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Author Topic: [POTENTIAL] Real-Estate investment group?  (Read 3847 times)
Ben Walsh (beamer)
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May 20, 2012, 10:26:42 AM
 #21

I really like this idea.

Maybe have a percentage of the properties where tenants pay rent in BTC if the idea proves less palatable for other investors.

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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rdponticelli
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May 20, 2012, 01:54:39 PM
 #22

Obviously it would be nice and may be even possible to pact some rent directly on btc, but doing so, anyway, won't remove the currency risk just like that. The best it would do is changing the direction of the risk...

Remember that the risk works both ways, and you'll have several expenses and liabilities on fiat. So, if btc suddenly plummets and you already arranged all your income in btc, you can end on tragedy...

Some tips to manage it right would be trying to maintain a balanced flow of income (if you buy several properties, for example, you can try to pact some contracts on fiat and some on btc), maintaining enough balanced reserves on both currencies, and heavily using options to handle the risk as far on time as possible...
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May 20, 2012, 02:41:21 PM
 #23

You can pay any amount of fiat in bitcoins instead of fiat - but it wouldn't make much sense right now to rent a flat in a monthly rent that is only composed of BTC (e.g. a flat that would typically cost 1000 USD/month for 200 BTC/month). As soon as you say that you change the price depending on the BTC <--> fiat exchange rate, you're no longer renting for bitcoins, you're renting for USD but can get paid in BTC.

Just imagine if I start a pizza business, that sells pizza for 1.5 BTC a piece. Since I can pay for my stuff like cheese, flour etc. in BTC (via Amazon vouchers or so) I never touch USD any more. Still I'll go bankrupt if BTC price tanks, as my pizzas are now dead cheap but to buy the ingredients I suddenly have to hand out 100 instead of 10 BTC. Same goes for rent etc. - even if it's PAID in BTC, it doesn't mean it's PRICED in BTC. Bitcoin is still highly volatile, has a huge inflation compared to fiat currencies and even though they are easier and easier to be used, most products one can buy are priced in fiat in the end and won't keep their current prices should the exchange rate jump in one or the other direction.

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conspirosphere.tk
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May 20, 2012, 03:40:20 PM
 #24

I find this idea promising if applied in some ideally still relatively undeveloped tourism destination, like Cambodia, or even developed, if well managed and low taxed. You could even finance a B&B or s/t like that in the same way. With tourists you lower the risk and get higher returns.

rdponticelli
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May 20, 2012, 04:37:57 PM
 #25

it wouldn't make much sense right now to rent a flat in a monthly rent that is only composed of BTC

For a bitcoiner, it would absolutely make sense to rent a flat, or any other property just for BTC, with a contract priced in BTC instead of fiat, absolutely independently from the exchange rate. I would love to do it, if I could. If you're producing BTC, let say that you have a mining operation and/or any other business and/or investments which yields you a roi in pure BTC, then you don't need to be that concerned about the exchange rate. Obviously, you'll have some expenses in fiat too, but if you reached a point in which you can rent a property for BTC, you surely already know how to manage those very well...

(e.g. a flat that would typically cost 1000 USD/month for 200 BTC/month). As soon as you say that you change the price depending on the BTC <--> fiat exchange rate, you're no longer renting for bitcoins, you're renting for USD but can get paid in BTC.

You don't do it that way. If you rent for BTC, you valuate it in BTC. You can't valuate a contract in BTC based solely on the current price on fiat and the exchange rate. You already have some assumptions of where BTC is headed, so you use that to make a pure BTC valuation which factors in all the particularities, expenses and risks you'll need to handle, including but not limited to just your expenses in fiat...

Same goes for rent etc. - even if it's PAID in BTC, it doesn't mean it's PRICED in BTC. Bitcoin is still highly volatile, has a huge inflation compared to fiat currencies and even though they are easier and easier to be used, most products one can buy are priced in fiat in the end and won't keep their current prices should the exchange rate jump in one or the other direction.

