RentalStarter - A Midwest Real Estate Investment Company

[ThickAsThieves]

For reference

Many people have always wanted to be a landlord or own some type of real estate. Unfortunately many people live in areas where it is nearly impossible to own property due to extremely high acquisition costs and very low rates of returns. On the other hand, some locations in the United States offer a wide variety of property that offers a very high return at extremely low entry prices.

Because of this, over the past few years we have purchased a few rental properties and rented them out, yielding great returns for ourselves.

Unfortunately, since 2008, it has become increasingly difficult for rehabbers and prospective landlords to gain financing for investment properties. Virtually all banks and mortgage companies require that properties be occupied and fully rehabbed before they will consider loaning on them.

This leaves one viable choice to purchase a property - Pay cash for it.

Purchasing real estate utilizing cash has several advantages over mortgages -

Sellers discount cash purchases by 10%-25% over mortgaged loans
Properties can close very quickly after an accepted contract
Financing costs are typically half versus a conventional loan

The primary drawback with this method is the large capital requirement for purchasing & rehabbing the property prior to renting it.
Our goal is to utilize a hybrid approach to purchasing real estate to use as rentals.

Locate property in acceptable price range ($15,000 to $35,000)
Purchase property without bank involvement (Cash Closing)
Rehab property for cash (repairs will run from $500 to $15,000)
Rent property
Cash-out the property via a 20 year low interest loan for 70%-80% ARV
Roll cash into new property acquisitions

With this method we can regularly re-invest in new properties and achieve a broad base of rental units without the need for second and third rounds of financing.
After mortgages, insurance, repair escrows and other management fees are paid, we expect to pay out a reasonable interest rate to stockholders. We believe that this amount will be high enough to keep the business financially viable and provide favorable returns to investors.
Our management team

We currently manage 2 properties consisting a total of 6 rental units. Check out our rental page for financial breakdowns on these properties. We have maintained an average simple return of about 24% per year over the course of 6 years. Our cash-on-cash return has been significantly higher.
Financial information

RentalStarter’s goal is to raise ฿1,000 through bitcoin funding. This would enable us to procure and rehab, for cash, approximately 3 rental properties. These properties then could be refinanced and more purchased.

70% of income after expenses will be passed through to shareholders. Income is determined by subtraction net rental income by mortgage (if applicable), insurance and property taxes and 15% off the top for management.

Of the 30% internally retained, 20% will go towards a repair escrow and 10% towards early loan payoff (This is on top of normal interest fees to build equity). (See management and retention escrows here)

There will be a 15% ‘management’ fee taken for each property will cover normal management associated to maintain the business operations of the company and income collection & distribution.

Income from the sale of any property will also be passed-through to shareholders with a similar method.

Please review our rental section for properties that we personally own and manage.
This asset is being offered with the following goals :

To provide diversification of investment for those holding BTC
Provide reasonable dividends and investment growth over several years
To allow investment in a USD denominated company with some risk mitigation concerning inflation or economic downturn

Shares

We will be issuing a total of 100,000 shares with a approximate value of $1/ea (Or .01btc) – (Total of $100,000 of investment). We plan on issuing the first 50,000 shares to purchase the first property. After we assess the time frame of additional rentals we look to issue the second round of 40,000 shares. Un-issued shares provide no dividend payments or voting rights. Issuer reserves the right to buy back any un-issued shares at IPO price.

Voting

Public voting rights will be decided by issuer at time of own discretion.


Dissolution of asset


In the event of un-foreseeable circumstance, the issuer may elect to dissolve the company with the following methods.

Shares may be bought back from shareholders at market price (110% of 7 day median market value)


Transparency

To insure complete transparency with shareholders, we will regularly upload financial statements, bank statements along with weekly investor-only videos and live chat sessions to provide updates and information on our progress.
There will be legal contract in place to insure continuation of company should the issuer meet a untimely demise.

