Would you accept rent in Bitcoin?

It has been a turbulent week for cryptocurrencies. Despite their volatility, they are filtering into the mainstream and could soon transform the rental market. Lettings services are creating new digital payment systems to court young professional tenants to pay rent in crypto. So how soon will landlords have to accept payments in Bitcoin?

Michael Stroev, 33, is relocating from Spain to London next month for work. He works in banking and is looking for a two-bedroom rental flat in South Kensington. He is also a crypto investor – and wants to pay his rent using digital currencies.

Mr Stroev started investing last year and now has a portfolio of around 30 cryptocurrencies including Bitcoin, Ethereum, Binance Coin and Polkadot. “I’m not a crypto whale, but my crypto investments are starting to look like a bank account,” he said. “I want to pay my rent in cryptocurrency, it would simplify life. Plus, it’s just cool. I’m a millennial.”

He estimated it would save him 1pc in costs, but it would also be much easier to pay directly in crypto. “If I need to convert Bitcoin, I need to sell to euros, send that to my bank account, convert euros to pounds, and transfer that to a UK account, which I need to set up,” said Mr Stroev. Paying directly in crypto would be a one-step process.

Mr Stroev is exactly the kind of tenant that London’s landlords desperately want back on their books. Corporate relocation inquiries plummeted during lockdown. Data from Knight Frank, the estate agency, showed that searches were recovering, but they were still down 41.6 percentage points on January 2020.

A survey by the National Residential Landlords Association, a trade body, found that 56pc of central London landlords reported tenant demand falling year-on-year in the first three months of 2021. Inner London rents in April were down 20.4pc, according to Hamptons estate agency. This means the capital’s rental sector needs to get creative.

Mr Stroev is conducting his search for a new flat through Mashroom, a lettings platform, which has just launched a pilot service that allows tenants to pay rent using cryptocurrencies. Mashroom converts the digital currency into pounds, which it then pays to landlords.

Stepan Dobrovolskiy, of Mashroom, said: “The tenant inquiries initially have all been young professionals in their 20s and 30s, almost entirely working in the financial sector and looking to rent in London.”

This tenant group were those most likely to be the early adopters of cryptocurrencies, said Mr Dobrovolskiy. “But we believe that this will soon become the norm and spread to the rest of the UK. More and more people are buying crypto nowadays.”

Mashroom said it had received a steady stream of requests from tenants for the service, and for now it is only being promoted to tenants. In time, it plans to offer landlords the option to receive funds directly in crypto.

John McKay, 63, is a portfolio landlord who is also a cryptocurrency investor. He said that he would be open to accepting crypto payments directly into his Bitcoin wallet on Coinbase, the online exchange.

But David Westgate, of Andrews Property Group, an estate and lettings agency, cautioned that landlords who accepted payments directly in crypto would be exposed to volatility. “When cryptocurrency prices move suddenly, they can often move double digits in a single day,” Mr Westgate said. On Wednesday, for example, Bitcoin crashed 30pc as China banned firms from providing crypto services.

Mr McKay said: “I would probably want the rent in Bitcoin or Ethereum, and I would fix the amount for six months and then fix it again.”

The biggest hurdle for a crypto rental market would be how quickly digital currencies become more widely accepted, he added. “Landlords have to pay for goods and services in pounds. Unless they have a good enough profit margin on their other investments to have cash to pay for things like council tax, or unless those services start accepting crypto payments, they have a problem.”

Kyri Kyriacou, of Property Vine, a lettings agent, also launched a crypto payments service this year, but found that preparing to process crypto payments brought hassle. “We ask for evidence of profits, and also for tenants to show where the original capital came from,” he said.

Property Vine was not actively promoting the service and no tenants had yet made crypto payments, Mr Kyriacou said. “Initially it will be more inconvenient for us. But it is something we have put in place because we know it will happen organically. It is not practical, but we are future-proofing.”