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Author Topic: [POTENTIAL] Real-Estate investment group?  (Read 3846 times)
SgtSpike
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May 17, 2012, 08:28:32 AM
 #1

The Bitcoin Island idea got me thinking.  Just curious, what do you all think of a real estate investment group through GLBSE?  If I started one, intent upon purchasing real estate for cash and renting it out, would you invest?

Buying houses outright is so cheap these days, especially when you're paying cash and can pick up foreclosures easily, while rental prices are skyrocketing.

Here's a decent example:  http://www.zillow.com/homedetails/285-S-38th-St-Springfield-OR-97478/48377601_zpid/
House that sold in 2006 for $162,000 is currently in foreclosure and for sale at $70k.  Current monthly rental rates for comparably-sized houses in the area are $900-$1000.  Figure, $5,000 to $10,000 in necessary improvements to make it ready for a renter, 20% off the monthly rental fee for a rental agency to take care of finding renters and taking payments, and you're looking at a payback period of < 10 years, plus owning a house that has likely appreciated in value at the end of that period.  And of course, more than one house can be invested in...

Seems like it would be a good way for people who are interested in real estate to get investing in it.  It's difficult to do without a large amount of upfront cash, or large amount of extra monthly income.  Pool a bunch of BTC up front though, and it becomes possible...

I don't think it would be feasible to raise enough BTC on GLBSE, or even through other methods, to actually get something like this going, but if there is enough interest, I will totally try it!  If all went through, I would obviously register a company, and give written notice that ownership is shared through GLBSE, etc, etc.  Details, details.

Thoughts?
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ribuck
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May 17, 2012, 09:40:51 AM
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Quote from: SgtSpike
If all went through, I would obviously register a company, and give written notice that ownership is shared through GLBSE, etc, etc.

I would be interested in this. I would seek a safeguard along the following lines:

At any time, on demand, holders of 1% or more of the shares can convert their GLBSE holding to a regular voting share in the company.

That way, the company never has more than 100 shareholders to deal with (because this is expensive for a company to do), yet there is no limit to the number of small players that can participate throigh the very efficient GLBSE platform. And yet, the GLBSE shareholders are not at risk of becoming "second-class citizens" because they can always group together with others and convert to company shareholders.

This could actually be a good way to do something productive with bitcoins that you're not needing to spend immediately.
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May 17, 2012, 11:11:53 AM
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More details would be needed but I think its an interesting proposition.
Ben Walsh (beamer)
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May 17, 2012, 12:12:43 PM
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I would be interested subject to the same and only with the conversion option detailed in post earlier.

More details would be needed but I think its an interesting proposition.

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Ben Walsh (beamer)
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May 17, 2012, 12:22:20 PM
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What does this mean?

Seen it a few times now.

sub

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Ben Walsh (beamer)
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May 17, 2012, 12:30:09 PM
 #6

Of course. Stupid me. I hadn't considered indicating subscription like that but makes excellent sense.

subscribing, i want to get notified when the thread updates.



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hashking
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May 17, 2012, 01:27:24 PM
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The Bitcoin Island idea got me thinking.  Just curious, what do you all think of a real estate investment group through GLBSE?  If I started one, intent upon purchasing real estate for cash and renting it out, would you invest?

Buying houses outright is so cheap these days, especially when you're paying cash and can pick up foreclosures easily, while rental prices are skyrocketing.

Here's a decent example:  http://www.zillow.com/homedetails/285-S-38th-St-Springfield-OR-97478/48377601_zpid/
House that sold in 2006 for $162,000 is currently in foreclosure and for sale at $70k.  Current monthly rental rates for comparably-sized houses in the area are $900-$1000.  Figure, $5,000 to $10,000 in necessary improvements to make it ready for a renter, 20% off the monthly rental fee for a rental agency to take care of finding renters and taking payments, and you're looking at a payback period of < 10 years, plus owning a house that has likely appreciated in value at the end of that period.  And of course, more than one house can be invested in...

Seems like it would be a good way for people who are interested in real estate to get investing in it.  It's difficult to do without a large amount of upfront cash, or large amount of extra monthly income.  Pool a bunch of BTC up front though, and it becomes possible...

I don't think it would be feasible to raise enough BTC on GLBSE, or even through other methods, to actually get something like this going, but if there is enough interest, I will totally try it!  If all went through, I would obviously register a company, and give written notice that ownership is shared through GLBSE, etc, etc.  Details, details.

Thoughts?

If the world of renting property went so smooth.  There are alot more expenses that you haven't included in this.  Also finding a management company that will take care of the property is another story.  I'm not trying to kill your idea here but if you have never done this before it could be a nightmare.  I understand that there won't be a mortgage but all it would take is putting the wrong first tenant in and you could be upside down for the next 1-2 years.  Just some of my thoughts on this.

