From Airbnb Arbitrage to Real Estate Tokenization — Brendan Burke’s Story

Brendan Burke (00:00)

tokenized real estate. Once you have that token, you can sell that token to other people. And so this…

drastically reduces the amount of time and effort it takes to sell because you don’t any longer have to list a property for sale, pay a 6 % commission and wait months for closing. You can just sell that token and someone can buy instantly. And because it’s already tokenized and we do a tokenization framework both in the legal and the logical side, because it’s already tokenized, all of the closing and transfer documents have already been done.

Dylan Silver (01:59)

Hey folks, welcome back to the show. Today’s guest is a Washington based real estate broker with a tech background who’s now focused on tokenizing real estate. Please welcome Brendan Burke. Brendan, welcome to the show.

Brendan Burke (02:13)

Hey folks, thanks. Thanks for having me.

Dylan Silver (02:15)

Man, it’s great to have you on and you’ve got an interesting background. You’re really doing something that is ultra cutting edge. But I wanna back up to the beginning and I often like to start by asking folks how they got into the real estate space.

Brendan Burke (02:29)

Yeah, absolutely, absolutely. I think of myself as a bit of a jack of all trades. Really, I grew up in California’s Silicon Valley. And growing up there, owning a house, much less investing in real estate, is pretty unattainable for a young person. House prices are in the millions. I was just graduating college and really not possible for me to own a house or invest in real estate there.

Dylan Silver (02:42)

Yeah.

Brendan Burke (02:50)

It kind of is what got me into it in the beginning. I grew up around so many amazing houses and getting into real estate and seeing people who made wealth through real estate really caught my eye. so fresh out of college, I started a side hustle doing Airbnb, rental arbitrage. Took me a long time. A lot of property owners said, no, I’m not interested in that. But I kept at it. Started with one and scaled to three, then five, then nine. so.

Currently I’m at nine rental arbitrage, Airbnb’s as well as four other units that I manage for other people. And it’s kind of snowballed from there. I ended up getting my broker’s license so could do property management and real estate brokerage in general. And kind of at the same time was working on tokenized real estate because back to what I was saying, it was unattainable for me to invest in properties that way. I wanted to get together with a lot of people to kind of.

take down a deal together. And so that’s where decentralized real estate came from. And so what we do in decentralized real estate is we tokenize real estate assets on the XRP ledger that allows anyone to buy into a real estate asset for as little as one token. But it’s as much as you get out of it that you put into it. So everyone is participating in the management and the actual activities that go into real estate investing right on the platform.

Dylan Silver (03:57)

tokenization, and I wanna break this down, because folks may be semi-familiar with the term, but maybe unclear with how this may be different or beneficial versus fractional real estate investing. There does seem to be some similarity there, but there’s some big differences. Can you help break this down for us?

Brendan Burke (05:01)

Yeah, absolutely. So sometimes it can be synonymous. Fractionalized ownership and tokenized ownership can mean the same thing in some ways. It’s like every tokenized ownership is fractionalized ownership, or it could be. You could buy one token that represents the entire property. But really, the tokenization is the backend. So instead of the fractions and the cap table existing in an Excel spreadsheet or in some backend system, it exists on the blockchain.

And so we built on the XRP ledger because they have institutional grade blockchain and tokenization capabilities. I can get into that more on a backend and technical if you want. But essentially what it does is once a property is tokenized, it allows that token to be instantly traded. And so you can think of it kind of synonymous with stocks. If you buy a stock of Amazon or Tesla, you can sell it on the market. ⁓ It’s similar with

Dylan Silver (05:45)

you

Brendan Burke (05:49)

tokenized real estate. Once you have that token, you can sell that token to other people. And so this…

drastically reduces the amount of time and effort it takes to sell because you don’t any longer have to list a property for sale, pay a 6 % commission and wait months for closing. You can just sell that token and someone can buy instantly. And because it’s already tokenized and we do a tokenization framework both in the legal and the logical side, because it’s already tokenized, all of the closing and transfer documents have already been done. And so essentially our legal framework is that

Each property is owned one-to-one by its own Wyoming Dow LLC. so, Wyoming, the state of Wyoming has protections under state law for Dows. And so, they have a Dow designated LLC. And that actually allows us to record the contract address of this token with the Secretary of State. It was a clear, logical, and legal record of ownership of whoever owns those tokens, owns that Dow LLC, and owns that Dow LLC’s assets.

And so, yeah.

It’s pretty cool technology for sure. We’re definitely one of the first, there’s a couple doing it. One is ahead of us, it’s called Lofty. Then there’s a couple that are similar in the space, Proppy. And really what we’re striving towards is 100 to 200 properties that people can interact with and actually participate and own around the blockchain.

Dylan Silver (07:03)

want to ask you about the ability to sell instantly versus fractionalize real estate where you really can’t do that because you have to hold on to it until pretty much everyone decides to let it go. That’s a big difference, right?

