I bought my first home when I was 26, and more than a decade later, it's still one of the best decisions I ever made. Homeownership has been an amazing journey for me. Not only am I extremely proud to own my own piece of land in the world, but I love being able to customize it to exactly my liking. I love building fences, installing sinks, and installing recessed lighting. I highly recommend it.
If you don't own your own place, but you own a decent amount of bitcoin, then the idea is probably floating around somewhere in your mind: Should you keep your bitcoin or sell it and buy a house with it?
Even if you already do own your place, then maybe you are considering buying a rental property or a vacation home. Maybe you're thinking about whether you should pull out some equity to buy bitcoin or keep paying down your mortgage. These are personal questions, with no “correct” answer, but I want to share some of my opinions here on this page, as well as the mechanics of how you can actually buy a house with bitcoin if you choose to.
4 Ways To Buy A House With Bitcoin
1. Traditional Sale With Fiat Conversion
Not surprisingly, some people actually want to sell their houses for bitcoin! However, it's not very common to do deals in bitcoin-only right now. Most of the time when you hear about a house being sold for bitcoin, it's either a single deal of super luxury vacation home, or part of some kind of marketing campaign for a real estate agent. Depending on the news cycle, bitcoin deals can get good clicks on social media.
What you'll run into most of the time is a traditional sale coupled with a conversion from bitcoin to fiat, or vice-versa, depending on who wants what currency. This could be a specific company that is looking to court bitcoiners, so advertises their prices in bitcoin, or an individual real estate agent who is willing to work with you.
For example, Coin Homes lists a ton of inventory on their website, PLUS they advertise that you can sell your home for bitcoin. However, I checked the listings, and they are pretty much the same as other popular real estate websites like Zillow and Redfin, meaning that the bitcoin/fiat conversion is happening on the back end. No way there are hundreds of people in my local area who are selling their properties for bitcoin!
There are other “bitcoin real estate” websites out there, but the listings seem to be manually updated, and the quality of the websites suggests that perhaps they won't be around in a few years. In fact, most are like this, so my recommendation is to proceed with caution if you plan to use one of these sites to search real estate sites listing properties for sale in bitcoin.
What's cool about Coin Homes is that they offer a bitcoin backed mortgage as well.
I have not borrowed bitcoin or dollars with this company, and am not 100% sure how the borrowing process works with them. This is just a company I found that seemed to have the most legit setup from what I found in my research. It's a bit odd to me that they seem to have a fully functioning bitcoin real estate sales website where bitcoin backed mortgages are possible, but I haven't heard much about them compared to some more popular companies I'll talk about below. Please do your own research before using them.
2. Bitcoin Backed Mortgage
Bitcoin backed mortgages are a brand new thing, so the mechanics of how they work and if they are actually something you should consider is still up in the air. What's interesting is that just a few years ago, a bitcoin backed mortgage was a fantasy. Now, it's a reality.
This is how change happens. In 5-10 years, bitcoin backed mortgages could be just as easy to finance as traditional mortgages.
There are a lot of unique aspects to these types of mortgages, so they are not for everyone. In fact, they are not even widely available, even with the companies entering this space, so you may need to get on a waitlist before even applying.
Two of the starkest differences you'll see in bitcoin backed home loans is that the length of the loan term and the financing rate may differ greatly from traditional financing. Usually, this doesn't work in your favor.
For example, mortgages at Ledn have two-year loan terms. You can reassess the loan every two years, which could work to your advantage… as long as the price of your bitcoin and home keeps going up. If we hit a deep bear market and the price of bitcoin continues to drop, you may have to add more funds to keep the LTV ratio in line with your contract.
What exactly happens if you get margin called in this situation is unclear. Presumably, you'd lose the bitcoin AND the home. That's why it's probably smart to only buy a home with a very small portion of your stack, to ensure that you always have enough funds to top up if necessary.