What would be your monthly net income on this property after all expenses are paid?
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May 17, 2012, 02:31:48 PM
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The main problem is that this is priced in USD, not BTC.

If I invest 1000 BTC now and BTC jump to 50 USD per BTC in 10 years, I'd be better off clinging to my BTC instead. If I expect BTC to go south in 10 years, this would be a useful investment, but there would be the risk that I can't sell my millions of BTC I get in return to anyone for USD.


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Ben Walsh (beamer)
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May 17, 2012, 02:36:32 PM
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Nothing is stopping you from investing in 1000btc and hoarding them too.

Think about such a fund if you would like to own a small piece of many properties, while starving corrupt Banksters of as much of your wealth as possible.

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hashking
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May 17, 2012, 02:47:29 PM
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I wonder what SGT Spikes experience in real estate investing is.
SgtSpike
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May 17, 2012, 04:07:19 PM
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Ok, good, so we have interest.

Certainly, a LOT more details would need to be worked out. ribuck, I like your idea of converting GLBSE shares to regular voting shares if they have ownership of at least 1% of the company.

Hashking, you are right - there are more expenses to consider, and I have heard my share of renter horror stories.  Property taxes, for instance, I did not take into account.  My post was built hastily, mainly to gauge interest.  Management companies are easy to find, though I need to get a better handle on exactly how much they charge.  I can't say what my monthly net income on this particular property would be, only estimate it.  Property taxes would be around $1300/year, so that will cut into income.  I'd have to take into account some rate of empty-rental period, as well as some monthly expense based on the risk factor of a renter destroying the place.  At any rate, I'll continue to do more research on all matters, and won't even think about offering a GLBSE until AFTER I am confident that I have accounted for all potential and real expenses.

Of course, we don't have to buy only one house either.

Sukrim - you are absolutely right.  This is part of the problem with a deflating currency that no one here likes to address - it discourages investment in other things.  Wink

Chaang - Good point about the taxes.  I suppose it would be interesting to find out if there are any planned property tax hikes.  In the past 5 years, the property taxes have risen by 9.5% on average, but the past two years, it had only risen by 2.1% average.  Certainly, if the economy turns around, I would expect to see the property taxes return to some of their former rates, but the city might even have some hikes planned regardless of the economy.  All of that would need to be taken into account.

Hashking - Aside from my own house, I have not done any other real estate investing.  To tell a little more about myself - I am 25, married for 6 years, graduated with a BS degree in accounting in 2009, and bought my first house in late 2008.  I do believe that my accounting degree helps with "crunching the numbers", and deciding on what investments make sense.  But because I have little experience with real estate investment, I would either rely heavily on my father for advice, or perhaps make him the "president" or key decision maker of the investment group to start with.  He has bought, fixed up, and resold many houses in the past, subdivided land and sold it, and really knows real estate inside and out.  He also currently manages 3 rental properties, including a vacation beach house on the coast.

Now, if I was to manage all of this, I would want to keep some portion of issued shares myself.  What would be a fair percentage to keep?  2%?  5%?  10%?  Obviously, I want to make it worth all of the work that I would be doing on my end, but I don't want it to be an amount that makes it seem unfair to investors.
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May 17, 2012, 09:33:33 PM
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Ok, good, so we have interest.

Certainly, a LOT more details would need to be worked out. ribuck, I like your idea of converting GLBSE shares to regular voting shares if they have ownership of at least 1% of the company.

Hashking, you are right - there are more expenses to consider, and I have heard my share of renter horror stories.  Property taxes, for instance, I did not take into account.  My post was built hastily, mainly to gauge interest.  Management companies are easy to find, though I need to get a better handle on exactly how much they charge.  I can't say what my monthly net income on this particular property would be, only estimate it.  Property taxes would be around $1300/year, so that will cut into income.  I'd have to take into account some rate of empty-rental period, as well as some monthly expense based on the risk factor of a renter destroying the place.  At any rate, I'll continue to do more research on all matters, and won't even think about offering a GLBSE until AFTER I am confident that I have accounted for all potential and real expenses.

Of course, we don't have to buy only one house either.

Sukrim - you are absolutely right.  This is part of the problem with a deflating currency that no one here likes to address - it discourages investment in other things.  Wink

Chaang - Good point about the taxes.  I suppose it would be interesting to find out if there are any planned property tax hikes.  In the past 5 years, the property taxes have risen by 9.5% on average, but the past two years, it had only risen by 2.1% average.  Certainly, if the economy turns around, I would expect to see the property taxes return to some of their former rates, but the city might even have some hikes planned regardless of the economy.  All of that would need to be taken into account.

