be present

Although some marketplaces are starting to make transactions with digital currency, not all of them want to do it. Many are still reluctant to implement this type of method for real estate investing. Mainly because there is still so much lack of knowledge about blockchain technology and how it works.

3. What do you have to keep in mind before investing in cryptocurrencies?

Before considering using cryptocurrency for real estate investing, there are some aspects you have to keep in mind. These are the following:

  • Cryptocurrencies are in some cases being used for illegal activities.
  • They are highly volatile in nature. For example, you may invest but if the price drops 50% you will have lost half of your money.
  • Since cryptocurrencies are unregulated, you have nobody to help you in case something goes wrong. Moreover, there are no rules or standards regarding the fair use of this digital currency.
  • Cryptocurrencies are prone to cyber hacking. You need to know how to secure your information about your digital currency. However, even if you take all the measures, you still may get hacked, and there is nothing you can do about it.

4. How will cryptocurrencies change the real estate industry?

Real estate investing can be very different if cryptocurrencies start to be used by investors in the UAE. Here are some of the ways in which the commercial real estate market can change in the coming years:

4.1 No need for third parties

Whether you are looking for the best site for property rental or for purchasing property, chances are that you are going to have to deal with a third party. The role of a third-party provider such as an escrow company is to protect the people involved in the transaction.

An escrow company will handle everything such as the documents and money, up to when the transaction is completed. Nevertheless, with the implementation of blockchain technology, this may not be necessary anymore. Transactions will be faster and cheaper since it is not necessary to deal with an intermediary.

This is because blockchain technology’s main feature is a peer-to-peer network. Whenever a person carries out cryptocurrency transactions, they are instantly recorded on the person’s computer. Moreover, it creates a permanent record that no one can erase or modify. Thus, these transactions are public.

Since you will not need to inform the parties involved about the transaction because it is recorded automatically, then everyone involved will know about it in real-time, wherever they are.

4.2 Instant transactions

As we mentioned before, transactions will be instant because they are recorded immediately when they are done. If you are located outside of the UAE, and you want to purchase property, you have to travel to the location since this is a common requirement.

But, with the implementation of blockchain technology, you could carry out your transactions wherever you are. You do not need to be in person to carry out the real estate transaction.

Thus, all of the previous reasons will make the process even faster. Would you want to contact us to learn more?

4.3 No hidden transactions

Since the blockchain records all the transactions, the public will be able to see them. In the real estate world, there tend to be hidden transactions. Although it may not seem like something bad, it does not allow the public to know what is going on in the market.

Nevertheless, blockchain technology allows for private transactions. But, they are costlier and require opting-in.

With public transactions, the commercial real estate industry will not be a secret. Thus, investors, realtors, and everyone involved in the process can take advantage of the data to create strategies or to decide where to invest.

5. What are the applications of cryptocurrencies for the property industry?

Whether you are considering investing in land or renting property, you have to know how cryptocurrencies can change the way transactions are made. Some of the current applications of the digital currency are the following:

5.1 Properties for sale

Some sellers are starting to accept Bitcoin as a payment method. They may do it just as a strategy to attract attention. Nevertheless, you may find many opportunities for purchasing a property using digital currency.

Since Bitcoin is the most used, some sellers may accept payments solely for Bitcoin, and others may accept a payment slip, which means between bitcoins and traditional money.

5.2 Real estate rentals

Finding real estate for rent is difficult. But, since Bitcoin is gaining more popularity, you can find more options. When it comes to real estate investing in property for leasing, you can state that you accept cryptocurrencies as a form of payment and increase your chances of finding outstanding clients.

Popular resorts and residential and retail property agencies are starting to include digital currencies. The popularity of cryptocurrencies in the next years will increase due to this factor.

5.3 Services you can trust

Since cryptocurrencies are recorded in the Blockchain, when you start using them for leasing, renting, or purchasing, you can be sure that the data is going to be trustworthy. Given the information is public, you will not have to deal with third-party providers or any other obstacles.

Consequently, you can avoid fraud, data manipulation, and double-spending. It can streamline the transactional process, reducing the risk of error, and making it more reliable and efficient.

6. What are the pros and cons of using cryptocurrency for real estate?

Once we have all the information we need regarding using cryptocurrency for commercial property investment, it is also important to evaluate the pros and cons of this method of payment.

First of all, let us observe the pros:

  • It makes transactions more efficient since they occur within minutes
  • Offers greater privacy when it comes to buying property
  • It gives liquidity in property investing
  • You can avoid taxes related to the transference of property rights
  • It reduces the costs involved in real estate transactions
  • You can transfer cryptocurrencies to tangible assets

Although it has many benefits, you also have to consider the cons. Let’s observe:

  • It faces too much volatility in the market. The value may change drastically depending on any change in the market
  • Real estate entrepreneurs with no experience enter the market and they do not give a well-informed advice
  • There is no downside protection.
  • You risk facing new regulation impacts
  • Since cryptocurrencies are not widely accepted by everyone, it may be a little harder to find a good property to rent or buy.

Despite this type of digital currency facing value fluctuations, it is still gaining popularity among experts. The real estate world may start seeing much more valuable applications of cryptocurrencies in the coming years. But, this does not mean that you do not have to be cautious.

7. Connect Property can help you with real estate investment

As you can see, cryptocurrencies in real estate investing are becoming increasingly popular. So, do not stay behind the trend. You have to know all the tools you have available for purchasing property in the UAE.

Our team of experts on Connect Property can help you decide the best strategy for investing in real estate in any of the prominent locations in this country. Our mission is to offer guidance so you can achieve your expected result.

We offer a variety of services, including our property listings where you can check for the best places to rent or buy.

On Connect Property we can advise you on the best way to invest in real estate in the UAE. You can contact us at +971 43 316 688 to get assistance on this matter. If you prefer, you can write to us at contact@connectproperty.ae. Our team will provide the best service according to your requirements.

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