A Recent Discovery
Recently I published an article addressing tokenized real estate and made mention of RealT, which I am sure many are aware of. However, I have to thank HattyHats for steering me in the direction of Lofty. I was pleasantly surprised by how much more efficient and liquid it is, compared to RealT. Something I noticed about RealT was the shortage of investment opportunities on offer at any given time. The last time I logged on, I think only two properties were available to investors. A quick visit to Lofty just revealed that there are currently well over 120 properties available to potential investors.
Another positive aspect of Lofty is that it is built on Algorand, as opposed to Ethereum, which is what RealT utilizes. I am unfortunately no longer really impressed by Ethereum. There are a number of “issues” that I find somewhat concerning going forward and have set my sights on alternative layer 1 blockchains. ALGO is also inexpensive to transact and is just as efficient, if not better. There have also been some recent adjustments that enable investors to directly purchase tokens with USD. Before I continue, in line with my Disclaimer, I don’t endorse any particular project or investment opportunity. I simply share what I am doing and discovering.
There is another vital aspect of Lofty. Each property is collectively owned under a DAO LLC, which helps to protect investors. This also excludes tokens from being categorized as securities, according to Lofty.ai and current regulatory practices.
Token holders legally have ownership of Lofty properties. When you purchase tokens in a Lofty property, you are directly buying a membership interest in the individual DAO LLC that owns the property.
For example, if you purchase 1% of the tokens in a single home offering, you would then be entitled to 1% of the economic interests of the asset over time, which may include income from rent or property value appreciation.
Something that also needs to be considered when investing via new and developing investment vehicles is that there is very little clarity in regard to regulation at this stage. Regulatory rulings could always be adjusted at any point in the future. Then again, I guess that applies to any investment vehicle. However, it is likely that the Crypto industry will come under intense scrutiny going forward.
What I Find Appealing
One of the most beneficial advantages of Lofty over alternative platforms, such as RealT, is the peer-to-peer marketplace. This is instrumental in ensuring that tokens remain liquid and easily tradeable between investors. If a token holder finds any investment to be unsatisfactory, for whatever reason, he or she can easily sell their tokens via the marketplace. Real estate is typically known as an asset class that is not very liquid. Lofty, on the other hand, solves this problem by utilizing blockchain technology. Potential investors also have access to detailed information and financials regarding each unique property.
Lofty does not own or hold the properties in any way, but merely acts as an agent, which ensures the company a 5% commission on real estate sales. Property owners can list their properties with Lofty, and in so doing gain exposure to a different group of investors. Due to the fact that there is no mortgage required in such a scenario, it can be a speedy process for the seller and a more beneficial acquisition for the buyer.
When purchasing a property via a mortgage, home buyers inevitably pay more than double for the property during the course of a 30-year mortgage. Purchasing smaller allocations enables investors to gain access to the real estate market without incurring the additional cost that takes place over the years, via a mortgage. This is a very important saving that many perhaps do not consider when looking at a real estate purchase.
What Happens If Lofty Goes Out Of Business?
This is perhaps a fairly valid question, right? This is what Lofty.ai has to say in regard to this possible, yet unlikely event:
Because your tokens represent legal ownership in the DAO LLC that owns each property, you would not lose your investment if Lofty went out of business.
If Lofty went out of business, each property DAO LLC would continue to remain in existence as a separate legal entity for property holding, tax, accounting, liability, and member ownership purposes. Regardless of what happens to Lofty AI, Inc., the assets and the Lofty tokens of a DAO LLC would remain independent and intact.
There is of course no investment that is entirely safe. Any investor will tell you that. However, it appears as if there is a fair amount of protection in terms of the way Lofty has chosen to package and present this service. Please do your own research if you are considering a real estate investment via Lofty. All information offered in this article is merely informative and should not be considered investment advice. See you next time!