DAO LLCs

Transferring title to DAO LLCs is the other option which would facilitate the property tokenization process. This method is more friendly for properties that are sold directly to the tokenholders where the original property owner does not want to remain a partial owner. This is due to the fact that because the owner wants to sell the property outright and will not want to maintain ownership interest or responsibilities via an operating agreement. Through this vehicle, a property is put into a sales contract with an LLC that is started by REX Protocol itself. This sales contract can specifically state that the financing for the property purchase will come directly from the IRET sales that REX Protocol auctions through their marketplace. This auction will have a minimum reserve price at the property sales price mentioned on the contract plus all closing expenses and property cash reserves. Once all of the IRETs are sold and the sales contract closes, the IRET holders are the LLC owners and therefore property owners. The bylaws of the LLC stating all material facts as well as property documentation will be uploaded to accessible permanent storage such as IPFS, Arweave, or Filecoin.

The management of the properties held through this structure will be fully DAO based. At the IPO (Initial Property Offering) through the Marketplace, the buyers of the IRETs will be required to vote for the property management group they want to manage the property. REX Protocol will provide from a selection of property managers as well as an option for “other”. From then on, that property management group will give periodic updates to the IRET holders and submit any required decisions through a voting mechanism.

There will be basic clauses in the LLC’s bylaws so that the property managers have some autonomy and the IRET holders do not need to vote on every basic decision. These will state that the property managers may use funds from the cash reserves for basic maintenance items and may choose tenants that adhere to certain criteria (e.g. minimum salary and credit scores). These clauses will also be voted on by the DAO at IPO.

One of the downsides of having DAO LLCs as the owners of the properties is that a K1 must be sent to every stakeholder of the DAO LLC (i.e. every IRET holder). This is not a huge dilemma, but may also be able to be streamlined via off-shore entities.

Upon sale of the property the LLCs will then be dissolved and all funds distributed amongst the IRET holders.