RealBricks CEO, Kevin Cottrell Discusses Fractional Real Estate At The Real Estate Reimagined Webinar
Realbricks, a proptech company that has recognized the increased opportunities that fractional real estate provides. The company created a platform that makes real estate investment accessible to anyone, anywhere – empowering all manner of investors to participate in the market. The company enables people to invest in vacation rentals like Airbnbs, long-term rentals, and multifamily properties without ever having to talk to a realtor. Its fractionalized approach to real estate investing means investors can gain access to properties that they would otherwise not have access to – with the ability to sell their shares at any time.
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NewsTranscript
00:00 - How's it going, Kevin?
00:01 - My pleasure.
00:01 Looking forward to the conversation today.
00:04 - Absolutely.
00:05 I'm really fascinated by what your company does.
00:07 I got a chance to stalk you on LinkedIn as well.
00:09 I mean, you've been in the real estate game
00:10 for quite some time,
00:12 but I'll let you tell the folks at home
00:14 what is it that your company does?
00:16 - Yeah, we are a fractional real estate company.
00:19 We basically take a real estate asset
00:21 and create fractional interest or shares in it.
00:24 Those are securities.
00:25 So it allows an investor, whether they're,
00:28 and I'll explain what this is,
00:29 an accreditor or a non-accredited investor.
00:31 And that tends to be the problem, right?
00:33 People think about investing in real estate
00:35 and they see multifamily like apartment buildings.
00:38 They see big commercial projects, development projects.
00:41 And unless you have a very high net worth and high income,
00:45 you can't invest in those.
00:47 So Realbooks allows people to invest
00:49 with a minimum of $100.
00:51 They don't have to be accredited,
00:52 meaning meet those standards.
00:54 And we're essentially selling them a security interest
00:58 in the properties.
00:59 - Now, I'm glad you mentioned that
01:01 because I am a point and click type of guy.
01:04 I don't know if you or the viewers at home
01:06 know what RuneScape is.
01:07 That's what I played when I was younger.
01:08 It's how I was rewarded,
01:09 which is why I love trading in the stock market.
01:11 It's all linked.
01:12 And I've always thought real estate was like,
01:13 hey, you gotta own this physical property.
01:16 That's how you gotta hold onto it for years.
01:18 And that's how you can make money on it.
01:20 But you're saying that you kind of make it easy
01:22 for the common man and woman to get involved
01:24 by just kind of fractional shares.
01:26 Nothing too crazy.
01:27 You invest in it.
01:28 You can hold onto it as you'd like.
01:29 You can go on and sell it when you'd like as well.
01:31 It's that easy?
01:32 - Yeah, so if you think about it,
01:33 I mean, our marketplace, which will be web-based,
01:36 will launch in January.
01:38 Shortly thereafter will be an app,
01:40 much like Robinhood, where you can point and click
01:42 and purchase.
01:44 And you do exactly what you just described.
01:46 And that tends to be the challenge with real estate
01:49 is people think of it as,
01:50 this is a difficult process.
01:52 I need to assemble a down payment.
01:53 I need to know how to manage it.
01:55 But then I gotta think about
01:57 how in the world will I sell it?
01:59 And in our world, we take care of all the settings.
02:02 We manage it, et cetera.
02:03 - Yeah, well, I mean, look,
02:04 if there's one thing I know is that liquidity matters.
02:06 When you want to get out,
02:07 you gotta have someone else that's gonna let you
02:09 go to exit your position as well.
02:11 Let's talk about what type of real estate assets
02:14 are exactly offered to investors as well.
02:16 And I'd love to know the process.
02:18 I know you said you've got a web platform coming up.
02:20 I know you said Robinhood as well.
02:21 You need a minimum of 100 bucks.
02:22 Is there anything else that our viewers at home need to know
02:25 to kind of get involved with Real Bricks in this process?
02:30 - Yeah, I mean, we're regulated
02:31 by the Securities and Exchange Commission.
02:32 So a lot of what's going on out there today
02:35 and the spilled over from the digital crypto world
02:38 is a lot of people are fearful.
02:40 So we're a fully vetted and qualified entity
02:43 from the Securities and Exchange Commission.
02:45 So as a qualified issuer,
02:46 whenever we launch our marketplace in January,
02:49 someone will know that they can open up an account.
