Rental Income Flow Explained

This section breaks down the flow of rental funds from the tenant all the way to the investor, step by step. It also covers how maintenance reserves are handled and the policy on claiming rewards.

1. Tenant to Treasury

• When a property is acquired via Subunit, it will typically be leased out to a tenant (for residential properties, this could be a family or individual; for commercial, a business; etc.). The tenant will pay rent periodically (e.g., monthly) as per the lease agreement. In the real world, this rent might be paid in fiat currency to a property manager or a bank account of the property-holding entity (LLC).

• Subunit’s structure will ensure those funds reach the property’s treasury in the crypto ecosystem. This will happen through an on-ramp integration (for example, the property manager converts the fiat rent to USDC and deposits it into the property’s Treasury smart contract, or uses a stablecoin payment rail if the tenant is agreeable).

• The rental income is brought on-chain to a designated treasury wallet or contract associated with that property’s DAO. This property treasury is essentially the pot of funds that belongs to the investors collectively, from which distributions and expenses will be managed.

• The timing of these on-chain deposits will be monthly, or quarterly depending on the tenant's arrangement.

2. Allocation to Maintenance Reserve

• Before distributing rent to investors, Subunit ensures that each property retains a prudent maintenance reserve. Real estate ownership comes with expenses – repairs, maintenance, property taxes, insurance, occasional vacancies, and so on. T

• o prepare for these costs, a portion of the rental income is set aside into a reserve fund. This is a fixed percentage of each rent payment (for example, let’s say 10% of the rent, though the exact percentage could be adjusted by the property DAO based on property type and condition).

• This deduction happens immediately when rent is received.

• If, for instance, $1,000 of rent comes in, $100 would go into the maintenance reserve fund and $900 remains as net income.

• The maintenance reserve is kept in the property’s treasury or in a separate wallet earmarked for that property’s expenses.

• The DAO will collectively vote on using reserve funds for major repairs or capital improvements, whereas routine expenses will be automatically paid out from this reserve by the executor or property manager within pre-approved limits.

• Importantly, these reserve funds belong to the property owners (the token holders), but are not paid out as profit; they are retained to keep the property in good shape and handle unforeseen costs. In the long run, if a reserve grows large and is deemed over-funded, the DAO could vote to release some of it as a bonus distribution, but generally a healthy reserve is maintained throughout the investment’s life.

• This ensures the investment club is operating the property responsibly, much like a well-run real estate partnership would – protecting the asset and thereby protecting investor value.

3. Distribution to Staking Pool

• After carving out the maintenance (and possibly other expenses like property management fees or insurance costs if those are handled similarly), the remaining net rental income is allocated for distribution to the investors.

• Subunit uses a staking pool mechanism to distribute this income on-chain. This means that investors who want to receive their share of the rent will stake their property tokens (UNIT tokens) into a designated pool (sometimes simply called the staking pool for that property).

• Why require staking of the tokens to get the rent? There are a few reasons:

  • (a) It simplifies the distribution logic – the smart contract can easily calculate rewards for those who have their tokens in the pool without scanning all token holders.

  • (b) It reinforces the idea of active membership – by staking, you signal you are an active member expecting the rental dividends (in line with the investment club ethos, you take an action to participate rather than just passively hold).

  • (c) It could have compliance benefits by ensuring only verified members stake.

  • (d) It boosts liquidity as staked tokens will be utilised in the DEX.

• In practical terms, once net rent is determined (say that $900 from the earlier example), that $900 (likely in USDC) is moved into the staking reward contract for the property. This contract then holds the funds to be claimed by token holders. The contract knows the total number of UNIT tokens staked in it (for example, suppose collectively 100,000 UNIT tokens representing the property are staked by all investors). Each investor’s share is proportional to how many of those staked tokens they contributed. If you staked 10,000 UNIT (which is 10% of the total stake), you are entitled to 10% of the $900 for that period, which is $90. If someone else staked 5,000 UNIT (5%), they get $45, and so on.

• If an investor does not stake their tokens in this pool, their share of the rewards will be distributed amongst the investors that do.

• You must stake your UNIT tokens in the rental pool to receive distributions. If you hold tokens in your wallet un-staked, you forgo collecting rent until you stake them.

4. Claiming Rewards ($10 Minimum)

• To actually receive the rental income as spendable funds, investors need to claim their rewards from the staking pool. Claiming typically means calling a function on the pool contract that transfers your accumulated USDC (or other stablecoin) from the contract to your own wallet.

• Subunit imposes a $10 minimum reward threshold for claims. This means you need to have at least $10 worth of distributable rent accrued before you can trigger a claim withdrawal. If your share of the rent is below $10, the contract will not allow a payout yet (or it will prompt you to wait).

• This policy is in place primarily to avoid inefficient use of gas and to prevent the network from being spammed with tiny transactions. Since on-chain transactions have fees, claiming very small amounts could cost more than the payout itself. By waiting until at least $10 is available, it ensures that the claim is worthwhile and cost-effective.

• For example, if you only invested a small amount in the property, your monthly rent share might be, say, $2. It would take five months to accumulate $10. You would then claim perhaps quarterly or semiannually, rather than every month. Investors with larger stakes will hit $10 much faster (maybe every month or even every few days, depending on rent levels and stake size), but they might still choose to claim less frequently to save on transaction fees, perhaps combining multiple periods.

• When a claim is executed (say you have $50 accrued and you call “claim”), the smart contract will transfer those stablecoins to your wallet and reset your accrued balance in the pool to zero (for that property). You can then use those stablecoins freely – reinvest in other Subunit deals, stake them again in the SubVault, trade, or convert to fiat if you need.

• You can only withdraw if you have voted in all active DAO votes for that property, or if there are no active DAO votes. This ensures that users who receive rewards have adequately participated in the management of said properties.

It’s worth noting that any protocol fees related to rental income (if Subunit charges one) would likely be taken before or during this distribution phase. For instance, if Subunit charges a 5% fee on rental distributions for providing the platform, that might be deducted from the net $900 before it goes to the pool (leaving $855 to distribute and $45 taken as a fee to the protocol treasury). But from the investor perspective, the steps remain the same; only the net amount changes due to fees.

To recap the rental flow:

• Rent from your property’s tenant flows into the DAO’s treasury, the system holds back a slice for maintenance/upkeep, and the rest is made available to you and fellow investors as stablecoin rewards. Y

• You access those rewards by staking your ownership tokens and later claiming the accumulated funds (ensuring you have at least $10 to make it worthwhile).

• As an participant, you also get to oversee this process via governance – for example, the percentage for maintenance reserve or any changes to claim thresholds can be proposed and voted on by the DAO, meaning the community controls the parameters of how income is managed.