For a $500,000 home, if that's a “small portion” of your stack, then you'd need about 100 or more bitcoin to safely afford that. If the price of bitcoin continues to go parabolic compared to the price of housing, you could see more people start to be eligible for a loan like this, as housing prices as measured in bitcoin continue to drop.
For example, for someone who owns just 20 bitcoin right now, a large loan of several hundred thousand dollars probably wouldn't make sense. If, however, bitcoin goes to a million dollars per coin while real estate appreciates at a mere 10% per year in the meantime, suddenly that same person could easily afford that loan.
Higher than normal rates may also be a deterrent to getting a bitcoin home loan, but not all lenders have higher than normal rates. For example, Crypto Mortgages at Milo seem to have rates in line with traditional mortgage lending, and they are not the only game in town. Another company just launched called Moon Mortgage, though they don't advertise their borrowing rates and are still only in “wait list” mode.
One advantage of doing a bitcoin mortgage is that you can often finance the whole property, rather than requiring a 20% down payment, as with traditional lending.
All of the companies I mentioned here are open to a very limited number of people as of late 2022, and it's not clear how fast they will ramp up their services. Definitely something to keep an eye on in the next couple of years.
3. Purchase Through Proptech Companies
It's no secret that fintech companies are entering the real estate space in a big way. For a while, Zillow was auto-buying properties based on an algorithm and reselling them on their marketplace, and although that deal didn't work out too well for them, the appetite is there.
Recently, a Columbian company called La Haus announced that they will start accepting bitcoin payments. Other tech companies like Divvy (rent-to-own) or Haus (home equity refinancing) could potentially follow suit with bitcoin payments in the future. This is speculation on my part, but as bitcoiner wealth grows, new business models will emerge.
The goal of a bitcoin-based economy is that new businesses will create offers (of all kinds) so attractive that people who own bitcoin will be compelled to spend it rather than hodl it.
There's not much else to say here. This isn't really a widely available or viable option right now, just a potential for the future.
4. Bitcoin Backed Loans
The cool thing about bitcoin backed loans is that if you have the money, you get the loan. It doesn't matter what it's for. The bad news is that you need the money to get the loan.
As previously discussed in the section about bitcoin backed mortgages, as the price of bitcoin rises, bitcoin backed loans for purchasing a house will become more realistic for more people as the price of bitcoin rises. Right now, there aren't a ton of “bitcoin millionaires” out there – maybe a couple dozen thousand of them.
If you have just 1 or 2 bitcoin, then using a bitcoin backed loan to buy a house doesn't really make sense. At least in the western world. You'd put up your entire stack for the loan, wouldn't be able to afford a very nice property, and you'd be at serious risk of liquidation if the price of bitcoin goes down.
However, if the price of bitcoin goes vertical in the next decade, then your “just 1 or 2” bitcoin could be more than enough for a standard 3-bed 2-bath in any suburb. There are a lot more people in this wealth bracket than in the 100+ bitcoin bracket.
Two of the most trusted places to get bitcoin backed loans are Ledn (affiliate link) and Unchained Capital. They are both quality services as far as I can tell. I've heard the owners of the companies speak on multiple podcasts, but that's as far as my research has gone into the individual companies.
As of Feb 2022, the interest rates with Ledn are slightly better, and they have a number of other financial services available on their platforms, such as buying/selling bitcoin, high interest savings accounts, and access to stablecoins. However, they do lend out your coins using “rehypothecation”, meaning they engage with various investments in order to turn a profit, which may represent platform risk for your money.
Unchained is an American company, so will have more experience with individual state lending practices. They also keep your coins in a multisig custody, meaning you hold one key, and can monitor that the coins don't move. Why? So you can ensure that your money isn't being rehypothecated. This absence of platform risk is a huge advantage to using Unchained.
The downside to any bitcoin backed loan is the risk of liquidation. All platforms require a minimum LTV (Loan To Value) ratio, and if the value of your bitcoin drops below this, you could get liquidated, meaning they have to sell your bitcoin to pay off the loan. This can happen in a matter of hours, so if you're on vacation, there's no “oops I didn't expect a crash!” clause. You need to have more bitcoin accessible at all times just to be safe.