02:52 They need to go through the vetting process
02:53 required by the SEC.
02:55 So there's Know Your Customer, KYC, anti-money laundering,
02:59 which is basically they'll upload their ID,
03:03 they'll verify themselves.
03:04 They can securely through our partners,
03:06 attach and provide funds into their wallet.
03:10 And then they can then go make the purchase in a manner
03:13 that will create shares that are issued to them
03:15 by our broker dealer partner.
03:17 And then there's actually a transfer agent.
03:19 It's much like buying stock on Robinhood.
03:22 - Yeah, that again, it makes it easy
03:24 and kind of give you a fight a little bit as well.
03:25 I told you I stocked you on LinkedIn.
03:26 So I know that you've done a lot of work,
03:28 especially on the Texas Border Rescue
03:30 and all the other great things that you've been doing.
03:32 The reason I bring that up
03:33 is because I mentioned that for me, it's a little tough,
03:35 especially as an immigrant, I sometimes feel like,
03:38 hey, it's a little tough to invest
03:39 in the real estate market.
03:40 You clearly have a passion for real estate,
03:42 but also not just that,
03:44 tying that in with underserved individuals to invest.
03:47 Why does that matter to you?
03:48 Why does that matter to Real Bricks?
03:51 - You know, it really matters to me
03:52 because when I got out of college many years ago,
03:55 I was lucky enough to get hired by Marcus and Noah Chap,
03:58 which a lot of people know the name or have heard it.
04:00 It's a boutique, probably a premier investment brokerage.
04:04 And almost everybody there was 15 to 20 years older than me
04:06 and had at least 10, 15 years of experience.
04:09 They were doing real estate investments left and right.
04:13 And because I didn't qualify,
04:15 I was kind of really locked out of the real estate market.
04:18 So not only me, but the passion from the Real Bricks team
04:21 is to create an entry point where anybody can purchase,
04:24 starting with $100.
04:26 And to your other point, we're also providing an off-ramp.
04:30 So we're realistic.
04:31 We know if somebody invests and buys $1,000 worth of interest
04:35 in a real estate asset, something comes up,
04:38 they need to potentially get out of part of it or all of it.
04:41 We're gonna provide a secondary market on our marketplace,
04:44 which will allow them to do that.
04:45 We'll be really the only player
04:47 with that potential off-ramp for real estate.
04:50 - Now, we already talked about liquidity.
04:52 I don't think I asked the question of how long
04:54 would I have to hold the investment for?
04:56 Say I buy it on January 1st,
04:58 how long do I have to wait till I sell it?
05:00 Or I can sell it?
05:01 - Well, yeah.
05:04 So technically the first part of that question,
05:06 and it's a great question,
05:07 is driven by the regulations
05:09 for the Securities and Exchange Commission.
05:12 They want the primary shares
05:15 to have been fully subscribed or sold for 30 days.
05:19 And then Realbricks can then make it available
05:21 by filing a form that allows it to be available
05:25 for a push, if you will,
05:27 if somebody wanted to sell in the secondary market.
05:29 So the answer from a technical standpoint
05:31 would be a minimum of 30 days.
05:33 Now, the way we try and guide people,
05:36 and we're gonna have a tremendous amount
05:37 of education and information,
05:39 is real estate should be a long-term player.
05:42 This is a little bit different than investing in stocks
05:45 and the equity market.
05:47 Most people, if they wanna take advantage
05:49 of a combination of cashflow and appreciation,
05:51 will probably look to hold five to seven years.
05:54 Obviously, there'll be some interesting scenarios
05:57 that come up in the next few years.
05:58 We expect to have some of our assets
06:00 appreciate much more rapidly,
06:01 just because of how we expect in the upcoming market
06:05 that's gonna happen,
06:06 provide some more upside
06:07 that may allow people to do it way quicker.
06:09 - So 30 days, but that's because of regulations.
06:13 And of course, as soon as that's available,
06:14 you'll make that available as well.
06:16 You mentioned your team.
06:17 Obviously, I have the pleasure of talking to you.
06:19 Anyone else on the team that we should know about
06:21 that's involved in the project?
