Anyone have thoughts on Building Bits?

Question

This type of business seems like a game changer to me.  I imagine other platforms will come along and follow in the footsteps as well in offering shares in an LLC that owns property.  Anyone have any experience or information working with them?  The only downside I can tell (other than the normal downsides to not controlling your own investments) is that selling your bits (shares) seem to be a DIY endevour.  I plan on investing long term, so that doesn't seem like a problem, but it would be nice if they setup a marketplace to sell bits and whatnot.  I realize they are new, but didn't see anything on BP discussing them.

Account Closed · Answer

I just emailed them with a few questions and got a response back.  Basically each property undergoes SEC approval by itself, so each one has to be vetted.  Also, as far as selling your bits (shares) in a building, you can sell on the secondary market, or you can sell on their marketplace which they plan to have up and running within the year.  That being said, this seems like more of a buy and hold play.

Account Closed · Answer

I think the idea behind it is that you would be one of the owners of the property, thus any depreciation on profits, appreciation on the property, principal paydown etc., would be a little different.  I know taxes outside of retirement accounts for REITs can be a bit complicated, but I think the tax treatment is the big difference as far as I can tell.  I may be wrong on that though.

Account Closed · Answer

Thanks, @John Corey.  That is some insightful information!

Josh Cook · Answer

Following this thread.

John Corey · Answer

So, the text makes it clear that the site is collecting interest and then it will decide what to do next. That the offer is not an offer to invest as much as an offer to show if people would be interested.

And the folks in TX and WA cannot participate. I wonder if folks outside the USA are excluded.

John Corey · Answer

I did a quick search and found some useful info at the BB website. Useful in that we can discuss here what is and what is not going on.

The health warning at the bottom of the first page contains the following.

THE COMPANY IS “TESTING THE WATERS” UNDER REGULATION A UNDER THE SECURITIES ACT OF 1933 FOR OFFERINGS OF OUR BITS THAT HAVE NOT YET BEEN QUALIFIED BY THE SECURITIES AND EXCHANGE COMMISSION (SEC) RELATED TO CERTAIN PROPERTIES. THIS PROCESS ALLOWS COMPANIES TO DETERMINE WHETHER THERE MAY BE INTEREST IN AN EVENTUAL OFFERING OF ITS SECURITIES. THE COMPANY IS NOT UNDER ANY OBLIGATION TO MAKE AN OFFERING UNDER REGULATION A. IT MAY CHOOSE TO MAKE AN OFFERING TO SOME, BUT NOT ALL, OF THE PEOPLE WHO INDICATE AN INTEREST IN INVESTING, AND THAT OFFERING MIGHT NOT BE MADE UNDER REGULATION A. IF THE COMPANY DOES GO AHEAD WITH AN OFFERING, IT WILL ONLY BE ABLE TO MAKE SALES AFTER IT HAS FILED AN OFFERING STATEMENT WITH THE SEC AND THE SEC HAS “QUALIFIED” THE OFFERING STATEMENT. THE INFORMATION IN THAT OFFERING STATEMENT WILL BE MORE COMPLETE THAN THE INFORMATION THE COMPANY IS PROVIDING NOW, AND COULD DIFFER IN IMPORTANT WAYS. YOU MUST READ THE DOCUMENTS FILED WITH THE SEC BEFORE INVESTING.

ALL SECURITIES WILL BE ISSUED BY BUILDING BITS PROPERTIES I, LLC, AN AFFILIATE OF BUILDING BITS HOLDINGS, LLC. OUR OFFERING CIRCULAR CAN BE FOUND BY FOLLOWING THESE LINKS: [link removed]

THE OFFERING IS AVAILABLE IN ALL STATES EXCEPT TX AND WA.

FOR OFFERINGS OF BITS UNDER REGULATION A THAT HAVE NOT YET BEEN QUALIFIED, NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED, AND IF SENT IN RESPONSE, WILL NOT BE ACCEPTED. NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED UNTIL THE OFFERING STATEMENT FILED BY THE COMPANY WITH THE SEC HAS BEEN QUALIFIED BY THE SEC. ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME BEFORE NOTICE OF ACCEPTANCE GIVEN AFTER THE DATE OF QUALIFICATION. AN INDICATION OF INTEREST INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND.

John Corey · Answer

I have no knowledge of Building Bits. That said, the principals are very old. We are talking about shares in a vehicle which selects or manages the real assets.

The ability to sell the shares on comes up the label of a secondary market, Think about the stock market. An IPO is the first time the shares are made available. There is an agreement that after the shares open, they will be traded on a specific market. Those trades are the secondary market taking place.

So, why not buy shares in a REIT or some other listed real estate fund? How does Building Bits make a difference compared to what is already working?