Miami condo for sale for bitcoins

BUYING WITH BITCOINS

By contrast, the nouveau riche looking to get something tangible out of their cryptocurrency investment have a bit more to consider.

If a seller won’t accept bitcoin outright, then a buyer needs first to sell to a third party for U.S. dollars, euros or another fiat currency.

Property site Redfin reports that its brokers have facilitated a number of deals where buyers sold bitcoins to make the down payment. For instance, one buyer sold two coins, each for over $7,400, to make the down payment on a home in Carlsbad, California.

Not every exchange has gone so smoothly, however. Redfin Agent Carina Isentaeva, based in San Francisco, saw a deal for a luxury home in Silicon Valley fall through when the client couldn’t sell bitcoins in time to make good on his offer.

Even a direct exchange of property for bitcoins holds tax implications a buyer should consider, said Robert W. Wood, a San Francisco-based tax lawyer.

The U.S. government recognizes bitcoin as property and officially under the new tax law starting Jan. 1, 2018, anyone trading cryptocurrency would trigger a capital gains tax.

Mr. Wood compared buying property with cryptocurrency to trading IBM stock for a new home. The home buyer would pay roughly 20% in capital gains tax and another 3.8% net investment tax on the amount their bitcoins had appreciated since they first bought or mined for them. That could be one doozy of a tax bill if the trader got into the crypto game when infant bitcoins were worth less than a dollar.

LOANS FOR BITCOINS

A better option that would avoid triggering a pricey tax event would be to pay for the home using a loan collateralized by bitcoin, Mr. Wood said.

“A loan is also better in the sense that you are unlocking some of the value of the bitcoin but you’re not disposing of the asset,” he said.

These days, Austin-based Unchained Capital is one of the few startups offering bitcoin owners loans backed by the cryptocurrency. Unchained allows bitcoin owners to borrow up to $1 million with interest rates between 10% and 14%. The company has gone all the way up to $5 million in rare instances, said Mr. Kelly, the co-founder and CEO.

Loan lengths range from three months to three years, with the principal due at the end, Mr. Kelly said.

“We can do longer term, but it’s pretty rare,” he said.

The lending startup has seen many clients use their loans for home purchases, though it makes the most sense when it comes to buying second homes, where traditional mortgage rates start to average around 10%, Mr. Kelly said.

“We do see a lot of people getting cash for a downpayment,” he said.