The major upside here is that there's no credit check, and you can get the money in about a week.
A possible investment strategy with this type of loan would be to get a loan to buy a distressed house with an all-cash offer. Use a portion of the money to fix up the house. Get the property value reassessed after fixing it up (will be worth more), then do a cash-out refinance. Use the cash to pay off your bitcoin loan, and now you own a rental and an income-producing asset.
The Costs Of Property Investing VS Holding Bitcoin
I own my own home, I own some rentals, and I own some bitcoin. There are advantages and disadvantages to all of the above.
Though I prefer to own my own home and wouldn't trade it for anything (even more bitcoin!), there are tons of costs associated with it. I replaced a fence last year for $5,000. I replaced a sink last weekend for $500. Next month I've got to stain the deck, prune the trees, and sometime in 2022, I'd like to do a stacked stone design on my fireplace.
That's money and time which could be invested in bitcoin or invested in income-producing activities to buy more bitcoin. In this case, the pride of homeownership comes at the cost of the opportunity to own more bitcoin. That means fewer savings, and less future security for me and my family.
Fixing up my home is not about the economics, and living in a place you love has plenty of non-monetary benefits, obviously. Contrast that with renting, where you just pay a fixed amount of money to a landlord, and you'll never see that money back again. At least with homeownership and the rising price of housing, I get the added benefit of growing my equity in the home, which can be accessed through traditional refinancing.
If I owned more bitcoin instead of buying a home and fixing it up, perhaps I could wait 10 years, and then I could afford a 10x bigger house or a house in a nicer area. By owning a home instead of owning bitcoin, I'm giving up the opportunity of owning more bitcoin during the (potential) parabolic price over the next decade.
Potential is the key word here. Of course, I'm a big believer in bitcoin, so I expect this to happen, but you never know. Nobody knows. So, I have to assess the risks and benefits, and have decided that I'd rather guarantee myself homeownership today, with the risk of missing out on some upside in bitcoin gains.
For me, it doesn't have to be “all or nothing”. Owning some property and some bitcoin at the same time seems to be the smartest move.
That's about homeownership. What about buying rental properties versus owning bitcoin? Again, I look at the monetary cost and the opportunity cost.
Owning rentals can be expensive. As a landlord, you are required to pay for certain types of maintenance, and a $15,000 roof replacement means that you can't buy $15,000 worth of bitcoin instead. However, monthly cash flow from a rental property means you can take that money and stack regardless of bitcoin market conditions. If you have a job and the rental income is just cake, what you've got is basically a bitcoin stacking business.
Spending VS Saving Bitcoin
One of the main bits of Bitcoin FUD you'll hear from time to time is that bitcoiners are hoarding the coin and that bitcoin can't be used as money because people would rather save than spend.
This is pretty obviously false.
You can only get so rich before you start to want to enjoy your wealth. There may be tax advantaged strategies you can use to spend less of it or spend it more efficiently, but at the end of the day, you can't get something for nothing. If you want stuff and have bitcoin, you gotta pay.
Right now, most people buy and hold bitcoin while spending fiat money because they think bitcoin will go up in value. It's called Gresham's Law: bad money drives out good money. We'd rather spend our dollars, which go down in value over time, and save our bitcoin, which goes up in value over time. Makes sense, right?
What happens when I want to buy an amazing, perfect home, but they only accept bitcoin? Well, then I have to decide what's more important to me: The house, or the bitcoin?
As more people and businesses start demanding bitcoin, then bitcoiners will be forced to make similar decisions. It's happening right now on a small scale, but will likely continue to grow. That's called Theirs' Law: good money drives out bad money. As people demand bitcoin, dollars will be used less.
These two phenomena will continue to play forward into the future as the incentives change, and individuals make personal choices. I think real estate will be at the forefront of this decision-making process.
Why real estate?
