Jenna Hall is a Content Marketing Coordinator at Redfin. Redfin does not provide legal, tax or financial advice. This article is for informational purposes only and is not a substitute for professional advice from an attorney, tax professional or licensed financial advisor.
Over the past few years, a growing number of companies around the world have started allowing customers to pay for their products and services with bitcoin. Although bitcoin used to be considered a niche asset, it has now become a very popular currency and is treated as a viable alternative to cash and credit for many major retailers. Now that you can use bitcoin to buy almost anything, some are wondering how they can use their digital currency to buy a house or even pay rent.
With bitcoin becoming increasingly intertwined with real estate transactions, you may be wondering if paying rent with bitcoin is a good option for you. Whether you’re a homeowner or renter, here’s what you need to know.
How it works?
Currently, there are two ways that landlords can collect bitcoin rental payments. The first is through the use of a property management platform that leverages technology to process bitcoin payments. The second is to simply transfer peer to peer with the tenant.
For payments made through property management software, both the tenant and the owner 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 QR code from the payment request and pay through their digital wallet.
It is important to note that most property management platforms do not contain any digital currency, they simply convert the currencies into US dollars and transfer the payment to the owner as such.
Without a platform, tenants can still rent an apartment with bitcoin by transferring their properties to the owner’s digital wallet. Landlords and tenants should note that peer-to-peer bitcoin transfer leaves no paper trail. Therefore, it is a good idea to create documentation that includes proof of payment records to avoid potential problems.
Five Benefits of Using Bitcoin to Pay Rent
Whether you are a landlord or renter, there are many benefits to using bitcoin for rent payments. Here are the top five benefits to help you decide if it’s a good choice for you:
More flexibility
Tenants are looking for properties that give them more payment flexibility. According to a recent Motley Fool study, more than half of renters surveyed said they would pay more in rent for more convenient payment options.
Bitcoin payments can be completely digital and made on a phone, computer or tablet. Unlike traditional banks, bitcoin payments can be made and received 24 hours a day. This means that landlords won’t have to wait until business hours or after a holiday weekend to receive their rent payment.
Easier payments for those renting abroad
Renting abroad can be complicated, especially when the landlord and tenant use different currencies. Transferring money the traditional way probably means paying bank transfer fees, foreign transaction fees and currency conversion fees. In addition to this, landlords and tenants need to be aware of exchange rates and the lag time it often takes for money to be transferred internationally.
However, bitcoin can be used instantly internationally with little or no fees, saving time and money for both landlord and tenant.
Fewer transaction fees
Most online rent payment platforms charge a fee for paying rent with a credit card. This fee is usually 2.5% to 2.9% of the rental amount and is paid by the tenant. Even third-party platforms like Venmo and PayPal charge a fee of about 3% for business transactions like accepting rent payments, which landlords must pay when they accept payments.
Renters and landlords can avoid these transaction fees by directly transferring bitcoin, which could save each party hundreds or even thousands of dollars over several 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 pale in comparison to credit card processing fees.
Added privacy for tenants
Bitcoin payments are great for renters who prioritize their financial privacy. Bitcoin uses anonymous addresses that change for each transaction, so payments do not require any personal information, traceable credit card numbers, or account numbers.
Given the pseudonymous nature of the blockchain, bitcoin payments are ideal for those who are privacy-conscious and wary of sharing their personal information.
Potential first mover advantage
Bitcoin is becoming more widely accepted in mainstream markets, with many businesses starting to accept bitcoin as payment. However, there is still work to be done before it becomes a financial norm.
Homeowners who are forward-thinking, tech-savvy and want to stay ahead of the next trends may want to consider being early adopters. Potential renters may see the value of a property that accepts bitcoins and be more inclined to rent with those properties.
What to consider when using Bitcoin to rent
Here are some final things to consider if you plan to use bitcoins to rent as a landlord or tenant:
Reimbursement versus retention
If you are an owner that accepts bitcoins, you can choose to cash out or keep. It’s a good idea to consider the pros and cons of each. Bitcoin is known to be volatile and the amount a renter pays in bitcoins could change quickly. Homeowners should examine their financial goals and consider speaking with a financial advisor to see which option works best for them.
The rental amount could fluctuate
Since the value of bitcoin fluctuates, so will the monthly rent amount. This means that the amount of bitcoin you give or receive as rent could change from month to month.
Keep the documentation
Given the nature of bitcoin that makes it more difficult to track, landlords and tenants should protect themselves by keeping records of rent payments using bitcoin as much as possible. Assume that landlords and tenants plan to transfer peer-to-peer. In this case, it is a good idea to consult with a legal professional to ensure that the proper paperwork and documentation is created regarding a rent payment agreement.
This is a guest post by Jenna Hall. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
