In-Depth Real Estate Investment Reviews
Landa aims to be a liquid marketplace for fractional real estate, but does it live up to the hype? We dove deep into their offering to find out.
Landa
The Bottom Line
Landa offers a great customer experience, liquidity, and decent returns, but has a worrisome lack of return projections and historical performance data.
Pros & Cons
Landa's mobile app is easy, intuitive, and delightful.
Investors can get started from just $5.
Landa's secondary marketplace is one of the only in the space, making real liquidity a possibility.
It's very difficult to fully understand what you're buying before you buy into a Landa property, and impossible to understand how Landa properties have performed in aggregate.
Most Landa properties are located in a single U.S. state, making investors vulnerable to market swings.
Landa buys properties outright before selling fractions back to their investors. Investors therefore carry the cost of financing the property.
You'll have to make trades on Landa's secondary market while you're at work .
Figuring out where to invest your money is hard enough. Stocks, bonds, and even crypto all have their places in the modern portfolio, but the most misunderstood asset class has always been real estate.
Over the last few years, several companies have appeared claiming to make it easier for people to invest in real estate by removing down payments, increasing liquidity, and breaking properties up into fractions. In such an environment, knowing who to trust and what you're really agreeing to when you invest is more difficult than ever.
We analyzed
Landa
by digging into key areas investors need to know about before going all in: How easy it is to invest, how much you can earn, and how you can get your money back once you've made the gains you wanted.
Full disclosure - we're Lofty, and we're one of those fractional real estate investment companies. We believe that a rising tide lifts all ships, and that providing an unbiased look at other fractional real estate companies through the lens of our industry expertise will help serve both investors and the companies serving them.
The Basics
Landa is a fractional real estate investment startup. They're aiming to allow users to invest in individual rental properties at low price points while making holding real estate investments more liquid than before.
Through their mobile app, investors can buy small or big fractions of properties from Landa, and receive rental cash flow and appreciation if properties grow in value over time.
Unlike almost every other option in the space, Landa also acts as property managers for the properties they list for investment. Residents of Landa properties use a separate app to sign leases, pay rent, and report issues in their home.
Landa users can invest in fractional ownership of rental properties in the U.S.A. Shares represent ownership in an LLC who's sole role is to manage the property in question.
Landa is open to all U.S. citizens aged 18 and over. The Landa app is completely unavailable to people from outside the U.S.
Not much is published about Landa's process on selecting the properties they acquire to list on their marketplace. This likely indicates that there is some flexibility in the way they acquire properties – if there was a strong method behind their acquisition strategy, they'd likely talk about it as a value proposition.
Landa actually purchases the properties before listing them on their marketplace. This means that share prices include financing costs from the mortgages they take out to fund them, costs that ultimately inflate the share price they offer to their investors.
Founded in 2019, Landa has raised $95 million to build their marketplace. As of October of 2022, they have around 50 properties listed on their marketplace.
Ease of Use
Before investing, it's crucial to ask yourself what you're really investing in. It's not always as clear-cut as you might think.
Landa buys rental properties before dividing ownership into shares of a holding LLC that owns and manages each distinct property. Most of their properties are single family rentals, but it seems like they have plans to offer multi-family in the future as well.
Each property is divided into either 10,000 or 100,000 shares (depending on if it's a single or multi-family property), so the initial share price is determined by dividing their initial offering price by the amount of shares that will be issued. This leads to a wide variety of possible share prices.
Investors can also buy shares of previously sold properties from other investors on their secondary market, at pricing determined by the sellers.
As of November 2022, 46 of Landa's 49 properties were located in the southern state of Georgia.
While this likely gives Landa some economies of scale for their property management business, it creates a situation where their investors will struggle to achieve proper diversification across multiple markets.
Starting at just $5, Landa has effectively removed "high initial investment" as a barrier to entry into real estate investment for essentially everyone.
Landa provides a handful of standard agreements that apply across most properties, and they provide an account ledger for each property that investors can peruse prior to making an investment.
Using this ledger, investors can run calculations on their own to figure out things like cap rate and expected cash flow. Landa doesn't go out of their way to project property appreciation or even rent dividends, leaving investors to fend for themselves.
Investing with Landa is pretty easy. Users will need to download their mobile app, validate their identity, tell Landa their relationship status (🤔), and load their account with cash from their bank. After the payment settles (usually a few days later), users can use it to purchase ownership in available Landa properties.
This differs from many other options that don't require payments until the time a purchase is completed. In other words: don't forget when you have cash sitting uninvested in your Landa account.
Earning Potential
There's really one core reason for investing in real estate: to leverage your current capital to create more capital. When it comes to choosing investing platforms, their expected yield and fee structure are the two core levers that determine how well they do that for their customers
Assessing potential returns on Landa properties is next to impossible.
