Although real estate is the world’s biggest asset class, it is largely inaccessible to non-institutional investors. The large sums of capital often required for an individual to purchase property combined with the industry’s reliance on manual, antiquated processes pose substantial barriers to entry for individual investors looking to gain exposure to real estate.
These challenges are further compounded for those who aren’t accredited investors and therefore shut out of 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 individual income over $200,000 per year.)
“Real estate ownership is the biggest source of wealth generation, and it’s out of reach for most Americans. As housing inequality grows, wealth inequality grows and property ownership remains inaccessible,” Landa co-founder and CEO Yishai Cohen told TechCrunch in August.
In the U.S., the homeownership rate has been steadily declining as prospective buyers grapple with low supply, weakening purchasing power and record-high costs. If current housing policies remain unchanged, communities of color in particular will face yet another setback in their ability to build generational wealth, research from the Urban Institute shows.
While many of the barriers to homeownership stem from policy decisions, startups like Landa are working to help people access real estate wealth through a different means — investing. Investing in shares of property is obviously not a perfect substitute for buying it, but it can be a more accessible entry point into the real estate market.
It’s worth noting that REITs (real estate investment trusts) exist to solve similar issues of access. REITs are publicly traded vehicles that allow individuals to invest in portfolios of properties, but they are limited in their scope by highly specific regulations and can differ in their return profile from private real estate, meaning there is still plenty of white space for tech startups to build new solutions.
The need to broaden access to real estate has, in part, driven a funding boom for tech in the sector. Real estate-related venture capital funding hit a record in 2021, with over $5 billion in capital deployed across 219 deals, according to PitchBook data. Over the last six months, TechCrunch covered fresh venture funding rounds from at least four different startups that are using technology to bring real estate investing to non-accredited investors.
Got $5? These startups allow for investments in slices of real estate by Anita Ramaswamy originally published on TechCrunch
