Selling Property Shares to Convert Into Higher Cash-Flow

[Ruben Wollerich]

Hi all! We currently operate a student housing brand with four houses in which we long-term lease properties, furnish, decorate and divide more rooms, and rent it out to students. Our margins are (when 100% occupancy) 35-40% to lease, 25% other costs and the rest profit to pay costs outside of business units. We are reconsidering this model to gain more equity/cash at the opening of the houses.

The idea is to set up a fund or entity to sell shares and fund the acquisition, remodeling, and furnishing of the project with. The shareholders will get dividends out of the cashflow that we generate which is a 10 - 14% return. 

Since we operate in residential properties (which is legal for student housing in Colombia), we are able to sell the shares for more than the cost of setting up the project (property, furnishing, remodeling etc.). We see this as our cash out of the project. So say the project costs 200k USD, the share sale gets raises 250k USD, we plan to use 50k for our new projects, while still being able to deliver a high return on the 250k invested capital by the investors. 

My question is how common this is. Is this something investors would agree with? Do other projects work like this too? ANd if not, is there another way for us to cash out?