We are all well aware of those particularities of BTC, and I think that we are here because we've managed to handle them until now. Obviously an agreement to rent a property in pure BTC would be risky for both sides, but as a renter you'll be hedging that risk renting other properties for fiat, maintaining a healthy buffer of any currency you need, and with any financial derivative you feel comfortable with...
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May 20, 2012, 05:06:41 PM
 #26

rdponticelli, it all sounds good until the price of BTC goes UP.  Suddenly, someone who was paying $1,000 in rent might be paying $2,000 in rent.  And you can argue all day that is it still the same price in BTC, but ultimately, no one is going to stand for a doubling of rent.  They'd move out, and we'd have to drop the price of the rent anyway.

May as well allow rent payments in BTC, but tie the actual monthly rental price to USD.  It might be neat to give a slight discount if paid with BTC though, to encourage people to use it instead of USD.

It sounds like there continues to be a lot of support for this idea.  I'll definitely push for it as far as it will go.  We'll see what happens.  Wink
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May 20, 2012, 06:21:15 PM
 #27

My brother is a real estate broker doing this very same thing (except for using BTC, of course) and I can tell you it isn't as easy as it seems. He had one renter who stopped paying rent and it took him months to fulfill all the requirements necessary to kick the guy out. Meanwhile, he was living there for free and my brother was still making mortgage payments with no income from that property.

Don't get me wrong, it can be profitable, but to stack the odds in your favor, you need:

  • A trustworthy and competent property manager. (My brother does this himself, saving that particular expense.)
  • Properties you can visit yourself. Even with a good property manager, it pays to be on hand when the inspector goes by, when repairs are being done, before and after renters move in, etc.
  • As much knowledge as possible about the neighborhood you're investing in. What's the crime rate like? What businesses are in the area? Schools? Any major developments planned in the area?

Those are just what I've gathered from listening to my brother over the years. I'll talk to him and see what else he recommends.

Still around.
conspirosphere.tk
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May 20, 2012, 07:29:21 PM
 #28

How about re-fitting some old West ghost town?



Some might come on the cheap:
SOLD! 'Scenic' Wild West ghost town bought by mysterious Filipino church for less than $800,000
http://www.dailymail.co.uk/news/article-2019030/Scenic-799-000-Entire-South-Dakota-town-sale.html

SgtSpike
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May 20, 2012, 08:19:46 PM
 #29

Good thoughts edd, thanks.  Everything always seems simple on the surface, indeed.

There's a rental agency around here (Emerald Property Management) who I've heard good things about, and who my dad and grandparents use to rent out their houses.  It warrants further investigation (especially as far as how much they take out of each payment), but it WOULD be nice to have them doing the evicting, etc, since they probably have a fastlane route to go on those.

Haha, conspirosphere, that might be a good option if I had the time to rebuild an old western town!
SgtSpike
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May 22, 2012, 08:09:23 AM
 #30

As I said, I am going to continue going forward with this idea insofar as research takes me, and it seems practical to do so.  Below are some further thoughts.

Company
I would found a company to encompass these investments.  The company would be based in Oregon.  Any advice related to what company type to choose (especially with the unique situation of potentially hundreds of investors) would be appreciated.

Likely, rather than issuing official shares (at least in the view of the state government), I would treat GLBSE investors as simply that - investors.  Obviously, I would still have a written contract describing the shares of the company, how profit is to be distributed, how expenses are to be paid, etc.  But, I think to avoid additional red tape and paperwork, it would be best to go this route.  Certainly open to opinions on that front though.

Shareholders
For each 100 shares issued, I would be entitled to 7 shares issued to myself.  This is the minimum amount I believe would be acceptable as compensation for management of the company and properties.

The above is subject to change, based on future feedback received.

I would be looking to raise at least $80,000 worth of capital to start with, preferably more.  This is the minimum amount I believe would be required in order to successfully purchase and prepare for rent a stick-built house (I have no plans to deal with older manufactured homes) in the Eugene/Springfield, OR area.

