BitShares Forum
Main => General Discussion => Topic started by: wesphily on January 24, 2015, 03:28:11 pm
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Below my initial plan for utilizing bitshares in real estate. Please poke it apart!!
The Company
The focus will be on residential real estate. Each deal will be analyzed to determine the best exit strategies. The company will own rental properties. I will be accompanied by a father & son team to help me find and analyze deals. The father has been a real estate agent for over 30 years. The son has done everything related to real estate. (everything is no exaggeration) More detailed credentials will be given during the official announcement. The company will be a LLC.
The Partnership
I will be a managing partner. A "founding" UIA will be created to allow white listed investors to purchase ownership interest in the company. If an investors wishes to be a managing partner then additional credentials will be required. The funds acquired in this stage will go to a bitshares escrow account. The funds will only be released if all founding investors agree to the cause. Partners will get share dropped interest in "deal" UIAs.
The First Deal
The very first deal will be funded by the founding investors. I will work with the father & son team to locate and analyze deals. Once a good deal is found I will create a workbook on it. The workbook will be reviewed by the founding investors. If the investors agree then the required funds from the escrow account will be released to purchase the property. Profit will be split proportional to ownership interest. A percentage of the deal will be held for future deals, unforeseen costs, and/or administrative requirements. If everything works as planned then we will continue with "deal" UIAs.
The Deal UIA
Same as before, each deal will be located and analyzed by the father & son team. I will create a workbook once we find a good deal. This time, I will post it in the bitshares forum for potential investors to review. Interested investors will need to meet certain qualifications to be whitelisted to purchase shares in the deal. Founding investors will have a percentage of the deal share dropped. They will also have the opportunity to purchase additional shares in each "deal" UIA. All funds will go to a bitshares escrow account. Fund lost due to currency conversion, closings costs, and unforeseen costs will be factored into each "deal" UIA. Target fund goals will be set accordingly. Once the target funding is met the bitshares will be released to purchase the property. Profit will be split proportional to ownership interest in the "deal" UIA. No percentage of the profit will be held for future deals, unforeseen costs, and/or administrative requirements. If the property is a rental then the UIA will live until the rental property is sold. If it is not a rental then the UIA will die once the profit funds are dispersed.
The Jobs
Below are a list of jobs that I would like fulfilled by founding partners.
Fund Manager: This person will be responsible for hedging funds to prevent loss due to negative volatility. Profits realized by the fund manager will be dispersed based on ownership interest in the founding UIA.
Lawyer(s): Needs to be well versed in real estate.
Software Developer: This person will need to be well versed in crypto technology. The goal of this position will be to help our company fully utilize all possible crypto technologies to further decentralize our efforts as well as improve efficiency and success.
The Deal Breaker
The hardest part of this entire idea is the management of personal information. To file as a partner in a LLC a partner has to have an employee identification number. This requires a lot of personal information that has to be given to the IRS for tax and law purposes. I am still investigating possible third party solutions that will allow me to issue identification numbers without having to handle the personal information myself.
The Wesphily Questions
1) Exact numbers and percentages will be determined once the founding investors are determined and the LLC is created. Negotiations will need to happen to determine things like: my ownership interest, how much funds to use for the first deal, ect...
2) I'm doing everything I can to make this trustless. Until the rest of the world agrees, there will be some trust required due to taxes and laws. I can only promise that I'll do everything I can lower the amount of required trust.
3) There are two ways I have thought about handling deals that fall through. I like the second option because if gives us more possibilities on future deals. Either way, funds are held in escrow so it is not like I'll be on a yacht somewhere drinking it up.
a) Return all funds
b) Hold funds and share drop accordingly on the next deal found.
4) Name of the company has not been decided
5) The LLC will be held in the state of Missouri. More exact details will be given to founding investors.
6) Currently, the father and son team will not be partners in the LLC. They are semi-retired. I am extremely luck to have them on my side.
I understand the risks of posting this on the forum. I'm doing this because there are a lot of smart people on this forum. Also, trying to explain this to industry experts in real estate/law/business is extremely difficult since most have no idea what crypto technology is! If this idea turns out to be a bust then I'll be doing it all the old fashioned way. Thank you all for your time!
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There are already some centralized real estate Crowdfunding platforms out there.
What is the advantage of doing this with UIA on BTS?
Your proposal has a big trust issue. After funds are released what is to stop you walking away with those funds?
To be honest I would feel more comfortable backing your deals on a centralized platform, so I would have the illusion of holding them responsible.
Edit: how will the white listing of investors work?
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There are already some centralized real estate Crowdfunding platforms out there.
What is the advantage of doing this with UIA on BTS?
Your proposal has a big trust issue. After funds are released what is to stop you walking away with those funds?
To be honest I would feel more comfortable backing your deals on a centralized platform, so I would have the illusion of holding them responsible.
Edit: how will the white listing of investors work?
I'm about to leave to look at a place that I may be getting married at. I will respond to all replies as soon as I get back. Sorry for the inconvenience!!!
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There are already some centralized real estate Crowdfunding platforms out there.
