Wirz Brothers Housing
Executive Summary
Wirz Brothers provides its investors with the same financial exposure as if the investor were a landlord, through the purchase of shares of its housing corporation. Conservatively, Wirz Brothers aims to pay shareholders .4% monthly dividends, which means that if re-invested, will double the investor's money every 13 years 11 months on dividends alone. This duration will be significantly shortened when adjusting for inflation.
Introduction
Do you own a house? Do you own rental real estate? Ask anyone and they will tell you that real estate is a good investment, but if you have tried to start from the ground up (as did Wirz Brothers) then you know that a large initial investment is required. Additionally, most real estate purchase necessitates a loan - reducing your return on your investment by about 4% annually - or whatever the interest rate may be. Wirz Brothers has found that reasonable property management can achieve 5% annual returns on investment (based on the average of six performing properties) - meaning that after interest, the typical landlord is seeing 1% annual growth.
In order to see a better return on investment, a landlord has to not pay interest. If you're wealthy, this is probably no problem. If you are well-off, then you're probably looking at being a slum lord. If you're of the upper middle class, then this means teaming up with your colleagues, forming a company, and dealing with the hassles of joint-land-lording. Plus, what happens when a party wants to leave the group? What if you wanted to limit your personal liability and collaborate with hundreds of investors? How does this affect your taxes? Wirz Brothers Housing is the solution - giving you the financial returns as if the investor were a landlord paying cash for real estate, but allowing for any level of financial obligation.
How It Works
Investing in Housing
Wirz Brothers intends to invest in the housing market through single family residence, land, and roommate agreements. Wirz Brothers understands that an income property may change function and may be sold, and is flexible to each option. Speculative investing is not a traditional Wirz Brothers practice, but may be entertained if Wirz Brothers' numerical models speak favorably to the notion. Wirz Brothers will consider investors to participate in Wirz Brothers ventures, helping Wirz Brothers to generate enticing cash offers on profitable property deals and in turn, enjoying the dividends that parallel a land-lord who pays cash for an income property.
Shares of Wirz Brothers Housing
Wirz Brothers Housing provides a simple solution to many of the typical hassles of land lording. By selling shares, Wirz Brothers uses the revenue to pay cash for properties, which Wirz Brothers will effectively manage. Not only is the investor seeing a return as if he or she had paid for a house in cash, but the investor also does not have to commit to the full cost of that property. Further, since the investor is buying shares in a company that owns properties, and not the actual properties, the investor is protected against the loss of rent from a single property and can enjoy the advantages of Wirz Brothers' diverse property portfolio and numerically guided investment techniques. Also, the investor may easily sell or transfer his or her shares much easier than it would be to sell or transfer a property.
Shares of Wirz Brothers may be purchased from Wirz Brothers directly or on the open market from current shareholders. When selling shares, Wirz Brothers will not use the proceeds of the sales to force opportunities. Wirz Brothers' numerical models suggest when to buy, sell, and rent - and these models will be followed. In fact, the purchase of Wirz Brothers shares may dilute dividends initially, but the intention is to utilize all available funds to own and manage productive income property. The bottom line monthly income is distributed to the shareholders as dividends.
The Rules of Real Estate Investing
Wirz Brothers actively invests in housing using numerical modeling, predictive analysis, and constant validation with an accurate and up-to-date financial ledger. After two years of experimentation and analysis, Wirz Brothers has leveraged multiple locations across the United States to achieve maximum profitability and make the following conclusions about real estate investing:
- If you intend to pay interest on a rental property, from an investment sake your money is better off in a bank and the only reason you should utilize this strategy is if there is speculation that the housing market will inflate in the reasonable future.
- Sell when the rental rate is 1.05% (or lower) of the value of the property and buy when the rental rate is 1.8% (or higher) the final closing cost of the property.
- Offer discounts to tenants who pay on a weekly (or bi-weekly depending on their employer) basis and use direct deposit. This will reduce any reliance on credit to be used for operating expenses and reduces feelings of renters' "entitlement".
In order to foster a good relationship with tenants, the following rules are practiced by WirzBrothers:
- A $5k investment in remodeling a unit may mean only $60/month more in rent. Offer tenants discounts where possible to allow them to make improvements. This fosters tenant retention and saves material cost and labor for improvements.
- Do not not raise the rent on tenants who pay on time and take pride in their residence. If the rent must be raised due to property taxes and insurance, be as transparent as possible as to why the rent has raised. Do not offer artificially low introductory rates.
