Paying rent in bitcoin is what forward-thinking multifamily operators should consider as consumer interest in cryptocurrency is rising.
Earlier last year, American billionaire and real estate magnate Rick Caruso announced that a portion of his real estate portfolio is accepting bitcoins—a cryptocurrency—for residential and commercial rent payments. Caruso’s bold move is considered an industry first.
The real estate sector is well known as a laggard in adopting new technology. Accepting rent payments in a cryptocurrency, such as Bitcoin, is undoubtedly a step toward the future, but it is scarily experimental by today’s real estate industry standards.
That said, evolving market factors and shifting consumer sentiment and behavior suggest that moving toward the crypto future may hold genuine promise for growing numbers of CRE and multifamily property owners.
What is Crypto?
Cryptocurrency is a relatively new form of digital payment that consumers use to exchange goods and services online. Cryptocurrencies rely on what is termed blockchain technology, in which a computer network tracks and records digital transactions in a decentralized way through a distributed ledger.
For both consumers and commercial entities, the appeal of cryptocurrency lies in its strong privacy and user security, decoupling from government-controlled financial institutions, transparent record-keeping through blockchain technology, and freedom from added “middleman” transaction fees and costs.
Bitcoin, the world’s first cryptocurrency, debuted in 2009. Twelve years later, consumers can choose from over 7,800 cryptocurrencies that boast a combined market cap of $324.716 billion. Among the most popular are Ethereum, Litecoin, Binance Coin, Cardano, Tether, Stellar, and Solana.
Cryptocurrency holds tremendous promise for virtually every commercial industry in the world. Consumers are jumping on board, investing in and using crypto for all kinds of transactions, including buying and selling merchandise (even from top brands that support crypto sales), online investing, money transfers, travel, lodging … and, as Mr. Caruso has shown, even paying rent.
Crypto’s upside goes beyond the convenience of simple financial transactions for both consumers and businesses. It facilitates secure data sharing, streamlines collection and payment, provides secure due diligence, improves operational efficiency, and saves time and costs.
Its appeal is highly compelling, and consumers, merchants, and financial payment firms alike are boarding the crypto bandwagon, signaling an impending industry shift. CRE and multifamily property owners should, at the very least, participate by considering the benefits that crypto may offer the industry.
Crypto and Millennials
Consumer interest in (and adoption) of cryptocurrency is rising. Across all consumer demographics, millennials are currently the largest group investing in crypto.
Millennials make up history’s largest demographic of individuals aged 24 to 39. As consumers, they are entering their prime spending years and, by Wall Street standards, are poised to reshape the economy. These driven digital natives have an immense affinity for technology, which explains their avid interest and engagement in the world of cryptocurrency.
The following points are critical to the CRE and multifamily industry.
A recent study from Piplsay found that “49% of millennials polled own cryptocurrency compared to 38% of Gen Xers and 13% of Gen Z,” and millennials are more likely to use crypto for payments, with 53% saying they are “very likely” to purchase products or services with crypto. According to the study, millennials own more crypto than any other generation.
A September 2021 consumer survey by digital asset platform provider Bakkt Holdings found that “37% of survey respondents ages 18–29 and 30–44 who have not purchased cryptocurrency in the past six months are ‘somewhat’ or ‘very interested’” in investing in cryptocurrency. Furthermore, says Bakkt Holdings, the ubiquity of digital assets and cryptocurrency is revolutionizing consumer buying habits and driving a new, increasingly dynamic economy.
Millennials – CRE and Multifamily’s Bread and Butter
Matching these findings to U.S. renter demographics reveals an important overlap.
According to an annual rent report from Apartment List, the share of millennials expected to rent forever has nearly doubled in two years to almost one-fifth. The rental listing site’s 2021 Millennial Homeownership Report found that, in 2020, 18.2% of millennials who did not then own homes expected to rent forever, up from 12.3% in 2019 and 10.7% in 2018. The report combined data from the U.S. Census Bureau’s Current Population Survey and Apartment List’s annual renter survey.
Millennials, the bread-and-butter tenants of multifamily property owners, are embracing crypto en masse. Multifamily owners and operators need to take note and think about accepting cryptocurrencies.
This may not mean diving into the digital currency pool today but rather taking proactive steps to understand their tenants’, potential tenants’, and property managers’ perspectives on cryptocurrency and, at the very least, considering the pros and cons of this exploding new industry.
About the author:
Daniel Berlind is the Founder and Chief Executive Officer (CEO) of Snappt – a Los Angeles-based software company that helps multifamily housing companies prevent tenant and financial fraud. A former real estate executive, innovator and entrepreneur, Dan founded Snappt in 2017 after running his own property management company where he recognized a significant, industry-wide financial issue in the billion-dollar apartment rental industry. The company’s technology aids and streamlines the apartment rental process by reducing bad debt, increasing asset value and minimizing the application review process.