Brendan Burke (07:15)

Yeah, absolutely. fractionalized ownership can look in many ways. It could be a small group of friends that have gotten together and they’ve bought into an LLC and then that LLC goes and buys property. In that case, it’s super illiquid. You would have to market just your share of that to either your other LLC members or to people on, say, facial marketplace or Craigslist. It’s very difficult or real estate investment groups. But once you add the tokenization in an actual secondary market,

and a DEX, a decentralized exchange, where people that have already signed onto a platform and gone through KYC and gone through the necessary tax reporting requirements can actually buy those tokens right away, it really reduces that burden by a

Dylan Silver (07:54)

I think, you know, when folks are thinking about getting into real estate, they may be thinking, hey, I got to pool money with friends. I got to maybe figure out all the different strategies of investing. But tokenization allows, I would say, ⁓ a limited risk in some ways. Of course, with leverage, there’ll be more, but it allows people an entry way to get in. Am I wrong in saying that?

Brendan Burke (08:13)

⁓ I mean, risk and limited risk is one of those things, especially investing that no one could ever say for sure, right? Investing in any sort carries risk with it. And so, yes, on a tokenized basis, you can buy in for less, which is maybe less risk, right? But every investment has its risk. Do your own due diligence. Check out the market. Check out the neighborhood. Check out the property. Really, analyze that deal for yourself. But yeah, I would agree.

in know impartiality with that statement. Yeah.

Dylan Silver (08:40)

I wanna pivot a bit here, Brendan, and ask you about

the Airbnb arbitrage because a lot of folks may, I think it’s in vogue, right? And you got in in 2021 with Airbnb arbitrage. So you got in really when it was not as many people now, but everyone’s talking about Airbnb arbitrage. The space is kind of adapted because I think people may be more aware, but what was it like in 2021? And then also, how did you get your first deals?

Brendan Burke (08:50)

Yep. Yep.

Yeah, absolutely good question. coming around out of college and wanting to get into real estate, that was kind of one of the only ways I could get into real estate, because I didn’t have tens or hundreds of thousands of dollars to put down on a real property. And so, it took a lot of reaching out. It was honestly about a whole year between when I first started looking and when I actually got a property that would let me do this. And so, I was reaching out, had a script that was like, hey, I want to rent your property out and

furnish it and put it on Airbnb, they have great insurance and I’ll get my own insurance and blah, blah. And so a lot of nos and I eventually circled back to one of the original property owners that was kind of interested but wasn’t sure. He’s like, I need to talk to my lawyer about this. I gotta figure out all the different things that could go wrong. And so about a year later, I was actually able to start renting this place. The first one was actually already furnished. And so essentially all had to do was pay a deposit.

And then it was like 1500 bucks and then I listed it for about $700 more than I was paying for rent and then it was instantly cash flowing in. So that was my first one and the second one was actually this guy’s brother-in-law and so I have a really, really good relationship with those two real estate investors and that’s where a lot of my units have come from. So really in real estate, your network is your net worth, right? So get out there and network with people, go to local real estate investor meetups.

that’s definitely gonna be one of your best bets for finding properties that will allow you to do rental arbitrage. And so, I live in, at the moment, not a very touristy area. It’s a place that people don’t go for vacation. It’s a place where people go for work and relocation. There’s a few big employers in this area, and so there’s a of travel nurses. And so that was really my thesis the entire time is provide basic accommodations that are much better than a hotel, of course, but that’s just a basic house, a basic apartment.

Dylan Silver (11:07)

you

Yeah.

Brendan Burke (11:29)

somewhere that someone can go and live and be here for one to six to even 12 months comfortably. So that’s what I’ve done. Kind of underwritten all of my properties to be, after all my expenses, if they make 500 bucks a month, that’s 60 grand a year, that’s pretty good. And generally it takes about 5K, you can do it for less, to spin it up. That’s your rent, your first month’s rent, hopefully you can recoup a lot of that.

pretty good success, even listing them before with just unfurnished pictures, now that I’m a super host for multiple years. I can list a property that have absolutely no furniture in it and say, hey, it’s gonna be furnished by the time you’re in there, don’t worry about it. But I buy all my furniture from Facebook Marketplace. It’s a lot of running around town with a truck or a trailer and picking up stuff and staging it in my garage or a storage unit and then hiring some help and just moving everything in, getting everything set up on day one.

Dylan Silver (12:01)

You ⁓

Brendan Burke (12:19)

and then getting people in there. So, yeah, I’ve seen a lot of things. There’s been a couple interesting people I’ve dealt with, but by and large it’s been a very, very good experience. A lot of people are super appreciative. I’m very easy to work with, provide good customer service, and they reward me for it. So, yeah.

Dylan Silver (12:36)

I wanna ask you specifically about me. You have nine, is it nine Airbnbs now?