First off, Landa doesn't project what kinds of rental income their properties may produce. Their website contains no information on projected returns from their properties – neither through cash flow or property appreciation. The only real data investors can reference when evaluating the potential returns of an investment in a Landa property is how that particular property has performed to date, which only applies to properties that have already been fully funded by other Landa investors. Even looking at this data can be misleading, since performance seems to vary wildly month to month.
Landa does not publish any kind of aggregated portfolio-level performance reports either. This leaves investors with very little information to lean on to help them judge the potential outcome on an investment in a Landa property.
At a glance, the dividend cash flow for some properties looks pretty attractive. Others have not paid out any yet. Appreciation is even more difficult to calculate.
Normally we'd provide hard numbers here, but that's not possible in this circumstance.
Investors receive rental income on a monthly basis, paid out on the first day of the month. Investors can list their assets on Landa's secondary marketplace at any time. If another investor agrees to their price, they can also realize any appreciation gains that property accumulated since the fraction was purchased.
Due to the magic of compound interest, real estate investments perform better in the long term when cash flow yield is paid out more frequently and reinvested by investors. Landa's monthly pay outs mean that investors miss out on a bigger portion of compounding interest than they could if they received their payments more often, like weekly or daily.
As Einstein said, "Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it."
Landa's business model has a few core pieces that impact both their revenue and their investors.
First, their property management fees. Landa charges investors an 8% premium on their investment to cover property management fees. This is pretty standard, except that the property managers in this case are... themselves. Since Landa also manages all the properties they sell ownership for, they're able to capture revenue that would traditionally gone to pay for an external property management company.
Their other revenue stream is their property acquisition fee. Landa adds up to 6% of the property purchase price before they open it up to investors to compensate themselves for sourcing the property.
Finally, Landa's property acquisition model also puts investors on the hook for an additional hidden fee - financing. Landa buys the properties outright before selling back to their investors, and they finance this with interest-only mortgages. This means mortgage interest is built into the price of property fractions investors buy on Landa.
If you'd invested that same $10,000 into corporate bonds (which are even more illiquid) and drawn Moody's long-term average (6.53%), you'd have earned $3,824.59 in yield - about a third of your Landa investment.
If you'd invested that same $10,000 into a fund mirroring all 12 equity REIT sub-sectors (real estate investment trusts) over the last 10 years (13.2%), you'd have earned $9,142.84 in yield - almost as much as your Landa investment.
If you'd invested that same $10,000 into the stock market and drawn the S&P 500's average yield over the last decade (14.7%), you'd have earned $10,581.68 in yield - about $700 less than your Landa investment.
Investment Liquidity
One of the most important things to keep in mind when deciding which real estate investment platform to use is to ensure you understand how easy it is to sell your stake when you want to.
In short, liquidity is a way to measure how much control you have over your money after you've invested it. Traditional real estate is illiquid because selling buildings is difficult and time consuming. On the other hand, cash is as liquid as it gets since you can exchange it for goods at any time.
One of Landa's chief advantages is that they have a secondary market. This means investors aren't subject to multi-year holding periods that tie up their capital and make it inaccessible.
After an initial property offering is completely sold, properties transition into active trading. This means investors can put owned shares up for sale for other investors to potentially buy.
Investors may choose whatever sales price they prefer, but that doesn’t mean there will be a buyer at that price. Trading is only available during business hours (Monday to Friday,10:30 am to 5:00 pm EST).
Landa also cautions investors that they "must be prepared to hold their shares indefinitely, in a worst-case scenario", in case their marketplace isn't able to provide liquidity on the timeline the investor desires.
Since there's no minimum holding period, there's correspondingly no early withdrawal penalties applicable on Landa investments.
Investors have a good deal of control of their money when they invest with Landa. They are still one of the only available investment options that promise at least the opportunity for liquidity, especially in the short term. As long as Landa can maintain a healthy marketplace of buyers and sellers, most investors should be in good shape.
However, Landa still requires investors to transfer cash into their Landa account before investments can be processed, which might tie up one's capital in unexpected ways in the meantime.
Compare
The Final Verdict
Landa has a strong vision for how real estate investing should be, and they've made strong strides toward making that vision a reality.
Their mobile app has a great user experience, and their ambition to create a liquid real estate marketplace is clearly a move in the right direction.
However, they provide investors with next to no real data about about their properties to help would-be investors conduct their due diligence before investing. Not only that, but Landa doesn't even provide rental payment or property appreciation projections either. This makes it next to impossible to go into any investment with the confidence required to allocate significant portfolio space to their properties.
We rate this opportunity a 4 out of 5. Decent returns, good liquidity, but poor investor education.
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Extras
Users can download the Landa app from the Apple Store or Google Play Store.
Landa has had a few questionable reviews. Their Facebook page is full of seemingly false reviews from people who have clearly not used the product. There's also a review outlining how Landa support couldn't locate $5,000 that a user put into their Landa account. Three weeks after posting, Landa representatives have yet to respond to this.
The Landa Residents app page in the Apple App Store also contains some troubling review content from people who live in Landa buildings.
Landa can be emailed at [email protected], as well as through live chat within the Landa app.
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