PROFITS:

Profits will be determined after subtracting the following from income:
15% - Management Fees (This includes any and all salary/office expenses)
Any taxes, mortgage, insurance or other costs are subtracted
After that, 20% of the remaining amount will be put into a maintenance & repairs fund
The remaining amount will be considered shareholder earnings ("Dividends").

DIVIDENDS:

Dividends will be paid out every 15th of the month within a 72 hour grace period.
Dividend funds will be distributed equally amongst all shares.

Reserved Rights of Issuer

To change schedule of dividends to be in line with any changes in schedule the underlying asset may enact.
To correct and clarify any gross errors or details herein that may prove to be open to misinterpretation.

Issuer may exchange at his discretion a exchange of the 15% management fee for 35% equity in the asset. This clause is only available when the business surpasses $250,000 in assets.

To comply with SEC regulations, we currently do not allow investment from US entities.

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[bitcoinsucker1]

Mill street closed today, rehab also started today.

How long is rehab?  How are we planning to convert the USD to BTC for dividends?  Whats the estimated dividend per home per share?

[Branny]

Mill street closed today, rehab also started today.

How long is rehab?  How are we planning to convert the USD to BTC for dividends?  Whats the estimated dividend per home per share?

Looking at 4 weeks at the moment, I decided today it would be better to go a little further and do some exterior work too, however ROI return from doing it will still meet our threshold (20% simple ROI).

Yes, USD>BTC

The dividend income per share is going to vary wildly. Next payment will likely be .0000142 per share (if my math is right.) However when we refinance the property the dividend could vary between .000715 and .0028 per share (7.2% and 28% for that monthly dividend period). Each property will return 2-4 BTC or so in dividends.

The real gain is equity - Mill street will provide 500-600btc in free equity which is close to our IPO size.

[gog1]

noticed shares issued is 70000 and total shares is 100000, are those shares going to released in a secondary offering? Happy to see a 'real' everyday business in bitcoin community.  After a few successful purchase / rehab / lease, the valuation should be a lot higher (barring a massive rise in BTC/USD prices) and a secondary offering would be helpful in acquiring more accretive properties. 

[Branny]

noticed shares issued is 70000 and total shares is 100000, are those shares going to released in a secondary offering? Happy to see a 'real' everyday business in bitcoin community.  After a few successful purchase / rehab / lease, the valuation should be a lot higher (barring a massive rise in BTC/USD prices) and a secondary offering would be helpful in acquiring more accretive properties. 

It very well might be involved in a secondary offering, although we don't *need* the money right now.

On the 70k issued shares, BTC value (Using the .01=$1 valuation during IPO) the "Book value" per share would be .0171btc per share (A increase of 55% or so from IPO).

[Branny]

Rehab is going smoothly.

As noted in #bitfunder, I made the decision on Friday last week to go the extra mile and order windows to be installed and siding done.

This will take the house to complete rehab status (And even higher equity).

Equity estimate is now $90,000-$100,000 to $100,000-$120,000

Rent should now be a extra $100/mo from the added rehab value, if not more.

[Peter Lambert]

Rehab is going smoothly.

Equity estimate is now $90,000-$100,000 to $100,000-$120,000

Rent should now be a extra $100/mo from the added rehab value, if not more.

Awesome.

Why not just say "equity estimate is now $90k to 120k"?

[bigbeninlondon]

Rehab is going smoothly.

As noted in #bitfunder, I made the decision on Friday last week to go the extra mile and order windows to be installed and siding done.

This will take the house to complete rehab status (And even higher equity).

Equity estimate is now $90,000-$100,000 to $100,000-$120,000

Rent should now be a extra $100/mo from the added rehab value, if not more.

Good deal.  I'm continually glad I have a stake in this game.  Thanks for the update.

[Branny]

Rehab is going smoothly.

Equity estimate is now $90,000-$100,000 to $100,000-$120,000

Rent should now be a extra $100/mo from the added rehab value, if not more.

Awesome.

Why not just say "equity estimate is now $90k to 120k"?

Phrased it wrong I guess.

old equity estimate was 90k-100k

New equity estimate is $100k-$120k. There was a house that sold right down the street with smaller sqft but with a nice basement for $145k about 4 months ago.