Brendan Burke (12:42)

Yeah, so nine rental arbitrage that are like my own and then two others that I manage as Airbnb’s and the two others that I manage as long-term. So the nine Airbnb’s, the rental arbitrage, they bring in about $26,500 a month in revenue. That’s when they’re all fully booked. With a portfolio that size though, I can have a week vacancy in one of the units and it only impacts my vacancy rate by like 2%. So it’s…

been pretty good, especially this year and last year I’ve had a lot of same day check-ins or next day check-ins. So, someone’s there for three months and then the next day or even the same day someone checks in for another three months. I really don’t do any short term, traditional short term, like one, two and like week long stays. I don’t really do that at all. It’s pretty much only month plus days. And I’m very selective also. I don’t have Instant Book on. Again, this depends on your market, whether or not you’re

going after vacationers that are gonna pay 500 to $1,000 a night, you might want Instantbook on, but mine are, I have one that’s by the room that’s a thousand bucks for the entire month. So, pretty selective, and that allows me to really reduce that vacancy, because if I just let the calendar open and sell them books, a three month stay, that’s a month away from my current vacancy that I’m pretty much screwed, I can’t really get anyone in there. So, yeah.

Dylan Silver (13:33)

Yeah.

Yeah.

Brendan Burke (13:59)

So anyways, back to the numbers if you’re interested. Yeah, so $26,500 a month in revenue, at about $17,000 a month in rent, and then over the course of almost four years, the only thing that’s been constant is it’s always an average of $200 per property per month in utilities. So that’s what I underwrite. But yeah, it leaves a pretty healthy margin. I’ll let the viewers do the math there.

Dylan Silver (14:02)

Yeah, let’s go.

Would you say that you’re in the midterm space because you have the 30 plus days?

Brendan Burke (14:26)

Yeah, absolutely. Yep.

Dylan Silver (15:09)

So I mean, I’m a big fan of the midterm space. I am in Santo Domingo right now, but I had really grown up in real estate in Texas. And I think oftentimes in Texas, a lot of people starting out may look at some more creative ways, know, wholesale or they may look at arbitrage as one, right?

But midterm isn’t as glorified as some of the other spaces. Why did you choose midterm over, say, know, a short term?

Brendan Burke (15:34)

It just goes back to the product market fit. So again, I live in an area that’s not a vacation destination where short term, there’s not gonna be as many people coming for short term as there are for midterm. so really just looked at the market, did some research, looked around with my eyes, because I live here now, but also researched online. What is going on in this area? And really what I found is it’s, there’s…

a few major industries here, and so a lot of people are coming to either work in those directly or indirectly through contractors and other support roles. so a lot of people come in the area, and yeah, that’s what made me just do midterm instead of short term is because that’s what would work best in my market.

Dylan Silver (16:14)

I’m curious to get your thoughts on people who may be looking at different areas to invest in the country, your thoughts on Washington versus other areas.

Brendan Burke (16:22)

Yeah, absolutely. right now, interest rates are higher. They’re higher than they have been, but that was really a very historic low. They’re pretty much about average for where they are historically, but it’s still in the high sixes, low sevens, and up depending on your property. So you gotta do your underwriting. gotta look, does this pencil as a cash flow? What’s my investment strategy here? Am I trying to do a flip?

Am I trying to do a BRRR? Am I trying to just do long term? I’m buying it already fixed up. All those things go into your underwriting. So what’s your purchase price? Are you going to have to rehab it? What’s your interest rate going to be? What’s your debt service? All your expenses, your taxes. And so I’ve invested in Ohio. It has a really good gross rental yield. And so for that reason, I’m looking for cashflow out there. If you’re looking for high growth appreciation in the value of the asset, dare I say California.

Do your research, right? There’s some states that are landlord unfriendly and there’s some states that are landlord friendly. If you’re really looking for cash flow, I’d say go Midwest or even into the South. But be aware of the local weather and other things like pests that can really affect the structural integrity and just the integrity of the house in general. So always get an infection if you’re not…

Dylan Silver (17:35)

Yeah.

Brendan Burke (17:37)

an ex-contractor or current property inspector. One, it’s really good to due diligence there on the quality of the house. But also, it’s a great bargaining chip for your negotiations with the seller on the sales price. So, yeah, it’s just my two cents.

Dylan Silver (17:52)

I mean I lived in Denton which was north of Dallas and I figured out Dallas will be okay. I had no idea that there was going to be all types of tornadoes when I moved out there. I don’t know if I would have moved right out there. They don’t they do get torn but they really don’t they don’t really get tornadoes in Dallas proper. You don’t see a cyclone dropping onto the dirt and you know you’ll see it in Denton.

and my car got wrecked and so all these things make me think you really do have to have some boots on the ground before you maybe start looking at these types of deals. But Brendan, we are coming up on time here. Where can folks go if maybe they’d like to learn more about your tokenization business and then also maybe if they have deals in the Washington area that maybe they want some feedback or a second opinion on?

Brendan Burke (18:40)

Yeah, absolutely. So, Decentralized Real Estate, deredao.com, D-E-R-E-D-A-O.com. You can find everything there. If you want to connect with me directly, go to meetbrendan.com, M-E-E-T-B-R-E-N-D-A-N.com. Happy to meet with anyone, happy to connect with anyone. Really love the real estate space and a bit of a jack of all trades. so, yeah. Thanks for having me.

Dylan Silver (19:04)

Absolutely, Brendan, thank you so much for coming on the show here today.

Brendan Burke (19:07)

Appreciate it, it was a blast.