Millions of Americans dream of becoming real estate investors, but it’s safe to say they can’t or won’t because of a variety of challenges, including lack of accreditation, capital, and time.
So it’s no surprise that in recent years, startups have sprung up with the goal of giving more people access to real estate ownership in the form of fractional shares.
One such startup, Landa, is emerging from stealth today with $33 million in funding — including a recent $25 million Series A round and an $8 million seed round. NFX, 83North and Viola Co-led by Series A closed in the first quarter of this year for the New York company. 83North and NFX co-led its seed round.
CEO Yishai Cohen and CTO Amit Asaraf launched Landa in 2020 in an effort to make real estate ownership more inclusive.
“Real estate ownership is the largest source of wealth generation, and it’s out of reach for most Americans. As housing inequality increases, wealth inequality increases and property ownership becomes unaffordable,” Cohen told Technology Flow in an interview. We’re thinking of ways to bring accessibility to more people.”
And so Landa was born.
Until late last year, the company was primarily “getting through the regulatory process,” Cohen said. So it’s really starting to see significant growth this year. Specifically, Landa grew from 600 to nearly 25,000 investors using its app in 2022.
Those users have invested in approximately 400 properties in 7 cities, including Atlanta, New York City, Charlotte, NC, Tampa, Birmingham, Orlando and Jacksonville, Fla., using the Landa app.
The company’s goal with its latest round of capital is to “scale and get more investors in more markets.” Over time Landa also secured $60 million in debt financing for its market expansion.
The way it works is similar to other fractional real estate ownership startups, and in particular, the model closely matches newcomers — including unaccredited investors — by allowing people to invest “less than $100” in shares of rental properties. That startup Collected 25 million dollars in a Series A led by and in partnership with Forerunner Ventures Bezos Expeditions, Jeff Bezos’ personal investment firm. Technology Flow previously reported Different And FinterThey also focus on residential real estate.
In Landa’s case, the only requirements for investors are that they be over 18 and US residents. They can start investing with just $5 and can buy and sell shares as well as see real-time updates on their holdings from the Landa app.
But how much money can be made with such a small investment?
“People start small and build their accounts over time,” Cohen said. “The $5 entry point allows them to build confidence over time and grow their portfolio when they’re comfortable.”
On the backend, Landa has deliberately chosen not to partner with REITS or funds with existing real estate operations.
“We have our own teams in the field for maintenance, property management and building an app for residents,” added Cohen. “We also use code for all the behind-the-scenes processes like automation and acquisition.”
As it turns out, Landa creates an LLC to buy real estate that sells for $130,000 for single-family homes and just under $3 million for multifamily investments.
Landa makes money by taking a 6% acquisition fee at the time of purchase. It keeps 8% of the gross rent on a monthly basis to cover property management fees. Since Landa itself is a property manager, it makes money on those fees as well.
“We focus on properties that generate good dividends and good rental income,” Cohen said. “We are looking for properties that are ready to rent or need minor work and we are confident that we will not incur significant material costs immediately after purchase. We focus on cap rates and markets that can generate high occupancy rates and high revenue.
Landa currently has 46 employees and is headquartered in New York.
Gigi Levy-Weiss, a founding partner at NFX, said she had known Cohen since he was 16 and founded his first company, SmartBus. A B2B marketplace for bus companies acquired in 2016.
“When we reconnected to discuss Landa and how they were going to increase accessibility to invest in the $43 trillion US residential real estate market, I knew it was something we had to be a part of,” she wrote via email. “Since then, Yishai and Landa have been involved in nearly every aspect of this market. Demonstrated remarkable ability to innovate the subject…”
Levy-Weiss added: “The combination of a low entry barrier with an innovative, mobile-first user experience is truly revolutionary compared to other real estate investment options that essentially serve the same audience that always has access.”
Interestingly, startups focused on rentals are gaining more traction and investor attention than those focused on home buying.
“Buy before you sell” startup Reali began the process of closing last week after raising $100 million in venture funding just over a year ago. Digital mortgage lender Better.com was planning its fourth layoff in 9 months as of last week. But the two companies aren’t the only ones facing challenges in the real estate tech world. Earlier this month, another “buy before you sell” startup Homeward laid off 20% of its staff. And Redfin and Compass let go a combined 900+ in mid-June. In February, online brokerage Homey laid off about a third of its staff, or about 90 to 100 people.
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