What is the advantage of doing this with UIA on BTS?
Your proposal has a big trust issue. After funds are released what is to stop you walking away with those funds?
To be honest I would feel more comfortable backing your deals on a centralized platform, so I would have the illusion of holding them responsible.
Edit: how will the white listing of investors work?
There are actually more disadvantages than advantages. I'm doing this because I'd like to be a pioneer. Also, real estate is not a rigid investment. Investors need to be open to solving problems to make the real money. I feel crypto investors are best suited for this.
The company will be a registered LLC where I'll be a managing partner. If I were to run with the money then people would need to call the police. I'd then have to face court charges. Bitshares will not relieve me of this.
Finally, most people would not feel comfortable doing anything with crypto technology. There are reasons why it is not massively accepted.
Thanks for the response. If I didn't answer your questions fully then please ask what I missed.
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This is awesome, I agree though with the trust issues, how do we make this work?
Do we make it like escrow after a certain block (predetermined) say quarterly or monthly a dividend is pay such as a REIT (Real Estate Investment Trust).
How do we stop this guy from just taking the money, do we put code in place where a person can vote on a certain block being paid out a certain price?
How do we get the UIA to be the owner of the property?
Hes pioneering something that could make bitshares go nuclear in the sense https://bitsharestalk.org/index.php?topic=8072.0 (https://bitsharestalk.org/index.php?topic=8072.0)
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Guys, he's not inviting you all to be the shareholders of his company and make decisions. He doesn't need your trust in how profitable he is or how he manages the company, he just wants to use our ledger system for his shareholders.
I think this is a good idea. Have you been able to talk to someone like stan or DACx about this?
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This is awesome, I agree though with the trust issues, how do we make this work?
Do we make it like escrow after a certain block (predetermined) say quarterly or monthly a dividend is pay such as a REIT (Real Estate Investment Trust).
How do we stop this guy from just taking the money, do we put code in place where a person can vote on a certain block being paid out a certain price?
How do we get the UIA to be the owner of the property?
Hes pioneering something that could make bitshares go nuclear in the sense https://bitsharestalk.org/index.php?topic=8072.0 (https://bitsharestalk.org/index.php?topic=8072.0)
I had planned on the title(s) being conveyed to the LLC. Could treat each UIA as a joint venture. This would allow investors into a single deal and would be dissolvable after the deal was completed. Also, join ventures can assume any form of ownership.
I don't want to do a REIT. Below are the requirements that might explain why:
1) Trust must be beneficially owned by at least 100 investors
2) 95 percent of the trust's gross income must be derived form investment income
3) 75 percent of the trust's gross income must be derived from real estate investments
Be kind of hard to find crypto investors who meet these qualifications. I myself to not meet these requirements. There are several more. These are just a few of the highlights.
A syndication is another possibility. I'd need to investigate the differences between a syndication and a joint venture.
I'll have to ask my partner how titles are conveyed when joint ventures are used. I'll also ask about the differences between joint venture and syndication.
Keep up the great questions!
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Guys, he's not inviting you all to be the shareholders of his company and make decisions. He doesn't need your trust in how profitable he is or how he manages the company, he just wants to use our ledger system for his shareholders.
I think this is a good idea. Have you been able to talk to someone like stan or DACx about this?
I'm not inviting people to be shareholders in the company. That is a correct statement. I'm asking for partners in a LLC and then partners for join ventures in future deals. The legal and tax ramifications are different.
I also plan to use bitshares as a ledger system. That is correct.
I have not spoken to Stan or DACx about this. It all hit me at once so I had to post it before I lost it. I still need to discuss this with my partner.
The exciting part about this for bitshares is that it could create a lot of volatility in bitshares and UIAs. It may also pave the way for others to try to do this with similar or other industries.
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Did some research. Syndications have a lot of red tape that requires a very experienced team. I'm going to avoid this for sure.
Join venture is still possible. It also has extra legal/tax ramifications. The positive side is that each venture would have its own LLC. Property can be conveyed to the join venture. So, partners in the joint venture would have ownership in the property.
I'll ask my partner if there is a better way.
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Yes please pursue this. If I had to invest crowd-funded type UIAs I'd feel more comfortable with this than most. You seem legitimate. Keep at it!
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Yes please pursue this. If I had to invest crowd-funded type UIAs I'd feel more comfortable with this than most. You seem legitimate. Keep at it!
Thanks for the kind words.
It appears that others agree. I expected a lot more posts with concerns about my idea that I had not thought of.
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Yes please pursue this. If I had to invest crowd-funded type UIAs I'd feel more comfortable with this than most. You seem legitimate. Keep at it!
I 2'nd this! Looking forward to many more custom use of our blockchain! Your approach totally follows the idea of BitSharesME (from what was known about ME)
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There was a fund on Havelock that did something simular. It was a Hong Company that worked with a US LLC for investing in properties.
Found it,
https://www.havelockinvestments.com/fund.php?symbol=RENT (https://www.havelockinvestments.com/fund.php?symbol=RENT)
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I think that it may be easier if you form a cooperative and use BTS technology rather to form an LLC. I maybe wrong..
