Founder and CEO of Lofty, Jerry Chu was like many of us. He wanted to invest in rental properties and knew it was not happening where he lived. The only way to do it was to look elsewhere. You buy an airline ticket, fly to a new city, rent a car, get a hotel, pay for meals, gasoline, check out houses, and meet property managers.
When you fly back to start making offers, you're already about $1000 in the hole from your trip, and you often get outbid and/or didn't like the houses you saw on your trip. So you go back the next month, or you visit another city, and repeat the same cycle of spending.
Others might be willing to make offers ahead of time, but you often incur the same expenses (airfare, rental car, meals, hotel, gas, etc.), except this time you're adding in your home inspection costs after getting your offer accepted, plus the overall time needed to accomplish buying a house.
"Our goal is to make real estate investing as simple as investing in stocks or crypto. Diversification is key to any investment strategy, but the barrier to entry for real estate investing has always been so high. We don't believe that should be the case", according to Jerry.
Lofty says their service will offer investors a fraction of a cash flowing rental properties starting for just $50. All properties have a property manager in place and investors start earning rental income on day one. If you need to sell your investment for any reason, Lofty says there are no lock-up periods or minimums to sell. Think of their platform is more like Amazon or eBay. It even has its own marketplace.
The properties are listed by multiple parties that source off-market deals. Some individuals source rental property owners and arrange a purchase agreement for a single property, or package of properties, at a specific price (usually at a discount). These individuals typically run a full inspection report, do any updates to the property to get it move-in ready, then lease out the units before putting the property onto Lofty's platform.
So how does this all relate to crypto? According to a blog on their website, investors can now invest into their properties with ALGO, USDC, and STBL, and now, ETH. Before accepting crypto, most investors were using credit cards to buy into these properties, right on your Metamask wallet. The platform uses the Algorand blockchain, they say specifically due its lower gas fees and quicker transaction times.
Property tokens on Lofty AI can be purchased via credit card or ACH transfer, and soon, eligible for purchase using Algorand-based currencies. Rental income is distributed to owners in USD, with forthcoming options for rental income to be sent directly to a user's Algorand wallet.
For those not wishing to use Metamask, Lofty has launched their own wallet, adding, "Lofty Wallet is a multi-signature (aka “multi-sig”) crypto wallet that you own and control. Included natively in your Lofty account, it strikes an optimal balance of ease of use, security, and control that is unrivaled by traditional wallets. Lofty Wallet bridges the gap between traditional finance (TradFi) and decentralized finance (DeFi). It provides the benefits of both, without the drawbacks of either."
Another key component of the process is how its users make decisions. Specifically, "fractional owners vote on all property decisions through our governance system. These decisions range from rent increases to handling repair requests and more. The winning decisions are determined by a supermajority (60%+) and are automatically relayed to the Property Manager to fulfill."
To date, Lofty AI has raised over $5M in total funding and is backed by leading investors including Y Combinator, Rebel Fund, Jason Calacanis, Hustle Fund, and more.
For someone like myself who truly believes that one day crypto and real estate will be as common as transacting in fiat, Lofty could have a bright future ahead. There are investment strategies for all kinds of people, and for those looking for a more passive way to invest, this could be a great fit. You still get to have a vote in property making decisions, but don't have to have it all on your shoulders. Somewhat similar to those who enjoy investment vehicles like a REIT, or syndication. I personally like getting my hands dirty and being more in control of investment decisions, but am very excited to see how the Lofty team continues growing.