Hashking - Aside from my own house, I have not done any other real estate investing.  To tell a little more about myself - I am 25, married for 6 years, graduated with a BS degree in accounting in 2009, and bought my first house in late 2008.  I do believe that my accounting degree helps with "crunching the numbers", and deciding on what investments make sense.  But because I have little experience with real estate investment, I would either rely heavily on my father for advice, or perhaps make him the "president" or key decision maker of the investment group to start with.  He has bought, fixed up, and resold many houses in the past, subdivided land and sold it, and really knows real estate inside and out.  He also currently manages 3 rental properties, including a vacation beach house on the coast.

Now, if I was to manage all of this, I would want to keep some portion of issued shares myself.  What would be a fair percentage to keep?  2%?  5%?  10%?  Obviously, I want to make it worth all of the work that I would be doing on my end, but I don't want it to be an amount that makes it seem unfair to investors.

I'm glad that you have someone who can help you get this started.  I started my business on my own and now it's my full time job.  Alot of my learning was from trial and error.    Being in this business I can tell you that this isn't for everyone.  I know alot of people who tried to get into this business and found out that this wasn't for them.  With in a year of getting started they wanted out. 
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May 17, 2012, 09:35:45 PM
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Sukrim - you are absolutely right.  This is part of the problem with a deflating currency that no one here likes to address - it discourages investment in other things.  Wink

Oh, I'm heavily invested in mining operations - this is priced in BTC and pays out BTC - and even though they are linked to exchange prices as well, there's a certain lagging effect.

If GLBSE had a way to accept USD or if you see it as a way to invest USD (e.g. by having "virtual USD" with an average exchange value taken from exchanges but these are never redeemable but can only exchanged for BTC on the page) then it can be interesting. Investing pure BTC though in a USD market is a VERY stupid thing to do, if you're longterm bullish (like a lot of people buying BTC).

Actually I'll try to suggest these virtual USD to Nefario, not sure if he'd dare to do that though.

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May 17, 2012, 09:42:23 PM
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Hashking - do you mind telling what type of business it is that you are in?

Sukrim - you are absolutely right.  This is part of the problem with a deflating currency that no one here likes to address - it discourages investment in other things.  Wink

Oh, I'm heavily invested in mining operations - this is priced in BTC and pays out BTC - and even though they are linked to exchange prices as well, there's a certain lagging effect.

If GLBSE had a way to accept USD or if you see it as a way to invest USD (e.g. by having "virtual USD" with an average exchange value taken from exchanges but these are never redeemable but can only exchanged for BTC on the page) then it can be interesting. Investing pure BTC though in a USD market is a VERY stupid thing to do, if you're longterm bullish (like a lot of people buying BTC).

Actually I'll try to suggest these virtual USD to Nefario, not sure if he'd dare to do that though.
I am confused.  What would be the difference between investing "pure BTC" into a business, versus exchanging USD for BTC, then putting it into the business?  If the price/BTC is $5 today, and you invest 100 BTC into a business, how would it be any different than investing $500 into the same business?  Sure, BTC could rise in price, but at the same time, you could have invested $500 into BTC and caught on to the rise instead of investing in something else as well.

Unless I am missing something?  Always a possibility.  Wink
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May 17, 2012, 10:15:11 PM
 #15

Example:

Now: 1 BTC = 5 USD, 1 Share = 1 BTC

Future: 1 BTC = 50 USD, 1 Share = 0.2 BTC

In BTC, your share has tanked. In USD your share is now worth twice as much as before! It would make sense to look at your share from the USD side, as your investments + expenses are in USD too, but there's no way to switch to "USD mode" in GLBSE currently, so all people would see would be a loss of 80% of initial investments.

It would make sense to mark this asset "USD side" and display the development of the share price in USD. Trades could still be done in BTC actually (but it would also help there to have an USD value displayed next to them) and payouts will hopefully always be only in BTC on GLBSE.

If you had bought USD valued stock in BTC ~1-1.5 years ago it would have needed to perform insanely well to even have you loose only half of your BTC. If you look at an insanely well performing stock on USD side however it is fine. These effects will hit GLBSE sooner or later too (SATOSHISDEAMON.HORSE for example is valued in USD and pays dividends in USD (converted to BTC) too), better make sure now on what side of the currencies you're working and have GLBSE support that until the next summer bubble approaches. Wink

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May 17, 2012, 10:43:03 PM
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Example:

Now: 1 BTC = 5 USD, 1 Share = 1 BTC

Future: 1 BTC = 50 USD, 1 Share = 0.2 BTC

In BTC, your share has tanked. In USD your share is now worth twice as much as before! It would make sense to look at your share from the USD side, as your investments + expenses are in USD too, but there's no way to switch to "USD mode" in GLBSE currently, so all people would see would be a loss of 80% of initial investments.

