SplitBrick is a real estate empire that is chosen by the people, owned by the people, and controlled by the people. Real estate investing has seen a lot of innovation, but we are still unsatisfied with the status quo. We want real estate and passive income to be more accessible to all investors no matter their wallet size, their social connections, or their location on earth. We want real estate to be liquid. We want to cut out the middlemen. We want diversification without sacrificing control.
The SplitBrick decree
SplitBrick is a hub for investors to pool their capital, time, and skills to purchase, own, and control real estate investments. SplitBrick is a paradigm shift in how we invest in real estate. We believe:
Legal ownership and control over property should never be sacrificed.
Real estate investing and passive income should be accessible to everyone.
Investors should be able to pick and choose what properties they want to invest in and develop their own unique portfolio.
Investors should simultaneously have control of their property while also being able to delegate work if they choose to.
Investors should be able to borrow against their assets.
High fees and other barriers to entry are relics of the past.
SplitBrick is a real estate investment hub that lets anyone become a real estate mogul. SplitBrick investors scout investment opportunities and pitch their investment thesis to other SplitBrick users in order to raise funds to acquire the property. A unique LLC for each property gives investors direct control and legal claim to their investment. Investors also receive Bricks for each property they invest in which represent the number of shares of the property that they own. Bricks allow investors to have total control over their property and collect rent revenue pro-rata to their ownership amount. Ballot votes for choosing a property manager, supervising reserve funds, and any other topic related to their property are performed by owners to exercise democratic control over their assets. Investors can diversify and create their own unique portfolios by crowdfunding only for the properties they like. Since managers are democratically chosen, they can compete for properties and grow their reputations as superb property managers in their area.
The SplitBrick crowdfunding model has never been done before. Current real estate crowdfunding businesses select which properties get offered to investors or receive kickbacks from sponsors of investments to list a specific project. These businesses are simply a means for investment sponsors to source capital for their projects. Investors are offered no control over the projects that are listed, the acquisition price of assets, management over their investment, or any decision. This is why SplitBrick is needed.
The status quo we want to replace
Like the foundation of many buildings, the way we invest in real estate has not been modernized in centuries. The predominant investment strategies each have profound sacrifices or barriers to entry. This is due to real-world limitations, conflicts of interest, and antiquated regulations.
Ultimately, choosing an investment strategy depends on each investor’s preference and limitations beyond their control:
Availability: Proximity to properties, net worth, access to public markets, local regulations, etc.
Capital requirements: Down payments, mortgage payments, minimum investment requirements, maintenance costs, etc.
Diversification: “Don’t put all your eggs in one basket” or do.
Time requirements: The different strategies each vary on how hands-on investors are required to be, from passive to full-time job.
Investment liquidity: Traditional real estate markets are illiquid and expensive to transact in. Few investment strategies can address this issue.
Property choice: Who is choosing the investment properties?
Property Management: Who can have a say in the day-to-day and big decisions of managing a property?
Financial Choice: Mortgages and leverage tools that each strategy can use to modulate debt and risk profiles.
Private direct ownership
Investors with enough capital to purchase or pay the down-payment for a property enjoy many perks. They can pick and choose what properties to purchase, what neighborhoods to invest in, how much debt to take, and how to manage their assets. However, having full control over their finances also comes with multiple drawbacks. There is an inherent risk to lack of diversification such as varying tenancy rates and unexpected maintenance costs. There is a risk of foreclosure if mortgage finance was used. Furthermore, real estate is an illiquid asset that requires time and capital to transact, so the investor must be able to lock their funds into each property. Finally, even if property management is outsourced, owners need to consolidate accounting, track finances between different platforms, keep track of bill due dates, and pay income, property taxes, and regulatory fees. Thus, owning real estate is time-consuming and could be a full-time job.
Publicly traded REITs are the opposite of private ownership. Investors pool their money together to own a basket of real estate in a specific sector (eg. single-family homes, commercial, retail). Alongside diversification, public REITs give investors the ability to trade shares quickly. Private REITs are much less liquid than public REITs, and usually have investment minimums and lock-up periods.
In exchange, investors give up all control over properties. They will have little to no say as to how properties are managed, what properties are bought or sold, and how much leverage risk the REIT takes on. REITs are required to pay out 90% of their revenue as dividends. Thus, in order to grow, REIT managers need to take on substantial debt. Since they depend on debt to finance growth, REIT returns are sensitive to interest rates. As one rises the other drops.
REITs, especially non-publicly traded REITs, charge investors lofty fees. Public REITs have management fees (0.05%-5%) and administrative overhead (~0.5%). Private REITs have upfront costs as high as 15% just for investors to join, marketing costs (0.5–1.5%), dealer fees (1–3%), acquisition fees (1.5%), and Asset Under Management fees (0.25–2%). In some cases, REITs have selling and buying commissions (~5%) that are charged by REITs when transacting properties. These transaction fees do not align with investors since they incentivize needless trading by managers to accrue fees. All of these fees are on top of property management fees if the REIT itself does not manage each property.
In conclusion, with zero control, investors depend on multiple middlemen whose incentives may not align with theirs and take inordinate fees.
