Jenna Hall is Content Marketing Coordinator at Redfin. Redfin does not provide legal, tax or financial advice. This article is provided for informational purposes only and is not a substitute for professional advice from a licensed attorney, tax practitioner or financial advisor.
Over the past few years, an increasing number of businesses around the world have started allowing customers to pay for their products and services with bitcoins. While bitcoin was once considered a niche asset, it has now become a very popular currency and is seen as a viable alternative to cash and credit for many large retailers. Now that you can use bitcoin to buy almost anything, some wonder how they can use their digital currency to buy a house or even pay their rent.
With bitcoin becoming more intertwined with real estate transactions, you may be wondering if paying rent with bitcoin is a good option for you. Whether you own or rent, here’s what you need to know.
How it works?
Currently, there are two ways for landlords to collect bitcoin rents. The first is to use a property management platform that leverages technology to process bitcoin payments. The second is to simply perform a peer-to-peer transfer with the tenant.
For payments made through property management software, both tenant and landlord must have an account on the platform. The landlord can then send the tenant a payment request and the tenant can choose how they want to pay. They can transfer bitcoin directly through a brokerage like Coinbase or scan a payment request QR code and pay through their digital wallet.
It is important to note that most property management platforms do not hold any digital currency, they simply convert the coins into US dollars and transfer the payment to the owner as such.
Without a platform, tenants can still rent an apartment with bitcoins by transferring their holdings to the landlord’s digital wallet. Landlords and tenants should keep in mind that peer-to-peer bitcoin transfer leaves no paper trail. It is therefore a good idea to create documentation that includes proof of payment records to avoid any potential problems.
Five Benefits of Using Bitcoin to Pay Rent
Whether you are a landlord or a tenant, there are many advantages to using bitcoin to pay rent. Here are the top five benefits to help you decide if this is a good option for you:
More flexibility
Tenants are looking for properties that offer them more payment flexibility. According to a recent Motley Fool study, more than half of renters surveyed said they would pay more in rent to have more convenient payment options.
Payments with bitcoin can be completely digital and made on a phone, computer or tablet. Unlike traditional banks, bitcoin payments can be made and received 24/7. This means landlords won’t have to wait until office hours or after a holiday weekend to receive their rent payment.
Simpler payments for those renting abroad
Renting abroad can be tricky, especially when landlord and tenant use different currencies. Transferring money the traditional way likely means paying wire transfer fees, foreign transaction fees, and currency conversion fees. On top of that, landlords and renters need to consider exchange rates and the time it often takes for money to be transferred internationally.
However, bitcoin can be used instantly internationally with little or no cost, saving time and money for the landlord and tenant.
Fewer transaction fees
Most online rent payment platforms charge a fee for paying rent with a credit card. These fees are generally 2.5% to 2.9% of the rent amount and are paid by the tenant. Even third-party platforms like Venmo and PayPal charge a fee of around 3% for business transactions like accepting rent payments, which landlords must pay when accepting payments.
Renters and landlords can completely avoid these transaction fees by transferring bitcoin directly, which could save each party hundreds or even thousands of dollars over a few years.
If tenants and landlords choose to transfer bitcoins through a property management platform that supports bitcoin transactions, they will likely still have to pay transaction fees. However, these fees are minimal compared to credit card processing fees.
Increased privacy for tenants
Bitcoin payments are perfect for tenants who prioritize their financial privacy. Bitcoin uses anonymous addresses that change with every transaction, so payments do not require any personal information, credit card numbers or traceable account numbers.
Given the pseudonymous nature of the blockchain, bitcoin payments are ideal for those who are privacy-conscious and afraid to share their personal information.
Potential first mover advantage
Bitcoin is gaining acceptance in traditional markets, with many businesses beginning to accept bitcoin as a form of payment. However, there is still work to be done before this becomes a financial norm.
Homeowners who are forward-thinking, tech-savvy and want to stay ahead of upcoming trends can consider being early adopters. Potential tenants can see the value of a property that accepts bitcoin and be more likely to rent with these properties.
What to keep in mind when using Bitcoin for rent
Here are a few final things to consider if you’re considering using bitcoin for rent as a landlord or tenant:
Collection versus holding
If you are an owner who accepts bitcoins, you have the choice to cash out or hold. It’s a good idea to consider the pros and cons of each. Bitcoin is known to be volatile, and the amount a tenant pays in bitcoin could change quickly. Homeowners should review their financial goals and consider speaking with a financial advisor to see which option is right for them.
The amount of the rent can fluctuate
Since the value of bitcoin fluctuates, the monthly rental amount will also fluctuate. This means that the amount of bitcoin you give away or receive for rent can change from month to month.
Keep documentation
Given the nature of bitcoin which makes it more difficult to trace, landlords and tenants should protect themselves by keeping records of rent payments using bitcoin to the best of their abilities. Suppose landlords and tenants plan to transfer peer-to-peer. In this case, it’s a good idea to consult with a legal professional to ensure that the proper paperwork and documentation regarding a lease payment agreement is created.
This is a guest post by Jenna Hall. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.