CEO and Co-Founder at Rhove. Expanding access and opportunity for everyone to invest in and own real estate.
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As it stands, non-accredited investors (individuals who make less than $200,000 annually and have a net worth of less than $1 million) cannot invest in the real estate that defines our cities. While it is possible to invest in a real estate investment trust (REIT) that owns commercial multifamily investment properties, there is no easy way to build a community of investors around the aligned values of specific owners, developers and financiers.
The time for change has come. This is more than an economic imperative; it’s about citizenship and social responsibility. Our democracy is strongest when everyone has ownership. That’s why I quit my job as a venture capitalist to dedicate my career to expanding access and opportunity for everyone to invest in and own real estate. We find ourselves in a new era of ownership — managing financial portfolios and holding cryptocurrency from smartphone apps, buying art in the form of non-fungible tokens (NFTs), building community and moving markets with the click of a button — but this generational shift has barely tapped the world’s most important and largest asset class: the $2.69 trillion global real estate market.
While society is putting a premium on the act of possessing both physical and digital assets, the idea of owning even a single-family home has become a stretch for many. Young people have $0 in net real estate wealth and nearly 20% of millennials say they plan to rent forever. Fractional ownership could be a solution, but investing in multifamily real estate — buildings with more than one residence — continues to be the exclusive domain of millionaires and billionaires.
How is this the case? Why is the powerful concept of ownership taking hold everywhere from sports cards and collectibles to artwork and music while failing to catch on in this critical sector of commercial real estate?
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The answer is simple. Until now, the barriers to entry were too high.
Technology and a more favorable regulatory environment open a world of possibilities. What if we could invest in apartment buildings and own the public art (like murals) associated with those properties? What if we auctioned off properties with a mix of equity and debt instruments? What if we programmed a royalty into the stock trades of iconic buildings that otherwise would never sell? What if people could get a loan against their crypto assets to invest in real estate? What if every renter were an owner? What if anyone, anywhere could invest in real estate and invite a friend with the click of a button? What if we could follow developer profiles and invest in projects that align with our values? What if there was a 24/7/365 market for trading real estate?
These aren’t just possibilities. This is the reality we must create.
Let The People Invest
Young people are expected to earn much less than previous generations on a traditional portfolio of stocks and bonds, according to Credit Suisse (download). Millennials can expect average annual real returns of just 5% on investment portfolios and Gen Z is expected to only earn 2%. No wonder our generation is flocking to higher-growth, riskier investment opportunities such as crypto assets. But what if we want to diversify into less volatile asset classes such as real estate?
Multifamily real estate can provide attractive returns that do not correlate highly with the stock market. This is great for rich people with access, but everyday investors are locked out of the private real estate market.
The only thing worse than the financial inequity of locking Main Street out of real estate ownership is the social impact of keeping everyday people out of the wealth generated in our communities. There is no value in the community if we do not pay rent or patronize the businesses that set up shop. We should have the access and opportunity to participate in real estate value created in our communities. In this new era of democratized ownership, anyone should be able to invest in the specific places they love.
Social + Real Estate Investing = Community Capitalism
Real estate is the next frontier for people to invest dollars to both capture value and advance their values. Today’s emphasis on ESG investing — which considers matters of environmental, social and corporate governance — is being driven by both institutional and retail investors who embrace more than just the sheer maximization of profits for shareholders. This sustainable investing approach became entrenched in public markets in 2019 with corporate leaders from the Business Roundtable looking beyond shareholder value by committing to delivering value to customers, employees, suppliers and communities. The purpose of a corporation, they said, should be about more than just maximizing profits for shareholders.
What could be more appropriate than bringing this approach to the ownership of the physical spaces where we live, work and play?
The social-purpose approach has been a key factor in the growing YIMBY movement. This “yes, in my backyard” contingent supports multifamily development to strengthen communities, creating an environment of collaboration and shared success among developers, residents, neighbors and investors. But it doesn’t go far enough. We need more housing in our communities, but we also need a way for everyone to own the housing in our communities.
Tokenize The World, Democratize Real Estate Finance
The world is changing and it is about time that multifamily real estate catches up. As technology democratizes finance and allows investors to hold fractional shares, there should be platforms for multifamily real estate that do for these investors what Robinhood did for stock traders or Coinbase did for Bitcoin enthusiasts. Commercial multifamily real estate could be the next great wealth-creation opportunity.
However, everyday people are being shut out and 20% of all homes in the U.S. are being bought by investors. We’ve seen what happens when ownership is a level removed. When Wall Street is the landlord, the value of an asset and the well-being of a community can become disconnected.
Rich people shouldn’t be the only ones to own our city blocks. It’s not sustainable. When we solve this problem and make ownership accessible to everyone, the impact will be immeasurable. Say it with me: “No wealth creation without representation.” It’s time we work together to democratize real estate finance.
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