Realbricks Attorney Reveals SEC Compliance Advantage

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1:00But really, what I want to do here first is talk about all of the compliance. Galen here is an attorney, is a lawyer, and is focused on compliance. And I just got to imagine the cost and time involved working with the SEC is nuts. So Galen, once you give us a primer on what is this regulation, certification, all of that good stuff, because I don't think people really realize this is a competitive advantage that you guys have invested in early. Yeah, so we'll just take a step back and kind of go from a historical perspective prior to the Great Depression in 1929. There were really no regulations on what we called now securities. So a guy could show up, knock on your front door and say, hey, I got this company. You can invest in it. And I'll give you 10, 20, 30% returns. Sign your name here, give me some cash, and here's your stock for the company. And that was it. Obviously ripe for fraud, of course, because it's really no way.

2:02And so after the Great Depression, there was a series of apps taxed by Congress, the 1933 Act is one of the big ones. And these acts created the Securities and Exchange Commission, the SEC. So today, if you want to sell securities in a company, you have to register the securities with the SEC. There are some exemptions to that. Some that your viewers might be familiar with is private placement or regulation D. So if you have accredited investors who have more than a million dollars in assets, not including their residents, then they don't need to go through this registration process. As you can see, if folks are accredited, they can get into these deals much easier. There's still some regulatory compliance related to disclosures, and you can still get into trouble with the Securities and Exchange Commission, as well as the state regulators, if you don't make your disclosures correctly. So what I say about disclosures is when I gave that example, pre-Great Depression, it

3:06was, hey, you know, here's some paperwork on the company, just sign your name, give me the cash, and we got, you know, you got an investment. Obviously, now we have to make a lot of disclosures. If you are a publicly traded company on the stock market, you have pages and pages and pages of disclosures that happen on a yearly basis. You may even have additional disclosures at earnings calls. So there is an extreme amount of disclosures or information the company is providing to its shareholders. In our case for real bricks, we are effectively required to make disclosures very similar to that of a public company. So when subscribers invest in the series LLCs so that the Jameson, the McCallan, those are the two new properties on our platform that we'll get to later. We have to be very clear in making disclosures about any risks our financial situation, and all of this is publicly searchable online. You can type in Edgar, like the name, and just search real bricks, and all this information

4:11will come up. And so you'll kind of, you get to see how our company works. It's a lot of transparency. Is it complicated? Yes. Does it require a lot of lawyers? Yes. I am regularly on calls where there are two lawyers of those of us in-house, and then there are three to five more attorneys on the call from multiple different law firms. So you can imagine how expensive it is to be on these calls. I can imagine. Yeah. It's talked to a lawyer. He's just like blood pressure rising and it's watching the clock tick by, so you know, it is really a lot of work, a lot of rereading sentences to make sure that they are written just precisely. We're not claiming something that could be construed as a misrepresentation. We're not allowed to omit information that would be considered material. So we can't just leave out a fact like, oh, there's a roof damage on one of these properties

5:12that's going to cost $50,000 to fix, right? When you go and buy, I'll give you another example that might make folks a little bit, you know, we'll see kind of an intersection here. When you go buy in property, depending on the state you're in, you may or may not be required to disclose whether there's a spessis, right? If you learn about a spessis, you're often required to make that disclosure. For example, the listing agent can't fail to disclose that, but if they don't know, they could get away with it. Where securities law kind of shows you how much duty you have is in securities law, that would be an example of potentially a material omission. So you would be required to tell the broker so the broker can then tell the potential buyers. So just the kind of level of duty of care that you have is quite a bit higher. And then also you have a duty to the shareholders and the securities and exchange commission, right? They're there to make sure that you're following the law.

6:12And if you don't, the Department of Justice may file a lawsuit against you if they believe what you've done raises to a pretty high level of. Yeah, and this, this was part of the conversation, you know, when I met with real brooks, you know, months and months and months ago that it got me interested is, frankly, you didn't take the easy way out. I think it would have been very easy just to lean into REGD and accredited investors. And frankly, a lot of your peers have. And I think that long term is going to be a mistake because I think what, I think what fractional real estate investing is going to do is it's going to democratize owning these assets for the mom and pop investors who aren't accredited, but could be in the future. So that was obviously a conscious choice made by the executives at the time, but it's, I think it will boil down to a competitive advantage. What do you think? Yeah. I agree. I mean, when you look at it, right, like when we talk about retail investors, what do we think? We think of Robin Hood. We think of Fidelity Vanguard, right?

7:13There are many private equity firms that loads of wealthy individuals use, but we don't talk about those, right? We want to be in that list. We want to be, you want to Robin Hood, real bricks, Vanguard. We want to be in there where people recognize our name and they see us as an opportunity to invest in real estate. And frankly, like we believe, you know, we do the extra work. We get that competitive advantage and we're also providing a less risky investment vehicle for folks. I mean, that's right. You could potentially make a lot more money in a regulation D where there's less costs associated of running, you know, running the business, yeah, exactly. You're not paying attorneys, you know, thousands and thousands of dollars for a single call. So that saves you a lot of money and that could be money back in the pockets of the investors, but our focus is making sure that we kind of have a longitudinal security here. I mean, we're hopeful these can be dividend issuing assets for folks for a long time.

