I for one, like NotLambchop's posts. Yes, they are, to the posts I've read, always negative. But that is good. He's pointed out things I have missed, and I thank him for it. Is posting additional information, questions, scrutinizing everything, and gathering additional information such a bad thing?
If a thread was ONLY positive, such as all those scam and failed IPO's I've seen, I'd be wary. I've been burnt on a few things when I first got into bitcoinland due to my inexperience, and wish there had been more people being the naysayers.
Caveat emptor.
Disclaimer: I'm invested into RentalStarter
No you're right, its good to chip away at any possible holes to make sure issuers are being honest. The Providence (PROV) ASIC offering was picked apart this way and for good reason, as they were evaluating the company at an absurd level, giving only ~2% to investors.
Are there risks with Rental Starter? Oh hell yeah, just as there are risks with any investment. There's a difference though between communicating risks in a balanced way and launching into a Y2K-esque hysteria about how
everything's a Madoff scheme.
Now granted, most are - and
to reiterate what I've previously stated and be fair, I've agreed with NotLambchop on 95+% of his other equity reviews. The community does (
desperately) need watchdogs like Puppet and NotLambchop. They provide a very valuable and necessary vetting service to warn investors of the duds.
The value behind this equity is that (1) Branny himself is invested in it with his time and money, (2) the ambiguous regulatory environment, in my opinion, currently leans toward allowing the type of investment core to Rental Starter's business plan, and (3) relatively speaking American real estate is cheaper than blow in Bogota right now, and (4) post-housing crash, with these low prices, the price-to-rent (analogous to/same thing as gross P/E for stocks) ratio is looking better than ever as people continue to shift toward renting vs. buying housing (especially younger people with outstanding student debt and young families working to build credit).
You're right to request a view of the risks involved here. Many have already been covered, but I will create a list summarizing those which could impact the business the most. I think that this is definitely healthy, and I also feel that this asset's investor community is one of the few that might be able to do so without verbally butchering each other in the process.
jjdub7's Projected Risks & Mitigations:
- Illiquidity:
Unavoidable, especially in the early stages and after BTC/USD-volatility-induced selloffs and due to the nature of listing on Havelock, but will decrease over time as the company maintains a successful track record and Havelock finally sifts through enough garbage to find the diamonds in the rough worth listing.
Probability: short-term medium-high; long-term unknown, optimistic
- Regulatory:
Rejection by the SEC for registration (if this does happen, keep in mind that investors could still restructure their equity in the company in a manner that complies with finalized regulation). In this case, personally I would consider becoming an accredited investor to maintain my equity, though I realize this option is not open to everyone.
Probability: unknown, optimistic. As detailed in my earlier posts, this will largely depend on the SEC's evaluation of Branny's character/mgmt ability/records/business plan, the resources (i.e. auditors) he chooses for 3rd party functions, Rental Starter's continued compliance with applicable tax law, leverage levels and financials, and levels of current capital raised vs. what has been returned to investors at this stage.
- Housing market volatility:
Similar to what caused the '08 mortgage crisis, if the housing market were to take a further dive, Rental Starter could run into solvency issues with its creditors. This can be mitigated through proper planning of loans, structuring of dividends, and maintenance of cash flows and working capital - it is
not rocket science. There are tried-and-true methods of doing this.
Probability: unlikely, due to the current record-low state of the market.
- Forex Risk (i.e. the BTC/USD factor)
The asset price, as determined in BTC, will likely fluctuate with the US dollar, as both revenues and assets are priced in USD markets. Because dividends are received in BTC, however, it is my understanding (
anyone with a CPA and knowledge of BTC tax liability - verification on this would be great) that only when gains or losses are realized in USD do investors become liable for a
capital gains tax burden (20%, because the money is generated from capital investment into a commodity, which may change according to IRS views of BTC/cryptos - detailed below). This is in contrast to mining operations, which would cost investors their marginal income tax rate of the proceeds, as mining is currently classified as
income.
Overall, not a huge issue, as the dollar value of your RENT investment will hold. This attribute will actually mitigate the forex risk across the rest of investors' BTC portfolios (portions of the portfolio which have yields driven by BTC-denominated revenues) since it functions to balance (hedge) the portfolio against such currency fluctuations.
- Tax Risk (i.e. the IRS factor)
The same risk inherent across the BTC equity spectrum - how the IRS will classify tax liabilities of investments in BTC and BTC-denominated equities. Currently BTC is considered a commodity by the IRS, but this could change. For more ont he topic, read up on the cryptocurrency bill recently passed by the California legislature and signed by Gov. Brown, as well as a federal-level bill sponsored by Congressman Stockman of Texas.
