Lofty.ai Review 2024

Lofty offers fractional property ownership in the form of blockchain-based tokens that allow investors to earn rental yield and profit from value appreciation.

Lofty is an online real estate investment platform that enables you to purchase a fraction of a property starting with as little as $50. At Lofty, fractional property ownership comes in the form of tradable, blockchain-based tokens that allow investors to earn rental yield and profit from a potential increase in the value of the property, thus opening up the real estate market to smaller investors who cannot afford a 20% down payment on a rental property. 

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Pros & Cons 

Pros Explained

• Provides small investors access to real estate investments: Starting with as little as $50, Lofty users can invest in real estate properties and gain exposure to real estate as an asset class.
• Pays out rental yield on a daily basis: Rental yields are paid out daily to token holders.
• Allows investors to purchase fractional real estate using a credit card: Alleviating the need to fund a wallet with cryptocurrency to purchase real estate tokens on the Lofty platform, users can make purchases with credit or debit cards (albeit with a 2.9% to 3.9% transaction fee). 

Cons Explained

• Blockchain token aspect may be a hurdle for non-crypto native investors: Lofty provides fractional asset ownership in the form of crypto tokens on the Algorand blockchain, potentially creating knowledge hurdles among users without crypto investing experience. 
• A secondary market for Lofty tokens only exists on Lofty’s marketplace: Lofty real estate tokens are not traded on major digital asset exchanges, limiting the secondary market liquidity of these tokens to Lofty’s own marketplace. 
• No mobile app: Lofty can only be accessed using a web browser; there is no mobile app version of the platform.
• Regulatory uncertainty around tokenized real estate investments: There is no clear regulatory framework covering tokenized fractional real estate investing, creating a certain degree of regulatory risk for investors.   

Company Overview

Founded in 2018 by Jerry Chu, Mark Keane, and Max Ball, Lofty’s mission is to make investing in real estate as easy as investing in stocks or crypto. 

The Miami-based real estate tokenization startup has raised over $6 million from venture capital firms, such as Y Combinator, Rebel Fund, Jason Calacanis, and Hustle Fund, to build a marketplace on the Algorand blockchain that enables investors to purchase crypto tokens that represent a fractional share in a tokenized rental property.  

Investors from across the globe benefit from gaining access to the illiquid real estate market with as little as $50, while property owners in the U.S. can submit their rental properties to be tokenized and sold on the Lofty marketplace. 

How Does Lofty Work?

Lofty is a marketplace offering fractional ownership in tokenized rental properties. Users can buy (and sell) fractional ownership in the form of digital tokens operating on the Algorand blockchain. 

The company’s investment team vets each property on Lofty’s marketplace before it’s under contract by a newly formed DAO LLC. Individual tokens are tokenized on the Algorand blockchain and are worth $50 each. 

After a professional property inspection company has inspected the property and provided a report to ensure the quality of each listed property, the house will be listed on Lofty’s marketplace. Once the real estate property is fully funded, the DAO LLC will purchase the property, and transfer the deed to the new DAO LLC, providing fractional ownership of the property to each token holder. 

The token holders of that property start to immediately earn rental yield, paid out daily. Additionally, token holders may benefit from an increase in the property’s value. What’s more, tokens of each fully funded property can be freely traded on the Lofty marketplace. 

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Key Features

Lofty provides a unique offering, enabling investors to purchase fractional ownership in U.S. residential properties by buying tradable digital tokens representing a fraction of a specific property. 

Lofty’s tokenized real estate marketplace is open to both accredited and non-accredited investors, allowing retail investors to start investing in real estate with as little as $50. 

A simple sign-up process that only takes five minutes opens up the U.S. real estate market to a global audience. 

• Available to non-accredited investors: Lofty enables non-accredited investors to gain access to the real estate market without requiring them to make a 20% down payment on a property, thus opening up the real estate market to a much broader investor base.  
• Investment minimum: Investors can start by purchasing as little as one token worth $50 to start their real estate investing journey. 
• Ease of use: The sign-up process is incredibly straightforward, with a seamless Know Your Client (KYC) check that only takes minutes to complete. However, for non-crypto-savvy investors, dealing in tokens using the platform’s native digital wallet may be a new experience. 
• Accredited investment minimums: Accredited investors can start investing in rental properties starting at $25,000. 
• Non-accredited investment minimums: Non-accredited investors can start investing in rental properties starting at $50. 
• Curated portfolios: Investors can choose from a range of curated properties to invest in to build a diversified portfolio of U.S. rental properties, but there are no pre-defined real estate portfolios you can invest in. 
• Customizable portfolios: Each user chooses which rental properties to invest in by purchasing each property’s individual tokens representing fractional ownership. Portfolio customization is, therefore, entirely up to the user. 
• Reinvestment opportunities: Investors can reinvest their daily rental income by purchasing more tokens in the same or other properties listed on the marketplace. 
• Countries: Lofty can be used by investors from across the globe, excluding investors located in sanctioned countries.  

Fees

Lofty charges a 2.5% fee for every purchase and sale on the Lofty marketplace. 

While there are no platform fees when it comes to depositing funds into a Lofty wallet, users will incur the following fees, depending on the funding method they use: 

• Credit or debit card users will be charged 2.9% of the transaction value plus $0.30 per transaction if they are U.S.-based or 3.9% plus $0.30 if they are based outside the U.S. 
• Bank transfer fees will vary depending on the provider and geographic location. 
• Cryptocurrency transfers will cost around $0.01, which is the fee for using the Algorand blockchain. 