It would make sense to mark this asset "USD side" and display the development of the share price in USD. Trades could still be done in BTC actually (but it would also help there to have an USD value displayed next to them) and payouts will hopefully always be only in BTC on GLBSE.

If you had bought USD valued stock in BTC ~1-1.5 years ago it would have needed to perform insanely well to even have you loose only half of your BTC. If you look at an insanely well performing stock on USD side however it is fine. These effects will hit GLBSE sooner or later too (SATOSHISDEAMON.HORSE for example is valued in USD and pays dividends in USD (converted to BTC) too), better make sure now on what side of the currencies you're working and have GLBSE support that until the next summer bubble approaches. Wink
Ok, so you are talking more about the psychological impact of showing investment returns in a volatile currency (BTC) instead of a stable one (USD)?  Makes sense.  Then again, if looked at from that perspective, the payback could be much quicker if BTC price drops too.  There's no guarantee in the future that BTC price will raise, but if someone believes that BTC is a better investment than real estate, they should invest in BTC, and not real estate.

Despite all of that, I kind of agree with you that denominating the investments in USD instead of BTC would make more sense.  Especially if it takes a while to sell all shares... I mean, I wouldn't want one guy to invest $1000 worth of BTC, then the next guy invest $1000 worth of BTC and get twice the share of the investment, just because the BTC price dropped in half between the time the two investments were made.

I couldn't really hold off trading the BTC for USD until the entire IPO is completed if it takes a while either, as a BTC price drop could cause the IPO to not generate enough funds to purchase a property in the first place.
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May 19, 2012, 10:27:50 PM
 #17

It's an interesting proposal. I also thought something like that when I saw the island thread. And it would be a nice thing, if well executed.

One of the main risk, apart from the already mentioned ones, is the natural degradation of properties due to time. There would need to be a fund to take care of lots of unexpected expenses, but even there, properties inexorably degrade on time and it would require a very careful planning to even have a ROI at all...

Concerning the risk associated with the exchange rate, any clever investor would be absolutely conscious of it. But it doesn't mean that it's not possible, and I don't even think that it discourages investments. I could, for example, invest in something like this as a way to hedge and balance the very long BTC position I have elsewhere. So, such an investment, if well planned and executed, could be really good for diversification, and can bring more long term stability and predictability to BTC.
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May 20, 2012, 02:03:52 AM
 #18

It's an interesting proposal. I also thought something like that when I saw the island thread. And it would be a nice thing, if well executed.

One of the main risk, apart from the already mentioned ones, is the natural degradation of properties due to time. There would need to be a fund to take care of lots of unexpected expenses, but even there, properties inexorably degrade on time and it would require a very careful planning to even have a ROI at all...

Concerning the risk associated with the exchange rate, any clever investor would be absolutely conscious of it. But it doesn't mean that it's not possible, and I don't even think that it discourages investments. I could, for example, invest in something like this as a way to hedge and balance the very long BTC position I have elsewhere. So, such an investment, if well planned and executed, could be really good for diversification, and can bring more long term stability and predictability to BTC.
Thanks for the input!

And yes, certainly some monthly amount should be set aside to prepare for repairs and maintenance.
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May 20, 2012, 09:23:43 AM
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Concerning the risk associated with the exchange rate, any clever investor would be absolutely conscious of it.

The problem is that not all investors are clever... Wink
Optional correction/scaling of GLBSE graphs to bump out USD conversion rates would be a great thing to have but as you said, all it takes someone smart who recognizes that Bitcoins in this case are only used to transfer USD and payouts will be scaled accordingly.

To hedge against the risk of "I sell 100 shares this month, but need 500 shares sold to buy anything - next month BTC crashes and I'm out of anything and can't even pay my users any more", you can sell bundles of shares in an amount that you feel comfortable with to trade immediately on MtGox. Say you want to sell 1000 shares at 1 USD each: As soon as there are 1000 buy offers at 0.2 BTC or higher (assuming 5 USD per BTC), you sell 1000 shares, get the BTC to MtGox (or elsewhere) and exchange them to USD. If volatility is SO high that even this bears significant risk, you should try to sell shares OTC via BitPay or other solution providers that do these conversion steps for you.

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May 20, 2012, 10:22:11 AM
 #20

How about renting the properties for bitcoins ?
We're going to get there eventually so might as well start the process.
The initial purchase will be done in Fiat probably but income could be in bitcoins later.

This group could also buy properties and farmland in exotic places around the world and its shareholders can time share.
And outsiders would need to pay in Bitcoins to rent the place or something.

I think it is a great diversification strategy.

My dear parents will be selling an appartment in a small modest Swiss mountain village in less than 12 months Smiley


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