CougarDAO's Short Term Rental Lease on Airbnb in Downtown Memphis: On-Chain Real Estate Management
WTF else would you like us to do? We'll probably do it.
CougarDAO LLC, our crypto real estate company, has recently signed a month-to-month lease with the property management arm of Memphis Merchant Exchange Building (Exchange 901), located in downtown Memphis, TN. The lease is for a 1 bedroom apartment, room number 809, which CougarDAO has listed as a short-term rental on Airbnb. This short-term rental lease is the next real property interest The Cougs are using as a proof of concept to demonstrate its ability to manage a real estate company on the blockchain.
The Location:
One of our members, mem.eth and his family, own the Memphis Merchants’ Exchange building in downtown Memphis. The building is mixed-use. They have commercial, long-term residential, and short-term residential units within the building.
As regular readers of this blog are familiar, we have an interest in testing out as many different real property interests as possible and managing those interests on-chain. Through this experimentation we are truly cat fooding blockchain orgs and discovering the competitive advantages and pain points. One of our areas in of interest is how to manage accounting, and banking and bridging from world fiat currency and distributing that on-chain.
The core components of this arrangement are in contract. We initiated a lease from Memphis Merchants’ Exchange and then subleasing via Airbnb to rent out the “possessory” interest from leasehold interest. It also gives us some more continuous cash flow since the farm only receives rent twice a year.
As readers of our blog, you can actually go and rent our unit the next time you’re visiting downtown Memphis: http://airbnb.com/h/cougars. Of course we also minted a TATR NFT of the property using TaterDAO protocol, that has all of the verifiable information and the parties use the NFT as a reference point for the lease. This NFT is also held in the CougarDAO treasury as provable ownership of the leasehold interest.
The Lease & Terms:
We created the lease via Openlaw.io (Real World Contracts for Ethereum). OpenLaw is a group who is friendly with LexDAO where several of our members originated. James McCall built the form for the lease using their protocol. The lease was cryptographically signed by me on behalf of CougarDAO LLC and S. Umarov on behalf of Silk Road Hospitality, LLC (owners of Exchange 901).
The lease also contemplates the ability to stream the rent in a continuous fashion using the Sablier protocol. Basically this makes the rent payment vest over the full year continuously, and will be claimable by the landlord as often or seldom as they wish. Pretty cool, that the lease is basically prepaid, and yet there are both landlord and tenant protections in place in case of a dispute or early termination of the lease. The rent streams continuously as it makes sense to have a perpetual flow of rent, versus arbitrary concepts of monthly and annual rent.
As of this blog post, we have signed the lease cryptographically and also with wet ink.
The terms: We are paying Silk Road Hospitality, LLC $500 per month base rent. We’ll be streaming those payments to them in $USDC streamed on Sablier. They will also get 35% of the Airbnb income from a separate agreement for property management. We haven’t moved this on chain yet.
The straight rent payment will be easy. CougarDAO LLC and Silk Road Hospitality, LLC are both crypto forward companies.
Airbnb does not make payouts in $USDC or other stablecoins. They pay out in $USD. Those funds are deposited directly into our checking account. We also set up a automatic routing rule to split payments 35% to KeyTree (property management for Silk Road Hospitality) and 65% to our bank. Airbnb handles the routing and the W9’s for each party.
The Income:
We have no idea exactly what the income will be, but this arrangement seems fair to both parties and allows us to keep iterating and exploring. What we know, is that a short term rental in a real city, can be insanely busy. Room 809 has been listed since approximately February 24th. As of March 3rd, we had completed 5 reservations and have 16 upcoming reservations.
Airbnb pays out quite rapidly. We usually get a payment deposited into our checking account the day after a guest checks-in.
Challenges Faced:
Despite the initial success of the Airbnb listing, we’ve faced a challenge with its second short-term tenant. The tenant dyed her hair and damaged the apartment, resulting in a dispute that we had to resolve through Airbnb. Dispute mechanisms are part and parcel of doing business over the internet. This is a common issue that many landlords and property managers face, and it highlights the importance of having clear guidelines and expectations for tenants to follow.
Airbnb and Ebay are some of the largest alternative dispute platforms in the world. Blockchain will also need something similar. After some back and forth, we did receive $100 from Airbnb to pay for the damage done to our bathtub, countertop, and couch. Speaking of the couch, we are also buying those as well. We will use the CougarDAO treasury to vote, and pay out and receive a bill of sale for the furnishings. I guess this means we need a depreciation schedule now for taxes. Yuck.
What’s next?
The short-term rental lease on Airbnb is an important step for CougarDAO LLC as we continue to prove our ability to manage real estate on blockchain rails. While we have faced challenges with one tenant (with other tenants issues practically guaranteed), we have demonstrated our commitment to running head first into complex real estate issues while operating in a distributed manor and laughing at the difficulties. As more companies explore the potential of blockchain for real estate management, CougarDAO LLC is setting a strong example for how this technology can be leveraged to improve efficiency, transparency, and hilarity.