After the initial investment, more public stock could be issued to increase the number of holdings.  While the percentage held by each investor would drop, the total holdings of the company would increase commensurately, and the absolute portion of the company held would remain the same.  In other words, if we doubled the investment to $160,000, and bought two houses instead of one, a $5,000 investment would only buy 3% of the company instead of 6%, but that 3% would still hold $5,000 worth of house.

Revenue and Expenses
All capital investments and expenses would be paid (hopefully) out of shareholder investments.  Profits would be calculated and distributed or reinvested monthly (depending on investor voting) as net income calculated on an accrual basis.  Allowances will be made and cash held for future anticipated expenses as appropriate.

If GLBSE allows it, I might just set it up to where those who want dividends can have them, and those who want to reinvest can have their dividends automatically purchase more shares of investment for them.

Property Management
Exact property management expenses are TBD, but Emerald Property Management has administrative and management fees in the range of 10-15%, based on speaking with two of their clients.  They would likely be my first choice, due to their large local holdings and ability to quickly rent out residences in the area.

In some cases, work on properties to prepare them for rental readiness may be completed by myself or others outside of the professional realm.  In this event, those non-professional workers would be compensated with no more than half of a comparable local professional wage for the same labor.

All of the above is subject to change, and I welcome any further feedback you might have.

Perhaps most importantly: If you are interested in becoming a serious investor in this investment group (i.e., at least $1,000), please PM me.  I need to get an idea of how many large, serious investors I could potentially gather.  If you have concerns about investing a large amount of money with some unknown guy on the internet, please let me know how I can resolve your concerns.  I am an honest person, but at the same time, I don't particularly want to publish my home address for all of the Bitcoin world to know.  But, if that is what it takes, I may even do just that.
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May 24, 2012, 02:35:14 AM
 #31

Still looking for more feedback on this!
gewure
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May 24, 2012, 12:55:16 PM
 #32

i don't know .. i would rather like if the group was managed by a senior in real-estate investments. someone who knows the market, knows prices, knows developement..

real-estate is quite a difficult field, where you have to take alot of factors into account..
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May 24, 2012, 04:11:59 PM
 #33

i don't know .. i would rather like if the group was managed by a senior in real-estate investments. someone who knows the market, knows prices, knows developement..

real-estate is quite a difficult field, where you have to take alot of factors into account..
Thanks for the input.  It might be difficult to find someone who is an expert in real estate investing who doesn't already have loads of money, and would scoff at whatever amount could be conjured up by forum members here, but you never know!  I might look in to that, see if I can find anyone local.
Kluge
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May 24, 2012, 04:29:14 PM
 #34

Buy my house. https://bitcointalk.org/index.php?topic=66852.0

Don't mix your coins someone said isn't legal
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May 24, 2012, 04:38:34 PM
 #35

Haha, tempting, but I'd want to buy property near me so I could inspect it myself, etc.
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May 24, 2012, 07:47:13 PM
 #36

A simple way to get started is to collect BTC at GLBSE, and invest into a pre-existing Real Estate Investment Trust, then distribute the dividends back through GLBSE. If that grows big enough, you can grow into buying and managing actual properties.
SgtSpike
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May 24, 2012, 07:48:50 PM
 #37

A simple way to get started is to collect BTC at GLBSE, and invest into a pre-existing Real Estate Investment Trust, then distribute the dividends back through GLBSE. If that grows big enough, you can grow into buying and managing actual properties.
Good idea as well, thanks for the suggestion!
Ben Walsh (beamer)
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May 24, 2012, 07:52:08 PM
 #38

That sounds like a good plan.

Would also assist in building up trust and confidence while at the same time exposing investors to the type of assets such a fund would eventually take on.

My understanding is that most REITs pay quarterly dividends. Are there any that pay more frequently or should we start to encourage GLBSE investors to be a little longer term in their investing ?

A simple way to get started is to collect BTC at GLBSE, and invest into a pre-existing Real Estate Investment Trust, then distribute the dividends back through GLBSE. If that grows big enough, you can grow into buying and managing actual properties.

BTC Difficulty Avg Change Google Gadget - http://bit.ly/nWZLkr
How many Bitcoins can I expect to mine ? - http://bitcoindetailedcalculator.appspot.com
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