The financing sector has been drastically affected by Bitcoin. Yet how does this imply for real estate investors? Let’s find out more about how blockchain can aid property management and the contrasts between investing in cryptocurrency and real estate.
Let’s get started!
Role of Blockchain in Property Management?
Cryptocurrency and blockchain technology have the possibility to have a significant effect on investors and the real estate industry. But what effect does this have on property management? While blockchain is still in its early stages in this field, there are two important areas with high innovation potential.
Blockchain-enabled smart contracts let investors digitally enforce agreements between multiple entities. These contracts function in a certain way, requiring one party to achieve an established condition before the resulting action is taken.
For instance, you will be handed keys to the property after you pay your security deposit. It indicates that a tenant must meet the criterion before proceeding with the following step. A landlord may agree to hand up the keys in exchange for a security deposit and the first month’s rent. But, after a tenant has paid, the landlord is unable to prevent the tenant from receiving keys. Furthermore, smart contracts are public information, so neither party can accuse the other of non-payment or fraud.
Because all property information is connected to the blockchain, smart contracts can also be tied to rent payments. You can also configure them to automatically deduct the rent payment from the tenant’s account each month. It holds renters accountable and decreases the chance of late payments.
Rent Collection via Cryptocurrency
Rent payments in Bitcoin provide a substantial innovation opportunity for real estate. Although it is not widely used now, and most property managers do not take cryptocurrency as payment, it is gradually becoming more prevalent. Unfortunately, one factor preventing investors and property managers from utilizing cryptocurrency is a lack of trust in this new technology.
Advantages of Cryptocurrency
Low-entry barrier-As opposed to getting real estate, you do not need to take out a loan or spend hundreds of thousands to buy cryptocurrencies.
Instant growth in value- As more investors become interested in cryptocurrency, its value might rise swiftly. Safety and comparative stability- More stable cryptocurrencies, such as Bitcoin, are more trustworthy and secure.
Drawbacks of Cryptocurrency
High volatility- Generally, volatile assets don’t make good investments. Cryptocurrencies’ values can fluctuate enormously in minutes.
Government regulations- Because cryptocurrency transactions pose a risk to traditional currencies, some governments may restrict or prohibit cryptocurrency transactions in their currency.
Security concerns- When dealing with digital assets such as cryptocurrencies, there is a higher risk of losing money due to hackers, flaws, and breakdowns.
Real Estate Advantages
Continuous cash flow- Rentals provide consistent revenue for their owners because tenants pay rent each month. Tax advantages- There are several tax advantages available to real estate investors, including write-offs and deductions. Value appreciation- Most real estate is bound to appreciate over time, making it a relatively safe investment.
Real Estate Disadvantages
High entrance barrier- Not everyone can afford to purchase a rental property. It necessitates a big down payment, which might result in significant debt for certain investors. Maintenance- For investors, rental property servicing may require quite a bit of time and money.
Why is Investing In Crypto Better?
Owning an eclectic portfolio is essential for people who have accumulated money over the years. Most individuals invest in mutual funds, stocks, and bonds, ETFs, and banking products, but most portfolios include two big options: real estate and cryptocurrency.
As a result, one of the most frequent subjects raised by professional investors is whether to buy another property or start investing in cryptocurrency.
Real estate is a large standard of investment that is currently one of the most popular investments and trading assets in the United States. But as seen in recent years, cryptocurrencies have the possibility for extra profits.
To keep this research as conservative as possible, let’s compare real estate investment simply with investment in Bitcoin, the most well-known crypto asset, and provide the reasons why it is a better investment in recent days.
Bitcoin: A Decentralized Asset
The main reason for people’s attraction toward Bitcoin is its decentralized nature. Unlike real estate, which requires a third party, Bitcoin is decentralized and is not controlled by any single person or company. So, if you want to protect your money and possessions, you shouldn’t rely on just one company. You may be your bank with Bitcoin.
In crypto, there is no chance of the government restricting your staking gains, as it did by putting a pause on rents during Covid: this left investors holding the bag while paying mortgages and getting no rent.
Bitcoin Has Potential for Higher Revenues
Real estate investing has hazards. There are major market risks, many investors are still scarred from the 2007 tragedy, and some analysts see signs of another housing boom. Although Bitcoin is a far more volatile investment, there is the chance of bigger returns: we are unlikely to see more than a single-digit YOY rise in real estate, which is much more likely with cryptocurrency in general.
The price and value of Bitcoin are rising in parallel with the growing interest in cryptocurrencies. As long as people are interested in Bitcoin and it is widely used, its value will rise.
Bitcoin has Higher Volatility as Compared to Real Estate
While availability in the real estate business is limited, it is nearly instantaneous with Bitcoin. You can smoothly trade your tokens from anywhere in the world at any time. Apart from that, real estate has a governmental process for buying, selling, and renting, which crypto does not have. If you need to cash out on your investments, especially in an emergency, crypto makes it much easier. A property would most likely take several months to sell at the price you choose.
Investing in Bitcoin is Less Costly and Faster than Investing in Real Estate
Purchasing real estate involves costly transactions as well as ongoing maintenance fees. During the year, real estate investors are expected to pay the usual costs such as inspection fees, HOA fees, appraisal fees, insurance, property taxes, and closing charges.
In addition, the property may require maintenance and repairs at times.
To buy Bitcoin or any other cryptocurrency, simply open an account with an exchange (such as Coinbase), transfer your funds, and place an order, which is completed fairly instantly.
The simple fact is that there are no tenants, toilets, or trash in crypto to deal with when investing in real estate. It is up to you to decide whether to invest in cryptocurrencies or real estate.
However, there are significant advantages to employing cryptocurrency for real estate investors and property managers.
Your investment plan should be tailored to how risky you are and perceptions of the markets in which you desire to invest.
There is solid expertise in both real estate and crypto, and currently believe that the latter is a stronger long-term investment.