[bitcoinsucker1]

Will we allow renters to pay in BTC?

[xaviarlol]

Wait, so houses in the US have rent yields in excess of 20%? Wtf?

Something doesn't add up here. If houses had rental yields of 20%+, every investor on earth would buy up houses in the US. I did some research and the average US rental yield is 5-9%, which is about the same in Australia. Can someone explain these figures in this thread?

[joris]

Wait, so houses in the US have rent yields in excess of 20%? Wtf?

Something doesn't add up here. If houses had rental yields of 20%+, every investor on earth would buy up houses in the US. I did some research and the average US rental yield is 5-9%, which is about the same in Australia. Can someone explain these figures in this thread?

If you buy a crappy house in a sloppy market and pimp it cheaply, you could be able to double or triple you're average rental yield. It's a limited size niche for those with cash and time on their hands.

[Peter Lambert]

Wait, so houses in the US have rent yields in excess of 20%? Wtf?

Something doesn't add up here. If houses had rental yields of 20%+, every investor on earth would buy up houses in the US. I did some research and the average US rental yield is 5-9%, which is about the same in Australia. Can someone explain these figures in this thread?

What happened is the housing market tanked, so you can buy houses real cheap (if you know what you are looking for and jump on deals as they pop up, and are willing to put in some repair work to make them livable), but people still need to live somewhere and so the rental rate for houses has not changed much. Add into that all the people who lost homes to foreclosure, those people cannot get approved for mortgages now (because they now have crappy credit), so you can get foreclosed houses cheap and there are not as many people buying and they need to rent. It all works together to make a great opportunity for somebody with liquid cash to slap down.

[Branny]

Wait, so houses in the US have rent yields in excess of 20%? Wtf?

Something doesn't add up here. If houses had rental yields of 20%+, every investor on earth would buy up houses in the US. I did some research and the average US rental yield is 5-9%, which is about the same in Australia. Can someone explain these figures in this thread?

Not enough people want to manage rentals. People typically see them as risky investments, however I've been doing them for 7 years and haven't had much of an issue with tenants. Unlike many local landlords, I don't own slum properties nor do I rent to slum tenants.

US Real estate return is higher than most countries. Granted if you want, you can go to states that have very poor rental performance and get only 5% a year.


Additionally, not every state has strict laws on building/renting like Australia, Canada and the UK do.

Whether anyone wants to admit it or not, to BUILD a house in the UK, Canada, Australia or the like, it costs about $40,000 per 1000 square foot. Any more and you're paying either for luxury or government regulations.

[Vycid]

So, I'm interested but curious about legality... is it? If this gets noticed, will it get shut down and all the assets seized?

[joris]

Branny, is annual indexation of the rent to the official CPI also a regular practice in the US?

Or do you have a lower / higher freedom in adjusting to the local rental market?

P.S. avoiding 'slum' is a very sane practice, imho

[Peter Lambert]

Branny, is annual indexation of the rent to the official CPI also a regular practice in the US?

Or do you have a lower / higher freedom in adjusting to the local rental market?

P.S. avoiding 'slum' is a very sane practice, imho

I've never seen annual indexing to anything in any of my rental agreements. It is all based on the market.

[joris]

Branny, is annual indexation of the rent to the official CPI also a regular practice in the US?

Or do you have a lower / higher freedom in adjusting to the local rental market?

P.S. avoiding 'slum' is a very sane practice, imho

I've never seen annual indexing to anything in any of my rental agreements. It is all based on the market.

So then you're only at the mercy of your landlord?

[ex-trader]

What has this got to do with Bitcoins?

The assets, income, expenses and returns are all USD. This is a USD investment unrelated to the Bitcoin economy.

[bobboooiie]

What has this got to do with Bitcoins?

The assets, income, expenses and returns are all USD. This is a USD investment unrelated to the Bitcoin economy.

No shit sherlock!

"IPO" funds were raised by bitcoins seems related to me.