Property Cash Reserves

In the case of income producing properties, there will be cash reserves set aside for property maintenance and carrying expenses in case of vacancies.

The maintenance reserve will be approximately 4-8% (depending on property age, condition, and inspection) of the property value at IPO. Any urgent repairs will be handled immediately by the property managers, non-urgent repairs, maintenance, and remodeling will be voted by that IRET’s DAO.

As with any investment property, it is highly likely that there will be vacancy periods. In order to cover for these periods there will also be a 2-4% vacancy reserve depending on the market conditions where the property is located. These reserves will be used to pay out IRET holders the fixed income provided from the leases until a new lease is signed in order to maintain consistent returns and prevent moments of high volatility on the IRETs during vacancies.

Should the maintenance and/or vacancy reserves be used, 10% of the monthly income from the property will be allocated to the reserves until they have the required funds.

The last cash reserve will be the property tax and insurance reserve which will automatically be deducted from lease inflows at a fixed rate as an expense and promptly used when due.

For non-income producing properties (i.e. where the property tokenizer lives or uses the property he/she tokenizes), there will be no cash reserves and the property tokenizer will be responsible for all repairs, maintenance, taxes, and insurance.