06:23 - Yeah, I mean, if you look at the team,
06:25 unlike a lot of property tech companies,
06:28 I mean, we've got a great tech team,
06:29 we've got a great operations team.
06:31 Our real estate bench has more
06:32 than 100 years of experience, right?
06:35 We've got, not only myself,
06:37 I've been with almost every major brokerage
06:39 since the mid '80s,
06:40 and we've got a lot of experience,
06:43 billions and billions of dollars of property sales.
06:46 Gene Frederick, who recently came off the board
06:48 of the XP World Holdings,
06:49 a publicly traded real estate brokerage firm.
06:52 We've got Scott Lewis, who's been in the business.
06:54 He's our chief strategy officer.
06:57 On the advisory side,
06:58 we've got a great bench on the advisory side.
07:00 I mean, Chris Heller, for example,
07:02 used to be the co-CEO of Keller Williams.
07:04 And for listeners here,
07:06 you're gonna start hearing names of the biggest
07:08 and the strongest players in the market.
07:10 We feel like we've assembled,
07:12 in terms of core competencies,
07:13 the best bench, both on the actual operations
07:16 and strategy side, but also on the advisory side.
07:19 - Now, when it comes to real estate,
07:22 so much of the conversation,
07:23 as we were about to get to the final moments
07:24 of wrapping this up,
07:26 has been around interest rates
07:28 and the price fluctuating, right?
07:29 Like, whenever you think of something dramatic
07:31 in the real estate market,
07:32 you think of the big short,
07:33 you think of 2008,
07:34 and now interest rates are kind of through the roof,
07:36 and obviously there are talks of cutting it,
07:39 but no matter what happens in the future,
07:41 no matter what the Fed does,
07:43 is your company able to,
07:45 I don't wanna say survive,
07:46 but make sure that the investors
07:49 have the tools and resources
07:50 to make the best decision possible?
07:52 I know there's no guaranteed returns
07:54 or none of that, right?
07:55 It's an investment for a reason,
07:56 but what are your thoughts on the outlook
07:58 of what may happen in the markets
07:59 based on interest rates
08:00 and everything else that's going around?
08:03 - So, Realbricks is an all-cash investor.
08:06 I mean, we may change at some point
08:07 in a different interest rate environment
08:09 where we can apply positive leverage,
08:11 meaning the return is higher than the interest rates
08:13 that we would borrow at,
08:14 to actually apply some debt to our purchases.
08:17 But for what we are launching in January
08:19 and for the foreseeable future,
08:20 we're all cash.
08:21 So there's gonna be a cash return
08:22 that comes from the net income
08:24 on a quarterly basis for investors.
08:26 We also, because of our experience,
08:29 which we just talked about,
08:31 are gonna take an approach
08:32 to be very smart about market selection
08:34 and property selection.
08:36 In other words, it's not a,
08:37 let's just go Hoover up
08:38 anything and everything we can.
08:40 And some of the players in the market
08:43 really harm themselves
08:45 by applying high leverage debt
08:47 and not being very strategic about looking at,
08:49 where are rent levels?
08:50 What's the trend in our rents?
08:52 What's happening in the market
08:53 with everything from demographics and employment?
08:55 And how strong has that market been,
08:57 both historically and what's the recent trend?
08:59 So we feel that between some of the AI
09:02 and the data feed stuff we're gonna do,
09:04 and then our high level of experience,
09:06 we can buy right.
09:08 'Cause here's the trick.
09:09 What most people don't know,
09:10 and this is kind of,
09:11 I wouldn't call it the dirty secret,
09:12 but the reality of real estate,
09:15 you make your money on the way in,
09:17 not when you sell.
09:18 - Yeah, I mean, you gotta make sure you time
09:21 the buying and the opening price of it as well.
09:24 When it comes to investing fractionally,
09:26 the reason I like it is because you get a chance
09:28 to kind of diversify your portfolio a little bit.
09:30 You get to kind of have your eggs
09:32 in many, many different baskets.
09:33 Can I kind of choose in terms of like,
09:36 hey, I feel like this type of property,
09:38 whether it's commercial real estate,
09:39 whether it's residential,
09:40 whether it's certain cities that I feel like might be,
09:43 like we had a great guest earlier talking about Las Vegas.