- Set money aside for a year end return to tenants that pay on time and take care of the residence. It is easier to reward good practice than to penalize adverse situations.
The 1% rule (by Wirz Brothers)
Using two years of highly accurate financial information, Wirz Brothers has determined that approximately 1% of a rental property's closing cost is spent every month through routine land-lord operations. These expenses are averaged as follows:
| Category | Expense (% of final closing cost) | Comments |
| Taxes | .25 | Even though state taxes may be less, we have found that those state taxes that are a lower percentage are less willing to entertain the decline-in-value reassessment |
| Insurance | .17 | For rental properties, most competitive insurance companies charge about 2% annually |
| Utilities (garbage, sewer, and water) | .21 | All of these utilities have a minimum charge but otherwise scale directly with the number of people in the residence |
| Landscaping, Maintenance, and Repairs | .37 | A general rule for any property is 4% annually |
| Total | 1.00 |
The implication of the 1% rule is that if an investor pays cash for a unit, the rental income must be greater than 1% of the closing cost in order for any profit to be realized. A lot of Realtors will try to sell you on the 1% rule for rental income. This implies that you are paying cash for the income property. If you require a loan to pay down the principal of this unit, your cash flow will be negative and offering a rental rate this low is a bad business decision unless there is speculation that the housing market will rapidly rise.
Wirz Brothers will not purchase a unit that will rent for anything less than 1.6% of the closing cost per month. With this commitment, Wirz Brothers can nearly guarantee that paying cash for a property will return .4-.42% of the closing cost on a monthly basis. As stated before, it seems reasonable that Wirz Brothers will return these earnings as dividends to the investor.
Summary
In summary, when an investor buys shares from Wirz Brothers, the investor is basically pooling with others to buy an income property in cash. As the income property generates revenue, the revenue is distributed to the the shareholders as dividends. Shares may be bought from Wirz Brothers directly or on the open market. Shares may be sold back to Wirz Brothers during buyback periods (Wirz Brothers will try to have these periods monthly) or on the open market.
The investor does not hold any of the risk of land-lording, but receives revenue as if he or she were a land-lord paying cash for all income property. Wirz Brothers may also invest in land, roommate opportunities, and single family residence.
Where do we go from here?
Wirz Brothers Incorporated has filed as a Stock Corporation in the state of Delaware and has a fully-functional Stock Transfer Ledger. As investors buy shares, Wirz Brothers will use the proceeds from the sale of these shares to purchase income-producing real estate. The bottom line cash flow (rental income - (taxes+insurance+utilities+repairs)) will be returned to investors monthly in the form of dividends. Typical shares will sell for $1000 each when purchased directly from Wirz Brothers with a requested minimum purchase of $10,000.
Investors may sell shares of Wirz Brothers housing operations to other investors, or may sell the shares back to Wirz Brothers during advertised buy-back periods. With this structure, the price of the share correlates linearly to the value of the properties which Wirz Brothers owns and manages, while the dividend is a function to the operating income and number of outstanding shares.
Questions?
Isn't mortgage interest tax-deductible [for traditional land-lord operations]?
Yes, mortgage interest, property taxes, re-occurring utility payments, and miscellaneous repairs are all tax-deductible. However, these expenses are real and documented and only count against rental income - meaning that when all is said and done, you are only taxed on your bottom line income. If you have enough deductions such that you are not paying any taxes, then you are receiving no income from your housing operations and this has proven to be a bad investment. Wirz Brothers considers productive properties - those which the most taxes are paid - and will grow the Wirz Brothers Housing portfolio with properties that fit this model.
The sharholders will not be able to take any deductions on their taxes - as they are receiving what would equate to the bottom line income of Wirz Brothers housing operations in the form of dividends.
Because Wirz Brothers is returning all profits to investors, Wirz Brothers will never actually pay income taxes. This notion is of great advantage because corporations are taxed at a higher rate than individuals.
Will the investor get any tax deductions?
The only way the investor can get a tax deduction is if he or she sells his or her shares at a loss. The realized loss due to transfer of shares will count against your gross income. This may vary state-to-state, but federally, this is the case through at least 2011.
What are the liabilities of the stockholders?
The stockholder holds very little liability. If Wirz Brothers Housing ends its operations, Wirz Brothers will stop paying dividends and buy back all the outstanding (non-Wirz Brothers owned) shares at 20x the current annual non-compounded dividend.
5% seems weak, why not just play the stock market?
