This is New York City's East Village and I'm standing in front of 13th, East and West in 2018. It was Manhattan's first property to try a new approach to ownership fractions of the condo tokenized. On a blockchain, the effort was put together by companies propeller, and fluidity as an alternative way to finance the development. The move was lauded by the web three industry as a way to take the technology mainstream, but the project ultimately failed. A lot of people still don't really understand, Oh, what are the tokens? What does that actually mean? It's just sort of a novel concept. Despite that setback, there are companies operating today that believe that technology can change how we interact with real estate, they're on a mission to let homeowners more easily tap into the value of their homes or even just let people buy real estate in a time when many feel it's harder than ever to purchase property. The key benefits of investing in fractional real estate are you don't need the 100,000, the 200,000 the $300,000 to get started in it. This can take form in concepts like tokenized rental properties, we turn houses into tokens that anyone can trade on lofty or rental property marketplace, investors are able to spend as little as around $50. For one fraction of a given property. The properties are owned by an LLC, which is governed by a decentralized autonomous organization, or Dow. This means that all investors get to vote on key issues like selecting a property manager. Everyone has an active manager. And so as a result of that, legally speaking, but dow itself on paper has no manager it's managed by a smart contract. On the blockchain. Essentially, any decision to operate or manage the property is decided collectively by the group voting, there's always governance votes, whether it's to make repairs, change property managers, you know, there's always a vote that comes forward. VISTA equity is a platform taking a different approach, homeowners can sell a portion of their home equity to an investor by tokenizing, what's called a Home Equity sharing agreement. This lets the homeowner get cash by selling the token, and the investor can make money through future appreciation of the property which raises the value of the token. If you are a homeowner and you've paid off a mortgage and spent your entire life paying off a mortgage, you need to access that equity again, why is it that you have to go back into debt. So well, we've created as a solution whereby the homeowner can tokenize their asset, access whatever amount of equity they want to access. And then through our marketplace, we partner them with investors who want to invest in that asset, homeowners can tap into their home equity by selling a token representing a portion of that equity investor says This lets the homeowner access the value of their home without borrowing money like they would in a home equity loan or line of credit. The agreement also protects the investor by preventing the homeowner from selling below market value with a homeowner maintains residential rights. And as they would in a mortgage situation, they still have to pay their taxes and they still have to pay maintenance and insurance, the investor does not have the right to go and live in a house doesn't have the right to go and reside in the house. It's really a you got to think of it as they're a silent partner, a silent investor in your home. If the homeowner decides they want full ownership of their property, they're able to buy their share back at market value. Now both lofty investor equity have secondary markets to give investors even more liquidity as really the transactions and the secondary trading between owners. That that is really unique about this model that you didn't get with traditional real estate just because of how difficult it is to transact and move the assets around and how expensive it is. These platforms might be seeing millions of dollars in transactions, but they're still a question of how they can operate within us regulations. The US Securities and Exchange Commission went after crypto firms following the 2022 meltdown, including companies that offered what it deemed unregistered securities. This left the industry scrambling to determine what is a security and what isn't. Most of them are actually taking the real estate that they want to tokenize putting it into a company like a limited liability company. And then issuing tokens that represent ownership in that company which indirectly owns the or directly owns the real estate. So you have an indirect exposure. That I think is a security. And I think the SEC would say it's a security. To me a more interesting question is can I actually do this where I'm really splitting up the underlying asset. And companies have differing interpretations of regulatory compliance. Lofty is business model, you know, despite there being tokens isn't actually that novel, right? Like, what are you actually owning and what are you legally buying? You're buying units and an LLC, LLC is have existed for decades. It's not a new concept, and the idea of you and a couple of family members to your friends, or colleagues from work, pooling money together to buy a property and then operating it together, that has never been deemed to be a securities in this country ever, we took the approach to be regulatory compliant, we have filed everything currently under reg D, which means only accredited investors and institutions, financial institutions can buy the assets at this point in time. And once we build out a larger marketplace, we'll open up to retail and fall under reggae. Now, that doesn't mean that I think this is a security, I think the SEC needs to go back and say, Look, there's all these digital assets, maybe we need to have sort of a whole range of definitions for different types of securities, the idea of trading shares of a property isn't totally new, publicly traded real estate investment trusts or REITs, are securities that lead investors buy shares of a company holding commercial property. They've been around since 1960. It's very similar, but I the the goal, as I understand it from most of the of the entities that are coming in now is to be more focused on specific properties. So people who buy $50 Of Rock Center, you could do that in a REIT do later several asset REITs. So in some ways, it's very, very similar. But in other ways, the goal I think, is much different. But it's not just about the investors, real people live in these properties. And it might be too early to tell how tokenization will affect communities. I've interviewed a couple of people who are investors with one fractionalized real estate investment platform. And they all suggested to me that the that the properties were in what they called lower class neighborhoods, or that the assets were of low quality that there were a lot of evictions, corporate owners of rental properties, especially single family home rentals have faced growing scrutiny amid a US home affordability crisis. Democrats in Congress recently introduced the American neighborhoods Protection Act To Provide downpayment assistance paid for by large corporate landlords. There's also the end hedge fund control of American homes act of 2023, which aims to deter investors from scooping up vast amounts of properties nationwide. Real Estate tokenization marketplaces aren't the same as hedge funds. But for some, it still raises concerns that this would only accelerate the country's affordability problem. As more investors adopt these platforms. There's definitely a criticism that making real estate ownership and access easier is going to potentially push up the price, which then makes it harder for some people to own real estate. I, you know, I don't really have a solution personally. And I think that, you know, either you outlaw the entire practice of just people investing in real estate, but that's going to hurt a lot of everyday people as well, or you allow it to happen. And then the market is just the the market, the tenant impacts of a dowel governance model also hasn't been closely studied. If an experienced property manager presents a solution to an issue, the investors ultimately had the final say, and it's unclear how investors with minimal stake would vote should a problem arise. Because sometimes it's very small amounts of money that are involved, there's a sense to kind of think about it as almost like play, or learning by doing it's adding another layer of abstraction or opacity in between tenants and the people who actually own and benefit from the ownership of those properties. And when it comes to the American dream of homeownership, this fractional real estate actually make that goal more accessible, especially when buyers don't reap many of the traditional benefits of owning a home. Historically, people have thought about owning their home as a kind of, yes, an illiquid asset, but one that they can capitalize on and sell, maybe when they retire, maybe when they want to downsize, etc. And so the idea of being able to use your home as a much more liquid asset where you can pull equity out almost like an ATM, of course, is at odds with the idea of that long term financial security. There's about $278 trillion in assets globally, or just real estate alone. So we've only started to scratch the surface of it. It's going to be an evolution that takes place over the next 10 to 15 years, and I think that every element of the home will eventually be tokenized including deeds will be tokenized as well, if ownership of every house in this country is technically fractionalized. You know there's technically not a single person who can't be a homeowner if they want to be