Buying a home is one of life's most important, and most expensive decisions. As someone saves enough bitcoin, buying a house is probably going to be one of their first bitcoin-spending decisions. So, home-buying is the vanguard of bitcoin transactions in my opinion, and we'll see this process trickle down into cheaper, and less-important decisions over time.
How I Look At Spending Bitcoin To Buy A House
There are two great things about bitcoin.
- You can buy small pieces over time
- It tends to go up in value over time
So, as you dollar cost average into a bitcoin position over the course of a couple of years, you may find yourself sitting on some amount money. Now what do you do with it? Though it's nice to sit on a fat stack bitcoin, your mind starts to wonder what that wealth can afford you.
These are just some of my personal thoughts on saving vs spending bitcoin to buy a house. Of course, these are just my opinions.
Should I Sell Bitcoin To Pay Cash For A House?
A lot of people will tell you that selling bitcoin to buy a house is a bad decision, but I think the correct answer is more nuanced than that.
The logic behind not selling bitcoin to pay cash for a house is that “money is cheap” right now, meaning you can borrow money at a very cheap interest rate. In fact, it's now cheaper to borrow money to buy a house than at any time in history. That means you can buy more house, with less money, and pay it back very easily over time.
If you can borrow dollars at a fixed 3%, to buy a house appreciating 10% per year, while your bitcoin is appreciating at 100% per year, that's a great trade. If you were to sell bitcoin to buy a house, you'd be giving up those 100% yearly gains as well as foregoing the opportunity to borrow money cheaply.
All of that is true, but that calculation leaves out one main consideration: you'd be living in a paid off house!
That means you'd have no monthly house payment, which would be a huge weight taken off your shoulders. You can live in that house until the day you die, and your only monthly expenses would be food, utilities, and then yearly taxes.
That frees up time, mental energy, and of course, money.
You could quit your shitty job and do something you love instead, even if it doesn't pay well. There's nothing more energizing than doing work you enjoy. Many people find that when they do a job they enjoy, they perform better, meaning you may actually end up making more money in the long term.
You could also work fewer hours and spend more time doing other, more important things. Maybe a part-time job is all you need to get by, and you want to spend the rest of your time walking in nature or being with your kids. That type of life energy can inspire you for the next phase of life, whatever that may be.
Then, of course, you could save more money to buy more bitcoin. It might be hard to separate yourself from a big chunk of your stack right now, but you can always stack it back (assuming you're still going to work!). Maybe you can't stack the whole thing back, especially if a bull market starts in the next couple of months, but there will always be opportunities to buy more dips in the future.
Everyone thought the bull would break through $69k in 2021, and here we are in 2022 sitting at $48k. Despite many predictions, nobody knows where the market is going. We could have a 15-year bear market you could leverage as a great stacking opportunity while you sit in your 100% owned home. Talk about peace of mind!
Personally, this is not what I'm doing. I think if bitcoin is going to run, it'll be in the next decade or two, so I'm holding as much bitcoin as possible. I have my business and am financially comfortable, so I'm OK with a 3% home loan while I continue to stack and hold bitcoin. However, it's tempting to just pay off the house and be done with it.
Should I Sell Bitcoin For A Down Payment?
Maybe the best compromise would be to sell a little bit of bitcoin for a 20% down payment for a house. That way you don't spend your whole stack, and you can still take advantage of this low rate environment.
The main issue here is timing. Most banks will look at three months of bank statements and ask where each large transaction comes from. They want to make sure that you aren't pulling some kind of financial scheme, where you borrowed money from another institution for the down payment, and then you'll be on the hook for two monthly payments (wherever you go the down payment from + mortgage payment).
So, if you sell your bitcoin and transfer it from an exchange to your bank account, then apply for a mortgage, they'll want to know where that money came from. This brings forth a number of potential issues.
First off, if the bank knows you're making money from bitcoin, they may not want to deal with you at all. This will depend on the lender you're working with, but there have been many instances of banks simply refusing to work with bitcoin and crypto companies, so there's no reason why it wouldn't apply to individuals too.