In a sense, you are playing the stock market. Our shares focus on returning financial gains to the investor through dividends while most stock market plays experience gains through price fluctuations which must be scrutinized in order to achieve profitability. Wirz Brothers seeks passive investment opportunity in which the risk of losing money is very low. As we know, most stock market investment has risk and relies on hype and inflation to sell shares at a higher price than which they were purchased. Since the share price of Wirz Brothers is proportional to the cash in hand and property value, the share price will fluctuate with the housing market, with even less volatility . Further, Wirz Brothers has found that rental prices, due to lease commitments, do not necessarily fluctuate with the housing market. Therefore, Wirz Brothers seeks a consistent dividends and lets the industry earnings per share average govern the Wirz Brothers Housing Operations share price. This strategy - along with controlled dilution and buy-back of shares - intends to keep share price consistent.
What is in it for Wirz Brothers?
Wirz Brothers has been looking for an investment opportunity like this for years. Wirz Brothers will manage the operations of the properties: buying, renting, interviewing renters, maintaining, and selling units. By seeking investors, Wirz Brothers no longer has to pay interest on its own housing-related investments and can get better real estate deals by offering cash for auction and bank-owned properties. If you would like to assist Wirz Brothers with the management of their Housing Operations, you will be eligible to receive outstanding shares which sall recieve monthly dividends. Wirz Brothers will retain the controlling number of voting shares - ensuring consistent management and a continual incentive to return the highest possible dividends.
Does an investor in Wirz Brothers own a share of all the property owned by Wirz Brothers, or just a share of the income?
When you own a share of Wirz Brothers, you own part of Wirz Brothers. Basically you are buying outstanding shares - or preferred shares. Preferred shares get dividends first, but have no control over the company. Outstanding shares control part of the company, and will still get dividends, but not first. The dividends are calculated by taking the profit from each month, and dividing by the total number of shares. It's like you own a part of a house that is renting at a certain rate. If you only own 1/100 of the house, then it stands to reason you would only get 1/100 of the income that the house generates. Now, if you buy more WirzBrothers shares, in theory you could own more than the value of an actual rental unit. WirzBrothers still owns the rental unit on paper, but you will recieve all the income - just in the form of dividends. Having investors buy shares allows them to own as much of a rental unit as they like - and not have to worry about the day-to-day operating activities.
If a property is sold, does the investor get a share of the proceeds?
When a property is sold, one of three things can happen.
1. WirzBrothers will have an authorized buy-back period for the number of shares equal to the value of the rental unit.
2. WirzBrothers will distribute the proceeds of the sale as dividends. Please note, however, this will decrease the value of each share.
3. WirzBrothers leverages its operations in multiple regions and purchases another performing rental unit.
In short, WirzBrothers will do whatever makes the most financial sense at the time for its investors and housing operations.
How has WirzBrothers been growing?
WirzBrothers has developed a ledger query to determine our growth since we began operations:
| year | Gross Income |
| 2008 | 2,760.00 |
| 2009 | 16,353.97 |
| 2010 | 64,384.90 |
| 2011 | 79,091.11 |
| 2012 | 53,093.42 |
| 2013 | 24,567.86 |
Please note that in 2011, our growth was strategically slowed as we position ourselves for larger capitalization purchases.
Why do you not talk about flips in this business model?
The notion of flips is implied. Suppose WirzBrothers buys a property for $100k, fixes it up for $20k and sells it for $200k (net sale = after closing costs) four months later. The profit is then $80k. WirzBrothers will authorize a buy-back of 18,000 shares (assuming the nominal share price is $10/share). However, this is where it gets complicated. . . .
Since it took 4 months between the purchase of the property and the sale of the property, $20,000 (=4*.025*$200,000) will be distributed as dividends to all shareholders (in conjunction with all other dividends). This leaves $60k left of the profit. WirzBrothers will authorize the buy-back of 18,000 shares (($100,000 purchase + $20,000 repair + $60,000 profit)/$10/share). (The .025 comes from the assumption of 2.5% per month return - meaning we buy flips at about 64% of market value and rent them out at 1.8% (1.8/.64=2.5) of market value per month.)
This buyback reduces the number of shares outstanding so that in the future, flips will have a greater return in the form of dividends.
Where are your Bylaws and Artiles of Incorporation?
The Bylaws and Articles of Incorporation are not required for a certificate of incorporation in the state of Deleware. However, we do maintain and operate by them accordingly.