How the Cryptocurrency Boom is Driving Up Luxury Real Estate Prices
By: Charles Sells
Millionaires and billionaires have always loved real estate. Cryptocurrency millionaires and billionaires are proving themselves no different. In fact, in 2021, newly “minted” crypto high-rollers drove some of the most expensive transactions in the luxury space, with the CEO of Coinbase purchasing a $133 million mansion in Bel-Air, California, and the CEO and co-founder of Moonpay sinking $38 million into a waterfront estate in Miami. These transactions and others like them have many high-end developers rushing to figure out how to accept cryptocurrency payments for luxury listings and attending boutique classes at brokerages to help them learn how to attract this desirable customer base.
Alex Sapir, a developer based in Miami, says that many crypto high-rollers just want to spend some of their millions on something tangible. “It’s gotten to the point where it’s like, ‘Okay, so what do I do with all this?’” he explained. Sapir made headlines when he sold an apartment for $22.5 million and accepted cryptocurrency in payment in 2021. In most cases, cryptocurrency homebuyers must transfer the currency to U.S. dollars before closing the real estate transaction. This can have tricky tax ramifications and create uncertainty for the buyer since the currency is highly volatile. Conversely, transferring to U.S. dollars may protect a seller since they will have a better idea of exactly what the payment they are accepting is worth.
However, more and more crypto-millionaires and -billionaires are finding that their digital currency “speaks” just as loudly (if not more so) than traditional dollars and cents. One of the biggest benefits of accepting digital currency, say developers who accept the currency directly, is that luxury buyers place a premium on being able to act quickly in order to acquire the properties they desire. “If I want to send a wire transfer today using my traditional bank account, it’s got to be banking hours [and] I need to make sure I hit that wire cutoff time and I can’t do it on the weekend,” explained Avi Dabir, vice president of business development at FTX US. “That’s not a problem with cryptocurrency. It’s open 24/7,” he said.
At present, accepting cryptocurrency can still be risky for individual investors, particularly since the use of the digital currency can lead sellers to delay conventional due diligence, such as obtaining proof of funds, because the process is unfamiliar. If you plan to accept cryptocurrency in 2022, take time to familiarize yourself with the process. For example, you may have to review cryptocurrency holdings rather than traditional bank proof-of-funds letters, so you will need to know how these work. If you operate in the luxury sector, however, the time is fast approaching when you will not be able to “opt out” of digital currency.