Although real estate is the largest asset class in the world, it is largely inaccessible to non-institutional investors. The large sums of capital often required for an individual to purchase a property, combined with the industry’s reliance on manual and antiquated processes, present significant barriers to entry for individual investors seeking exposure to real estate.
These challenges are further compounded for those who are not accredited investors and therefore excluded from most private real estate investment opportunities. (Under U.S. Securities and Exchange Commission rules, accredited investors must have a net worth of $1 million or an individual income of more than $200,000 per year.)
“Home ownership is the greatest source of wealth generation, and it’s out of reach for most Americans. As housing inequality rises, wealth inequality rises, and land ownership remains inaccessible,” Landa co-founder and CEO Yishai Cohen told TechCrunch in August.
In the United States, the homeownership rate has steadily fallen as potential buyers grapple with low supply, weakened purchasing power and record costs. If current housing policies remain unchanged, communities of color in particular will face another setback in their ability to build generational wealth, according to research by the Urban Institute.
While many barriers to homeownership stem from political decisions, startups like Landa are working to help people access real estate wealth through a different means – investment. Investing in ownership shares is obviously not a perfect substitute for buying one, but it can be a more accessible entry point into the real estate market.
It should be noted that REITs (Real Estate Investment Trusts) exist to solve similar access issues. REITs are publicly traded vehicles that allow individuals to invest in portfolios of properties, but they are limited in scope by very specific regulations and may differ in their return profile from private real estate, which means that there is still plenty of white space for tech startups. build new solutions.
The need to expand access to real estate has, in part, driven a boom in technology funding in the sector. Real estate-related venture capital funding hit a record high in 2021, with more than $5 billion in capital deployed in 219 deals, according to data from PitchBook. Over the past six months, TechCrunch has covered new funding rounds from at least four different startups that are using technology to bring real estate investments to unaccredited investors.