8:19For example, I mean, if you're at the tail end of your landlord career, you're like, you know, I don't want to be doing this anymore. I want to, I just want to get dividends every month, pay the bills. I don't have to think about managing, right? And I'm sure there's a lot of people watching this right now that are like, yeah, I mean, I got five, 10 years left in me. And then at a certain point, I don't want to wake up and be answering text messages. No, I think I think this fractional real estate investing is going to be a great exit. You know, in my second book, 15 conversations with real estate millionaires, the chapter that mess met most to me, I want to say she was 77 and it was a landlord at the end of her career talking about seller financing in exiting, right? That was the most powerful chapter in that second book of mine. But that's exactly right, right? Is what are we doing? You know, now we have these piles of money. What are we going to do with it? And I think turning into dividends, making them financial assets that can be shared with errors is the right answer. But really, what I see what you guys are doing, again, this investment you've made

9:20getting it, you know, not leaning into regd, the, the, which would have been the, I don't know, the cheaper way or lazy way is you are bringing it to everyone, right? You, you can still get shares in a house for as little as a hundred bucks, isn't that true? That is correct. Yeah. I mean, we, there, there, there, there is a future in which we might even reduce that amount right now, again, like we're a small team. A hundred bucks is enough. No, you don't need to go low. It's pretty about a money. Yeah, I think for folks who are serious about getting a dividend that they'll, you know, $10.00 is not going to get you anywhere. No, I don't think, I don't, yeah, I would tell you not to bother going lower, right? If you, if you can't scratch a hundred bucks, a C note, then that's a different problem. But what's interesting here is you do have a first trade. If you use the code on the screen or at 50, you'll actually buying a hundred and fifty bucks worth of shares. So 15 shares versus 10. So again, that's a, you get, you get an extra 50 on any initial investment. But it's 50% return for one investment is not bad. Yeah. Yeah. I mean, it's, you know, the, the idea here is to get folks interested.

10:24And I think like, you know, you think about a portfolio for retirement or a portfolio for, to pass down, maybe to your, to your children or grandchildren. Probably the simplest tool is often going to be a dividend yielding investment. You know, it's, it's great to look at these stocks or investments that have this really high yield. But a dividend yielding investment is, it's pretty easy for the recipient to just hold on to and, and not really, they just keep getting dividends. And if you have enough of a, it starts to work into your budget. And it makes a lot easier to figure out, you know, future income. Where you can spend cash. Yeah, yeah, I think one of like the most interesting things about this is, you know, I live here in Colorado. Colorado is a tricky place to do real estate investing, very, very expensive up front. And there's so much building that is going on in desperate parts of the state.

11:26It's sometimes difficult to figure out what the best geography for where to make these investments, if you're going to be a landlord, kind of like where the most optimal area to get involved in this is. And what I really like is that with real bricks, I can invest in a, in a, in a property in a different state. No, yeah, I love that. So you've actually got a couple of new houses. I'm going to bring up on, on screen. But again, I think what you're doing with the real bricks and compliance shouldn't be slept on. So what do we got here? What are we looking at? So we've got these two new houses listed in Princeton, Texas, the Jamison and MacGalen. And you can see these are both single family homes. You can see the purchase price, the Delta 2026. These are brand new brands, spanking new. Let's, let's do a quick walk through. You can see, yeah, brand new vinyl, paint, flooring, yeah, brick, exterior.

12:26And then we'll look at, we'll take a look at the other one. These, these are in Princeton, Texas, which is located in Colin County, which is relatively just, it's a suburb of the Dallas, Fort Worth area. And so, you know, these are what, what we think is probably the next location in the Dallas metro area. And there's been a 30% increase in residents in these towns. So there's a huge demand for folks to move out here. Again, a nice two car garage and a nice, a stone exterior. Because again, these are, these appear to be brand new units in a community. Obviously, you've got two, but how big is the community? Are they building, you know, 100 homes, 50 homes? What is the, what's the developer doing out there? Any idea? Yeah, it's a pretty decent size suburb. So this, this is your, you're buying into a, what will kind of become probably

13:27an area for a lot of families to move into again, they're new. So there's active, you know, I think most of the homes in this, in this, in this particular block have already been built. But the greater, you know, area is going to continue to see development, going to continue to see infrastructure built, probably more grocery stores. It's just one of the fast. Go ahead. Yeah, I was going to say one of the things that my community were probably latch on to is, is obviously this all comes down to the monthly rent. Again, these are own free and clear. So there is no debt, no debt, no debt. But I think I saw 2150 for one of them. How solid do you think those are? Did you, how did you comp those? What, what, what do you say? We're pretty confident. We're pretty confident in this rent. We, we work with some third party rental companies to help us figure out to pricing these for price discovery, as well as just looking at what is being rented in the community. We, we've been, we've had a pretty easy time actually meeting these rents. And that was one of the things I wanted to discuss.

