Lofty started as an AI tool with a mission to aid real estate investors in finding optimal neighborhoods. However, it soon became apparent that the real hurdle investors faced was overcoming the high cost of entry to investing in the real estate market. The founders—Jerry Chu, Max Ball, and Mark Keane—pivoted to a much larger mission: democratizing access to property ownership. Lofty now provides fractional homeownership by tokenizing real estate, enabling investors across the U.S. to build wealth through property value growth and rental income.
Highlights*
- Lofty has tokenized 148 properties to date across 11 US states.
- The highest-valued Lofty portfolio is around $2,221,000, and the lowest is just $50.
- The average number of buyers per home is around 231.
- Lofty has around 7,000 monthly active users.
- Lofty has generated $2 million in rental income for its users to date.
Challenge
"We had assumed that finding a property to invest in was 95% of the work involved," recalls Jerry Chu, co-founder of Lofty. "But after speaking with our early users, we realized that the bigger barriers were actually having the funds, being able to get the right loans, and ultimately going through the transaction process."
The traditional process of buying real estate keeps many locked out of the property market, not only because of the high initial down payment needed but also because of the time commitment required to go through the cumbersome and lengthy buying process.
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"If we could build a platform that not only helped them source available properties for sale but also allowed them to invest any amount they could afford instantaneously, then we would be able to truly disrupt the existing real estate investing process," he continues.
Solution
Lofty needed a payment system where users could trade directly with each other for the property sales to be instantaneous. “Direct payments happen in traditional real estate transactions, but they require a lot of trust or intermediaries like brokers and agents,” explains Chu. “Blockchain excels at peer-to-peer (P2P) payments. With blockchain, your funds are locked in a smart contract—in escrow—and only once each side’s requirements are met do they settle.”
Lofty also wanted to grant investors true control over assets, unlike traditional real estate investment trusts (REITs), which enable a form of fractional ownership but without any real control over the property. Blockchain could facilitate full ownership of digital assets, along with a payment system where users can trade directly with each other.
The next step was to find a blockchain that could provide inclusivity and access to anyone, in particular those who aren’t native to crypto and Web3. “We were looking for somewhere to build where we could operate similarly to a Web2 platform, where transactions process immediately—and many blockchains don’t offer that.”
“We quickly realized Algorand was the solution: Transactions settle with immediate finality in 3 or 4 seconds, very much like what people are used to in Web2. Algorand transaction fees are incredibly cheap, which Lofty is able to compensate for since people aren’t used to paying them in Web2,” he continues.
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Lofty property tokens, issued as Algorand Standard Assets (ASAs), represent an investor's stake in a property. "We do not own or manage any of the assets on the platform. Rather, we allow anyone interested in selling a property to sell to many buyers, who collectively manage and own the property through a legal DAO in the United States,” explains Chu. Token holders essentially become the ultimate managers of the property, voting on things like home improvements, raising the rent, and replacing household appliances.
Lofty's marketplace provides comprehensive property information, including projected returns, lease details, and tenant information. The platform emphasizes the importance of conducting due diligence before investing in a property.
To engage with Lofty, users create an account, complete KYC (Know Your Customer) verification, and purchase property in the form of tokens using USD, Algo, or other cryptocurrencies. The tokens equate to ownership of a portion of the property, and this ownership can be traded at any time on the Lofty marketplace since there is no mandatory token lockup period. Users don’t need an Algorand wallet set up to store their tokenized assets, as the Lofty app creates one for them, which is attached to their account. Users can then interact with this wallet using the basic UI on Lofty without knowing or learning anything about cryptocurrencies or the blockchain. It’s also possible to store Lofty tokens and tokenized property assets in an Algorand wallet, if you already have one.
An exceptional feature of Lofty is its secondary marketplace, which enables users to sell their property shares and liquidate their ownership more easily. Lofty will soon launch the world's first liquidity pool and automated market-maker for real estate, where users can trade in an instant and transparent manner with a market and spot price, as with other asset classes.
Results
As of September 2023, Lofty's platform collectively generated $2 million in rental income for its users, showcasing the platform's tangible impact on generating cashflow streams from one of the world’s largest asset classes—US residential real estate. Lofty's journey from an AI tool to a blockchain-powered real estate marketplace exemplifies the transformative potential of technology in the investment landscape. It demonstrates how real-world assets can deliver inclusivity and access to an industry previously out of reach for so many.
See all Algorand case studies.
*data recorded September 2023
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