The way to avoid this could possibly be to sell your bitcoin first, then wait a few months before applying for your mortgage.
Secondly, they may ask how much bitcoin you own in total, which means you need to reveal your entire bitcoin holdings, and they may even ask for addresses. I haven't read of anyone actually experiencing this, so I'm speculating here, but right now, bitcoin is radioactive in some circles, so a particularly skittish lender may require more documentation. The main downside here is privacy loss.
Don't forget, you still need to be able to make your house payment, so the main thing lenders are going to look at is your income. You can't apply for a loan and just tell them you own a ton of bitcoin and will pay it month to month from your stack. They want to see income from a job or 2+ years of business statements.
That means even if you have $10 million in bitcoin, but you have a new business that isn't profitable yet, you likely won't be able to get a traditional home loan. If your day job only pays you $1,500/month because you're bitcoin rich and just working a part-time job you enjoy, then you likely wouldn't get approved for a mortgage that costs over 50% of that monthly income due to lending laws.
That being said, if you get a lender that doesn't care about your bitcoin sale for the down payment, and you find a house that fits your monthly budget, then I don't see why this should be an issue for you to get a house by selling bitcoin.
The question then remains, should you? That's up to you, and your priorities.
- how important is home ownership to you?
- does the place need fixing and do you have the budget?
- would you prefer to hold bitcoin and see the go up?
- would you rather pay monthly income to a mortgage or to a landlord?
- will you live in the house or rent it out?
Should I Sell Bitcoin To Buy A Rental?
I own some rentals and some bitcoin, and this is a harder question to answer as I continue to do both.
The main advantage to rentals is the cash flow. Some bitcoiners joke that “real estate is a shitcoin”, but what they mean is that the value appreciation of real estate will underperform bitcoin. In terms of being an income-producing asset, bitcoin can't compete. Even if real estate didn't appreciate in value, the fact is that you can rely on it for monthly income.
Even better, as rents continue to go up, your income goes up too, making it inflation-proof income. Try asking your boss for a 10% raise every year!
There are some major downsides to rentals to consider as well, and I've experienced all of them.
First, and most obviously, there are lots of costs associated with real estate, especially with rentals. Two years ago, I had to replace three water heaters at $1,500 each. Last year I had a renter move out and spent over $10,000 to replace the carpet, paint the interior/exterior, and the windows needed to be updated. Even with rent at $2,000 per month, it'll take me a full year to recoup those costs.
Also, consider that the previous tenants took care of the house, and this was normal wear and tear after living there for six years (the windows hadn't been updated for 30 years). What happens when you have tenants who trash the place after six months? A one-month deposit isn't always going to cover your costs, and you must eat that cost that as the asset owner.
Secondly, it can be hard to find a rental that's actually profitable in many areas. Since the cost of real estate is high, even with a mortgage at 3%, you will probably find that the cost of your mortgage + taxes + insurance outpaces the price of rent. Even if you can eke out $100 net profit per month, a year's worth of profit could be wiped out by a single repair.
To actually make money from rentals you need to buy a place with cash or buy a distressed property and fix it up. That means you need cash, skills, or both.
That being said, if you can successfully buy a rental with decent monthly cash flow, that's a super simple way to stack bitcoin. Have your tenants pay you in bitcoin, or automatically convert it every month. It's an easy way to stack every month, regardless of whether it's a bull or bear market!
Should I Sell Bitcoin To Buy Land?
I would only buy land if you plan to live there or use it for something. I just can't see how land would appreciate faster than bitcoin in the next few decades. Sure, it sounds pretty awesome to say that you “own some land”, especially if it has cool things like access to water or hunting rights, but realistically, it takes a LOT of work to develop “land” into “productive land”.
Focus on what you are actually going to do, instead of what sounds cool. I've seen some bitcoiners legitimately buy farms and move there as a drastic lifestyle change, so it can work, but just be honest with yourself about what buying land is all about. There is A LOT of land available in the world, and there's only 21 million bitcoin.