14:27I mean, you could live in a state where to get this type of rent, your look, your investments may be double. Yeah, 400 grand for sure. That's a 1% rule. Again, I don't follow 1% of that math is pretty clean, 1%. Yeah. So it's, it can be, and it, it could just be that the state you live in, that's just not possible. Right. There's not enough supply. I mean, there's just, it is just not possible to meet that rule. And so that is kind of a way for folks that want to follow those rules of thumb to make investments that may be aligned with, you know, their risk profile. Yeah. The other thing that's that I would be keen on is I'm guessing this is in an HOA, but probably not a very high HOA. What is there? I guess is there an HOA? Well, well, so that's the thing is we, we handle all that. There, there are HOAs, but they're, they're not the type that are extremely difficult. Yeah, let's say so it's, it's probably, is it 80, I mean, it's probably pretty small. Given the way I see on the screen, like 80 bucks or 50. Yeah, they're pretty small fees and not super restrictive covenants, not super restrictive.

15:32So you're going to have an easy time managing these rentals. And again, like this is, this, this estimated dividend yield. This is after all of the fees. So we're, when we build into our price model, I mean, we're, we're picking that based on our ability to believe that we can return somewhere between, you know, five and a half and seven and a half is our, is our goal range after fees. So, yeah, net fees got it. Yeah, exactly. And again, I think again, I just loved reiterating what I've heard before. If somebody wanted to get into these today, they still qualify for the full Q1 dividend, right? That is correct. We, yeah, I know we were just discussing this and like, you could sign up March 30th. And you're going to get a dividend for first quarter. So, um, that's fun, but you're seeing your CFO is not going to do that forever. I can promise you that. Yeah. So yeah, I don't know. I mean, I, I like the idea. I mean, it's it's getting before the end of the quarter, yeah, you're dividends.

16:33There's, uh, so it's an easy thing. Um, what I would suggest folks is like, go on the website. Don't forget the Orat 50 code that, that's, I mean, that's basically 50 bucks for free. They're giving you. Um, so don't turn that down. Um, and yeah, I just go on here and obviously we've got Woody Creek is also being offered. We kind of briefly discuss this in our last show and this one. This property was built in 2015. Um, you see it's quite a bit bigger, um, purchase price. You know, so this one doesn't meet that, that 1% rule. But it is, you know, in, uh, Omaha and, um, we've had renters in this space before. So, um, yeah. Again, go to the site, real bricks.com, check it out, look around, um, you know, a lot, you know, you can get started. You know, you could, you could, you could be a real estate investor for as little as a hundred bucks. You can get in the game. You have, uh, there's lots of things my community could do, uh, with real bricks going forward. So again, folks, don't forget Orat 50 gets you 50 bucks on your first investment.

17:39Uh, any closing thoughts? Um, not particularly. I would say right now, I think a lot of folks are paying attention to the news. Um, they're watching the stock market. Uh, they're wondering what the Fed is going to do. Um, crypto is, I don't know what's going on, crypto. Um, and I think like a tangible asset like housing. Exactly. Yeah, I think we're great minds think alike. I think right now is the time to be looking at these types of investments. And seriously, you know, doing the work to decide like, where do I want to be in the future? Where do I want to be in five and 10 years? And like, you know, if, if you could invest in the stock market, you can invest in index funds. You can invest in ETFs, crypto, right? I think the one thing that we, we probably all deep down know is that, you know, if we could invest in real estate, that would be a good, you know, bull work to, uh, to a lot of other potential issues. And like I said before and, and we've kind of been going, you know, making this point known,

18:39unlike our competitors, we're not doing debt financing with these properties. So if there is a situation in which we have a problem in the United States housing market, which I personally don't think is going to happen. I, I've, it's kind of a global issue. So I don't think we're going to end up in a 2008 situation. Um, we could still liquidate the house and there's no mortgage to pay off. You, you can't get under water on this. So I think that's like the big thing. There's so many things that I see in real bricks. And it's why I said yes to these conversations. Yeah, you're unique in no debt. Your SEC approved or certified. You did the extra legwork. Um, you are doing long term rentals. You're not, because I, what, one of your peers, uh, is leaning into co-living, which I fear turns into the next Airbnb, right? People were outlaw of the regulations and then, then, then where do you go? You got this eight bedroom house, which should have been four. I mean, it's just, it's going to work until it doesn't. And again, as a buy and hold guy, again, admittedly laid in my career,

19:43I don't have to make those choices. There's just a lot of things that are very one rental at a time, you know, similar in, in real bricks. So that's why we talk a couple of times a month. So I appreciate you guys. Yeah. Thanks, Mike. All right, take care of yourself. Yeah, real bricks.com. Remember the code or at 50 never turned down free money. Go get your 50 bucks later. President Barack Obama, Virginia, we are counting on you. Republicans want to steal enough seats in Congress to raid the next election and wield unchecked power for two more years, but you can stop them by voting. Yes, by April 21st, help put our elections back on a level playing field and let voters decide not politicians vote. Yes, by April 21st. Paid for by Virginians for fair elections.