Single property crowdfunding
The “Blue Sky laws” were enacted in the USA to protect unsophisticated investors from fraud. This means that in the USA, regular individuals to this day do not have access to what the government considers “risky investments”. Unlike REITs which are diversified, pooling money together to buy a single property (non-diversified) is currently only available to “accredited investors” in the USA, or via friends-and-family deals. Accredited investors are individuals with over $1M USD net worth or a gross income of at least $200K. Instead of protecting small investors, these laws have effectively censored most individuals from investing in real estate on their terms.
Crowdfunding companies that allow accredited or international investors to pool their resources are usually just means for the sponsors of each investment to acquire capital. These solutions have no decentralized decision-making, no control over management, and little control over investment choice. To drive the point home as to how little control investors have, the properties listed by these crowdfunding companies are usually curated and hand-picked by the crowdfunding company, not the investors. For others, sponsors pay the crowdfunding company to list their investments and get access to the investor pool. There is no control over what properties to invest in and zero to no control as to how they are managed.
The SplitBrick difference
Empowering users with all the benefits of the SplitBrick model does not come with sacrifice to legal ownership and control over one’s property. Each property is owned by a unique LLC which is created at the time of purchase. Ownership of each LLC is defined by the ownership of Bricks for that unique property, these Bricks are distributed pro-rata to investors at the time of purchase. All investments are siloed from SplitBrick the company. Bricks are a legal representation of ownership of each property. If SplitBrick were to no longer exist, Bricks owners would still have complete rights to their property.
Investors control their assets through their SplitBrick dashboard. All actions and transactions for each property are transparent and easily verifiable by each owner. Owners may also create and vote on ballots that determine the property’s direction. By hosting a complete financial history for each property, owners can verify the financial state of their assets. Furthermore, since SplitBrick is collaborative by its design, owners can distribute the workload of owning real estate. So that investors can focus on the big picture, SplitBrick handles bureaucratic chores for properties, such as paying real estate taxes, insurance, and LLC fees.
A real estate model that works for everyone
You found a great investment property through Zillow or Redfin. After doing your research you believe it is a good investment, but you do not have the capital to purchase it alone nor do you want to put all your money into one property. You post your research and investment thesis on SplitBrick. You also suggest a property manager (yourself, another individual, or a company) who will handle the day-to-day operations of this property.
SplitBrick investors all over the world analyze your work and do their own research. Each investor up- or down-votes your proposal, and top-voted proposals move on to the bidding phase. Each investor determines the amount they wish to invest and the maximum property valuation they are willing to pay. They can invest as little or as much as they want.
Crowdfunding is dynamic. SplitBrick’s unique algorithm combines every investor’s funds and valuation to create the best possible offer to acquire an asset. For the first time ever, an asset can be priced by many people without the need to trade it, like the stock market. Another first is that, unlike other crowdfunding models where investors get told the amount needed to be raised, SplitBrick lets investors “value” the asset during the crowdfunding phase. If the valuation of the property ever goes over an investor’s maximum valuation, they are immediately refunded their bid without any fees and are able to make another bid.
Once the timeline for bidding ends, SplitBrick presents the highest offer to the property seller while not going above any user’s maximum valuation. If the offer is accepted, SplitBrick performs due diligence on the investment. If everything is in order, the property is purchased under the name of a brand-new LLC owned by all investors who were part of the offer. Bricks representing ownership over this LLC are distributed to investors based on their capital allocation.
The first order of business is for owners to vote on hiring a property manager. This can be the manager suggested by the original proposal or anyone else. The manager will oversee maintaining and renting the property. All actions and expenses taken by the manager are discussed and transparently shown to the property owners. Investors can take a passive investment approach and let their manager handle their property.
Managers and investors can create ballots to vote on changes they would like on their property, from hiring a new manager to large renovation expenses. SplitBrick ensures regulations such as insurance, LLC fees, and taxes are taken care of.
Investors receive dividend payments pro-rata to their ownership percentage of the property. A portion of the rent revenue is used to grow a reserve for unexpected expenses and prepare for known upcoming expenses. Disposition of the reserve is ballot-based; for example, the manager can request a disbursement to pay for maintenance costs.
The amount of time required by investors is based on their preferences and the needs of the property. Properties may allow a hands-off approach, allowing investors to check in once a month to review expenses posted by the manager and collect rent. Other properties, such as those undergoing a tenant change or renovations, may involve more frequent discussions between investors and managers.
Managers can build a reputation for their hard work and skill, making them more likely to get chosen to manage future properties. Likewise, investors may build a reputation for analyzing and finding properties for the community. Every user has an anonymous profile page showing their past proposals and successful acquisitions.
In conclusion, properties on SplitBrick are chosen, vetted, and valued by its users. Participants all over the world can invest as little or as much as they want in each property. The owners choose to hire a manager who reports to them. Owners receive rent dividends and vote on property ballots proposed by their manager or another investor. Diversification is key, so users can split their investment between multiple properties while at the same time having complete autonomy over which properties and markets to invest in. Managers compete for better reputation and ranking in their local area to grow the empire they control. Meanwhile, SplitBrick serves as a one-stop shop to manage portfolios, facilitate all legal requirements, handle tax reporting, and protect investors, managers, and the relations between them.
The concrete is setting and the foundation is solid.