It is now easier than ever for cross-border transactions to be processed using digital currencies such as Bitcoin. This is especially important in Mexico’s real estate market, which is heavily influenced by foreign investors. Tokenizing real estate assets eliminates intermediaries and addresses common problems in Mexico such as fluctuation in exchange rate and inflation.
Although cryptocurrencies are not new, they are now gaining popularity and are recognized worldwide. Some companies have invested in cryptocurrency and can accept payments from clients looking to diversify their investment portfolio.
Companies are being encouraged to accept cryptocurrencies as legitimate forms of payment. Lamborghini, Microsoft, Tesla, PayPal, WordPress, and even Subway are accepting cryptocurrencies such as Bitcoin, Ethereum and Litecoin. This new revolution in finance is supported by business moguls like Bill Gates and Richard Branson.
Bitcoin, along with other blockchains is an international currency and works well for real estate transactions in Mexico.
What is cryptocurrency?
In case you haven’t been watching any TV, YouTube, or other social media activity for the past 10 years, here is a quick description of crypto.
A cryptocurrency is digital or virtual currency that has been secured with cryptography. This makes it almost impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks that use blockchain technology, which is a distributed ledger that is enforced by a dispersed network of computers. The key feature of cryptocurrency is their inability to be issued by any central authority. This makes them theoretically impervious to government manipulation or interference.
Benefits of cryptocurrency
A large portion of the population does not have access to high-value investments today. Blockchain technology has opened up new opportunities for the real estate sector to offer capital mobility and access global capital markets. Tokenization has many benefits:
- Accessibility: Tokenized items are accessible worldwide and 24 hours a day.
- Transparency: Each record is kept on a ledger so that no one can claim assets fraudulently.
- Cost-effective: Cryptocurrencies are cost-effective and can eliminate the need for intermediaries who used to limit investment access
- Ease in investment: Tokenized assets offer greater liquidity, and even fractional ownership. This transforms the way that investors view traditional real estate opportunities.
The rise of crypto in real estate
Real estate companies are responding to the growing demand for blockchain-based payments for their everyday purchases. The status quo in the real estate sector is being challenged by blockchain technology.
Traders and early crypto adopters are creating a lot of wealth and investing it in real estate, which is fueling a hot market. Smart contracts can also facilitate faster and more efficient property transfers and transactions.
The use of cryptocurrencies in Mexico for real estate
Although cryptocurrency is still a relatively new development in Latin America, it has become more common in the United States to purchase homes using them. Bitcoin is currently helping to facilitate more foreign investment into the real estate market in various places in Mexico. The ultimate goal is to also benefit domestic buyers.
As many companies accept digital currencies as payment for investment, the use of digital currency is becoming a major movement in real estate.
Why buy real estate in Mexico using cryptocurrency?
There are many reasons someone might choose to pay with Bitcoin, Ethereum or another cryptocurrency rather than cash or with a loan-backed deal. These are the three main reasons.
1) Fast and cheap transactions
Transferring money between international banks has been a nightmare for many years. Intermediary clearing banks can hold money for up to weeks, charge high transfer fees, offer poor currency exchange rates and sometimes disappear in the “cloud”. It can take months to recover your money. You can avoid the hassle of dealing with banks and avoid freezing your funds. This will allow you to acquire bitcoin quickly and easily. The transaction fees are low because neither financial intermediaries nor governmental bodies have the ability to interfere with cryptocurrency transactions.
2) Tax Benefits
Mexico’s tax advantages have been a major benefit of Mexico real estate investments for years. However, this is now changing. Mexico recently introduced IVA, a 16% sales tax on real estate. You can purchase your investment property using Bitcoin, Litecoin or Ethereum. The sales tax is removed by removing the third-party entity. This allows you to save a lot of taxes.
Your personal identity will not be revealed unless you decide to make your transaction public. Although addresses and transactions do not link to an individual’s identity, there is a gray area. Cryptocurrencies are still striving to be completely anonymous as technology improves. To avoid being harmed by those who have more experience with CC’s, we will use the term “pseudo-autonomous”. If you need to increase your anonymity, there are several ways. Please leave a comment below with any questions.
NOTE: Although there are many benefits to purchasing property or real estate using cryptocurrency, this may not be the best option for everyone. There are potential drawbacks, such as sellers refusing to accept cryptocurrency payments or daily fluctuations in crypto price that can impact buying power.
How to buy house in Mexico with cryptocurrency
There are a few options available if you want to buy property using Ethereum, Bitcoin, or any other cryptocurrency.
Buy real estate directly from the seller using cryptocurrency
Private sellers will have different requirements when it comes to buying crypto-backed real estate. While some may prefer 100% crypto transactions, others might choose to split the transaction between cryptocurrency and cash. This means that you will need to send Bitcoins from one wallet to the other in order to complete any such transaction.
Some sellers are reluctant to accept crypto
Sellers who are unable to accept cryptocurrency will need to convert their crypto to dollars in order to complete the transaction.
BitPay is able to facilitate crypto real estate transactions for buyers and sellers. The selling party will generate an email invoice. The seller will send an invoice to the buyer. They can then pay using their crypto wallet of choice, manually or via scanning a QR code. BitPay transfers the funds to the seller via direct deposit.
Even if you use cryptocurrency to purchase real estate, cash payments might be required to intermediary and government agencies.
Is it possible to pay my mortgage using Bitcoin?
Major banks won’t accept cryptocurrency so it’s unlikely you’ll be able to pay your mortgage with crypto. You may be able to use the BitPay Card to convert cryptocurrency into cash to pay your mortgage.
BitPay Card functions just like any other debit card except that you don’t need to withdraw funds from your bank account. Instead, the BitPay Card lets you access funds from any cryptocurrency wallet within the BitPay app.
You can convert Bitcoin, Ethereum, Litecoin, Bitcoin Cash, or Dogecoin into cash to pay your mortgage.
What’s next in Mexico’s real-estate market?
The token economy is a significant shift away from central agents and gives power to the individual. Many expect that cryptocurrencies will be adopted by more companies, which will lead to new players in the market who will increase the demand for property in Mexico.
This change means that someone from the US can now purchase an apartment in Los Cabos with Bitcoin. This opens up real estate markets to middle-class families and new players, as well as families from lower income households who might not otherwise be able to access them.