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There was a fund on Havelock that did something simular. It was a Hong Company that worked with a US LLC for investing in properties.
Found it,
https://www.havelockinvestments.com/fund.php?symbol=RENT (https://www.havelockinvestments.com/fund.php?symbol=RENT)
13% cap rate minimum? Most people shoot for 8-10%. 13% would be hitting a home run. Wonder who they are targeting to get such great deals.
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I think that it may be easier if you form a cooperative and use BTS technology rather to form an LLC. I maybe wrong..
I'll investigate utilizing a cooperative. The key will be the forms if ownership it can do.
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I think that it may be easier if you form a cooperative and use BTS technology rather to form an LLC. I maybe wrong..
I'll investigate utilizing a cooperative. The key will be the forms if ownership it can do.
Silly me. If I hadn't just woken up I would have responded better.
A co-op is similar to a condo. Tenants are share holders that pay maintenance fees and other fees. There are also a lot of rules/red tape. I don't see where it would be adventagious to use this method of ownership.
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As someone who is all ready involved in rental's and home flipping I am not sure how you can work this.
Will every share holder be a "active" owner or are you operating the fund and everyone else is a passive owner?
What will the legal doc's look like? I understand that the LLC will be listed on the property title but how do you tie the investors of the LLC to the LLC. Typically they would come and sign some documents and verify who they are while getting this notarized.
If every shareholder is a active owner then they also get the tax liabilities associated with the property not to mention the benefits. Who do you determine who gets what where?
I am slightly out of my element here because the business I have done is the past has just been with my money which makes it much easier. I had given everything you stated some thought months ago but I do not know a way you can structure to define clear ownership, roles and tax implications good/bad. I have access to a good real estate lawyer that I have worked with for years and a tax guy that could be straight out of Dragnet.
With the above being said their is money to be made here but how you will structure it and show investor ownership VIA a UIA on a title through a LLC without some paperwork from the owners of the UIA will make any lawyer cringe at the thought.
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As someone who is all ready involved in rental's and home flipping I am not sure how you can work this.
Will every share holder be a "active" owner or are you operating the fund and everyone else is a passive owner?
What will the legal doc's look like? I understand that the LLC will be listed on the property title but how do you tie the investors of the LLC to the LLC. Typically they would come and sign some documents and verify who they are while getting this notarized.
If every shareholder is a active owner then they also get the tax liabilities associated with the property not to mention the benefits. Who do you determine who gets what where?
I am slightly out of my element here because the business I have done is the past has just been with my money which makes it much easier. I had given everything you stated some thought months ago but I do not know a way you can structure to define clear ownership, roles and tax implications good/bad. I have access to a good real estate lawyer that I have worked with for years and a tax guy that could be straight out of Dragnet.
With the above being said their is money to be made here but how you will structure it and show investor ownership VIA a UIA on a title through a LLC without some paperwork from the owners of the UIA will make any lawyer cringe at the thought.
It is definitely not an easy thing to try to tackle. I am about to message my mentor with this idea to see what he thinks about it. Below are his credentials:
Bank Examiner for FDIC
Owner of a Mortgage Company & Private Mortgage Brokerage/Servicing
Real Estate Broker
Appraised Residential & Commercial
Appraised Privately Held Mortgages/Installment Contracts for the State of Missouri
Note Broker
Creditor's Representative Federal Bankruptcy Court
Commissioner of a Large Public Housing Authority
Executive Director of Non-Profit Housing Development Entity
Chair of Municipal Housing Rehabilitation & Redevelopment
Board of Directors Habitat For Humanity Affiliate
Too many years to touch on here and over a 1,000 deals!
Investing since 1974
The founding UIA will be the simplest part of this whole idea. It will be a LLC where investors use bitshares instead of cash. Also, it will allow people from around the world to participate. The only hard part about it will be securing personal information needed to finalize all the documents. Off the top of my head, utilizing a trusted lawyer may be the only way to do this. I'm still investigating.
The deal UIAs are where things get tricky. I'm still investigating the best way to tie in deal UIA investors. A joint venture is the leader so far.
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Just messaged my mentor. I'll let you all know what he says.
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Met with my mentor. He believes that the only way to do this is through a REIT. Unfortunately, REITs cost a lot of money. They are created for multi million dollar deals. I'm not prepared to take on that expense. C-corp is also possible, but that is also more complicated then I want to go.
It is possible to integrate bitshares, but I can't make it trustless or even close to it. This means that most crypto enthusiasts would not be interested.
Sorry for the bad news.
Good News: I plan to post a solution to all this later today.
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The Solution:
Research forms of ownership in real estate. You will see that each ownership has advantages and disadvantages. One thing that you want see are the forms of ownership a DAC can assume. Once a DAC has the ability to assume a form of ownership it will have the ability to be a legal instrument for real estate. It will take a lot of money, time, and expertise to make this possible.
Bitshares is the first crypto technology to develop the idea of a DAC. If it is able to complete this idea then it will create a new chapter in my real estate book!!!
Thanks all for your time. Good luck to you all.