Transparency

Lofty provides a high level of transparency regarding the token liquidity on its marketplace as well as the fees users are charged to trade on the platform and deposit funds. However, Lofty does not provide regular reporting about the state of its business. 

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Liquidity

Lofty tokens are sold for $50 each when a new property is funded, which means there are a few thousand tokens per property. While this creates enough liquidity for smaller investors on Lofty’s secondary marketplace, it may make it harder for larger investors to sell their fractional ownership if there are not enough willing buyers at the level they want to sell. 

• Redemption options: Users can redeem their real estate investments by selling their tokens and converting their USDC holdings back into U.S. dollars. 
• Lockup period: There are no lockup periods. Users can buy and sell their real estate tokens as they please on the Lofty marketplace. 

Investment Selection

Investments on the Lofty marketplace are limited to individual rental properties in residential areas across the United States. Users can invest in each property by purchasing digital tokens representing tokenized fractional ownership. 

Sectors and Domains

Lofty enables investors to purchase fractional ownership in residential rental and commercial properties, opening up residential investments to retail investors. 

Typically, you need to make a 20% down payment on a property to invest in a physical real estate project. With Lofty, however, you can start with as little as $50 by purchasing digital tokens representing fractional ownership. 

Educational Offerings 

Lofty provides educational content via the Blog and Learn sections of its website. While the blog offers some insights into how to invest in the real estate market, Lofty’s Learn section focuses exclusively on how to use the platform, forcing Lofty users to look elsewhere to develop a deeper understanding of real estate as an asset class. 

Customer Support 

Lofty’s customer support offering is on the weaker side of the industry, with email and a chatbot the only available options on its website. In addition, chat responses can take time, leaving room for improvement when it comes to customer service. 

The Bottom Line

Lofty enables investors to access the illiquid real estate market by providing tokenized fractional ownership in U.S. rental properties. On the Lofty marketplace, you can purchase tradable, blockchain-based tokens that represent fractional ownership, opening up the real estate market to small investors who cannot afford to make a 20% down payment on a property. Rental yields are paid out daily, and token holders can benefit from an increase in the property’s value, making Lofty tokens a potentially lucrative investment. 

However, non-crypto-savvy users will need to first familiarize themselves with the platform’s digital wallet and how to fund it to make their real estate token purchases using the USD Coin (USDC) stablecoin. Also, there is no clear regulatory framework covering tokenized fractional real estate investing, and Lofty’s tokens are not registered as securities, opening investors up to a degree of regulatory risk. 

If you are looking to add real estate exposure to your portfolio and are comfortable with the technical and regulatory aspects of purchasing crypto tokens, Lofty may pose an exciting investment opportunity.  

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Why You Should Trust Us

Investopedia analyzed 19 real estate crowdfunding companies and scored each based on eight major categories and 38 criteria that are crucial in evaluating the offerings and usability of these platforms. We used this data to review each company for their fees, investment selection, transparency, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999 and has been helping readers find the best real estate crowdfunding platforms since 2020.

What Is Lofty?

Lofty is a tokenized real estate investment platform that enables investors to purchase digital tokens that represent fractional ownership in U.S. rental properties starting at as little as $50. 

How Does Lofty Make Money?

Lofty makes money with marketplace fees. The company charges a 2.5% marketplace fee on buy and sell orders for traded properties on the Lofty marketplace. 

Is Fractional Real Estate a Good Investment?

Fractional real estate investing is an excellent way to gain access to real estate as an asset class without having to deploy a large amount of capital. It allows small investors to earn passive income and potentially profit from an increase in property values. 

However, when it comes to fractional real estate investing, like in traditional real estate investment, numerous factors will determine whether it will end up being “a good investment.” These factors include the type of and the location of the properties you are purchasing, the overall buyer sentiment in the real estate market, interest rates, and more. 

Is Lofty Legit?

Lofty is a U.S.-based startup backed by several prominent investors, including Y Combinator and Rebel Fund, with a five-year track record without any regulatory or legal action taken against them. 

However, Lofty is not registered as a broker-dealer, and the real estate tokens sold on its marketplace are not registered as securities. Instead, the company uses a corporate structure using DAO LLCs, which are formed for each listed property, to ensure that they comply with laws and regulations around fractional real estate investments. 

How We Review Real Estate Crowdfunding Platforms

To evaluate and review real estate crowdfunding platforms, Investopedia’s team of researchers, data collectors, and industry experts spent nearly two months conducting in-depth industry research, company survey data collection, and hands-on evaluations of 19 companies. We grouped the 38 criteria that we collected, like investment selection and minimums, holding periods, and curated portfolios, into eight categories. We then scored these criteria and weighted the categories to determine which real estate crowdfunding platforms are best for both accredited and non-accredited investors.

• Fees: 15%
• Account Services: 15%
• Investment Selection: 15%
• Liquidity: 12.5% 
• Transparency: 12.5%
• Sectors and Domains: 12.5%
• Customer Support and Usability: 10%
• Educational Offerings: 7.5%

Through this all-encompassing data collection and review process, Investopedia has provided you with an unbiased and thorough review of real estate crowdfunding platforms. Read our full process for more information on how we review real estate crowdfunding platforms.

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