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Millions of Americans dream of becoming a real estate investor but can’t or won’t because of various challenges such as lack of recognition, lack of capital and time.
So it’s no surprise that in recent years there has been a proliferation of startups that aim to give more people access to real estate ownership in the form of fractional shares.
One such startup, Landa, is exiting the heist today with $33 million in funding — including a recent $25 million Series A round and an $8 million seed round. NFX, 83 North and Viola Co-led. A Series A for the New York company that closed in the first quarter of this year. 83North and NFX co-led the race.
CEO Yishai Cohen and CTO Amit Assaraf launched Landa in 2020 to make real estate ownership more inclusive.
“Owning real estate is the greatest source of wealth, and it’s out of reach for most Americans. As housing inequality rises, wealth inequality grows and home ownership remains unattainable,” Cohen told TechCrunch in an interview. “So we’ve been thinking about ways to lower the barrier to entry into real estate and provide more people with the ability to access the real estate segment.”
And so Landa was born.
Until the end of last year, the company was mainly “going through the regulatory process,” Cohen said. So it started to see significant growth only this year. In particular, Landa has grown from 600 to nearly 25,000 investors using the app by 2022.
Using the Landa app – those users have invested in nearly 400 properties in 7 cities, including Atlanta, New York City, Charlotte, N.C., Tampa, Birmingham, Orlando and Jacksonville, Fla.
The company’s latest move is to expand its capital and “find more investors in more markets,” Cohen said. Landa secured $60 million in debt financing for market expansion over time.
The way it works is similar to other fractional real estate ownership startups, and in particular, this model is very similar to Arrived – which allows people – including non-accredited investors – to invest in shares of rental properties “for as little as $100.” That’s the beginning He collected 25 million dollars With participation in Series A and C led by Forerunner Ventures Bezos Expeditions, Jeff Bezos’ private investment company. TechCrunch previously reported Fraction And SurpriseThese are focused on residential real estate.
In Landa’s case, investors are only required to be 18 years old and US residents. You can start investing with just $5 and buy and sell stocks and see real-time updates on your assets from the Landa app.
But how much money can one make with such a small investment?
“People start low and build their accounts over time,” Cohen said. “The entry point of $5, allows them to build confidence over time and add to their portfolio as they become comfortable.”
On the upside, Landa has deliberately chosen not to partner with REITS or funds with existing real estate operations.
“We’ve built our own teams in the field for maintenance, property management and building apps for residents,” added Cohen. “We also use automation and code for all the behind-the-scenes processes like acquisition.”
As soon as he arrived, Landa formed an LLC to buy real estate that sells for a minimum of $130,000 for single-family homes and less than $3 million for multi-family investments.
Landa makes money by taking a 6% acquisition fee on purchases. It also takes 8% of the gross rent to cover property management fees. Since Landa is a property manager himself, he makes money from 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 require minimal work, and we have good faith that we will not have high material costs after purchase. We focus on market values and markets with high occupancy rates and high income.
Landa currently has 46 employees and is headquartered in New York.
Image Credits: Landa
Gigi Levi-Weiss, a founding partner at NFX, says she’s known Cohen since she was 16 and founded her first company, Smart Bass; B2B marketplace for bus companies acquired in 2016.
“When we met again to discuss Landa and how they can increase access to invest in the $43 trillion residential real estate market, I knew this was something we had to be a part of.” she wrote in an email. “Since then, Yishai and Landa have demonstrated an amazing ability to create all aspects of this market…”
Levy-Weiss added, “The combination of a low barrier to entry with an innovative mobile-first user experience is revolutionary compared to other real estate investment options that are always accessible to the same audience.
Interestingly, startups focused on renting seem to be getting more traction and investor attention than those focused on home buying.
“Buy before you sell” startup Riley began the closing process last week after raising $100 million in venture funding a year ago. Digital mortgage lender Better.com was reportedly planning its fourth discount plan in nine months as of last week. 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 workforce. And Redfin and Compass laid off 900+ people in mid-June. In February, online brokerage Homey laid off a third of its workforce, or about 90 to 100 people.
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