09:46 So either now or in the future,
09:48 am I able to kind of see which type of fund
09:51 or where I want my investments to go to,
09:54 or is it one big pool?
09:55 - It's their individual properties.
09:58 We may have a fund that is a portfolio fund later.
10:03 We're certainly discussing that.
10:04 And if it makes sense, we may roll that out.
10:06 So you can pick the property.
10:08 You'll know everything about it.
10:09 You'll know what market it is.
10:10 You'll see our data and our information
10:12 on that particular property.
10:14 So it allows people to,
10:15 it's almost like you're getting a group of investors, right?
10:18 Like those investments I was describing earlier
10:20 were syndicated to buy apartment buildings
10:22 and things like that.
10:23 This is essentially buying a slice
10:26 or a share in a property that's one, two, three Main Street.
10:30 You may decide to like, we have a property, for example,
10:32 if you really like it, you're in Las Vegas, great.
10:35 If it's in Orlando, great.
10:36 Maybe you say, I really like this part of the country.
10:38 What do you have over there?
10:40 And we intend to socialize through our blog,
10:44 our social media information and intel
10:47 about why we think certain markets and property categories
10:50 are where things make sense and share a lot of our wisdom
10:53 so that investors who typically tend to be less experienced
10:57 can get some guidance.
10:59 This is almost like what I got
11:02 from those more experienced brokers.
11:04 I knew what I wanted to buy, right?
11:05 I was sitting there at Marcus Millshop
11:07 and they would tell me, this is why we buy these.
11:08 This is how we analyze the market.
11:10 And then I was locked out.
11:11 The difference in Realbricks is we're gonna share
11:13 that same kind of wisdom and guidance,
11:15 but you're not locked out.
11:17 You can actually come in and buy a minimum of $100.
11:20 - All right, well, I mean, I love, again,
11:23 I've been saying it from the beginning.
11:24 I love the fact that you only need 100 bucks
11:25 to go in and get invested.
11:26 I like the fact that you can get out in 30 days
11:28 'cause the old school mindset of mine was,
11:31 oh man, I don't want my money stuck for four years
11:34 and if I wanna sell, I gotta find a buyer.
11:36 Obviously you're helping provide the secondary market.
11:38 You're helping provide the liquidity aspect
11:40 of things as well.
11:41 But before I let you go, Kevin,
11:43 I wanna turn the floor over to you.
11:44 Is there anything else that you wanted to talk about?
11:46 Anything else you want to discuss
11:48 that I didn't bring up, our viewers are listening?
11:50 - I can tell you that one of the most frequent questions
11:55 we get, right?
11:56 'Cause you see a lot of this going on with crowdfunding
11:58 being so popular now, is, is Realbricks going
12:02 to do something in the form of crowdfunding?
12:05 I mean, we're certainly considering it.
12:06 We're having some discussions internally.
12:08 And so the second part of the question,
12:09 I got this on email yesterday,
12:11 is if you guys do a crowdfunding,
12:13 how am I gonna know about it, right?
12:15 So for anybody listening to this,
12:16 there's, it's the same step to start, right?
12:19 You're not obligating yourself.
12:20 You can go to realbricks.com, set up an account,
12:23 go through the process, make sure you're all set up.
12:25 And then that's gonna put you in the queue to be notified
12:28 when the marketplace goes live to learn about properties.
12:31 And if at the future we launch a crowdfunding,
12:35 investment opportunity in the actual company Realbricks,
12:38 you'll be notified there of both of those opportunities.
12:41 - I love it.
12:42 And I'm on your homepage right now.
12:44 And it says, you know, you have your spiel.
12:46 It's like select a property,
12:47 buy shares with as little as $10, depending on the property.
12:50 But you can grow your portfolio one brick at a time.
12:52 I love that.
12:53 Way to have it all come back together
12:56 in terms of what you're doing
12:57 and what your company's doing.
12:58 But Kevin, excuse me.
13:00 Kevin, it's been a real pleasure talking to you, man.
13:02 I love what you guys are doing for, you know,
13:04 the little guy, gal out there
13:05 to invest in the real estate market.
13:07 And I look forward to more conversations,
13:08 especially when you launch the app.
13:10 I look forward to dabbling a little bit in myself.
13:13 - Absolutely.
13:14 Thank you for letting me come on today.