Should You Accept Crypto as Rent? What to Consider.

Cryptocurrencies, like Bitcoin & Ethereum, are becoming more popular, and some property owners are wondering if they should accept it for rental payments. This idea has a lot of appeal: it’s flexible, may offer lower fees, and it’s trendy and cutting-edge. On the surface, crypto is attractive – but it comes with uncertainties and risks that could turn your rental income into a rollercoaster ride.

If you want predictable income streams that are secure and straightforward, accepting cryptocurrency for commercial property leases might not be a good idea. Here’s why:

Crypto is Unpredictable

The value of cryptocurrencies changes a lot. Unlike traditional currencies, whose values remain relatively stable, digital currencies can experience drastic fluctuations within short periods. For property owners, this means the rent amount could vary significantly from month to month. For example, if you set rent at $5,000 in Bitcoin, the actual value when converted to USD could swing wildly every month due to market swings. This makes it hard to have stable and predictable income.

Even though crypto is unpredictable, there may be two ways to alleviate this disadvantage. If you accept rent in Bitcoin but based on the US Dollar value, and can immediately convert the BTC you receive into USD, then most of the volatility will be irrelevant to you. Or, if you’re a bullish investor in Bitcoin and believe that the value is highly likely to continue increasing in the future, it may be smart to accept Bitcoin and hold it.

Read More: How to Make Money in Commercial Real Estate

Crypto Has Complicated Taxes

Using cryptocurrency for rent payments makes taxes complicated. Each transaction involving cryptocurrency can be a taxable event, which means every time you get a payment, you might have to report gains or losses to the tax authorities. This means you need to keep very detailed digital records to make sure your records are accurate and audit-ready. Keeping these records and navigating state and federal tax laws takes a lot of time and effort, which can make managing your property more difficult. 

Crypto Has Conversion Costs

Converting cryptocurrency to traditional money isn’t free. There are fees when you change Bitcoin to US dollars, and these fees can add up quickly and eat into your rental income. The process also involves dealing with multiple exchanges, which can make managing your finances more difficult. It is often more practical to maintain rent payments in the same currency you use to pay your expenses. 

Crypto Has Security Risks

Cryptocurrency is not as secure as traditional banking. Crypto assets aren’t insured the same way investments are with a bank or a brokerage, and are often more prone to hacking and theft. Traditional banks offer more security measures and insurance protections, so your money is safer. The risk of financial loss due to cybersecurity breaches should be a major consideration for any property owner.

Crypto Has Legal Issues

The rules and regulations for using cryptocurrency are still being developed. Accepting cryptocurrency for rent could lead to compliance issues and legal problems now or in the future. You might need to talk to a lawyer to make sure you are following the law, which can be expensive and complicated. The changing rules for using cryptocurrency means that what is allowed today could change, which could create long-term operational challenges for your property if you decide to accept it as rent.

Should You Accept Crypto as Rent?

While the idea of accepting cryptocurrency for commercial property lease payments has its appeal, the disadvantages are substantial. The unpredictable value, complicated taxes, costly conversions, security risks, legal issues, and need for detailed records make it a risky choice. If a tenant asks to pay rent in crypto, you should think carefully and get professional advice before deciding to accept it – or just ask them to convert it to USD. For most, sticking with traditional currency is a safer and easier option.

Elifin Realty
No Comments

Post A Comment