How real estate can be the new frontier of ethical investment
The landscape of investment is changing. Managing portfolios and speculating on companies used to be the domain of the ultra-wealthy, but thanks to new crowdfunding laws and tech platforms, it’s now accessible to many in the developed world.
The other day my Uber driver told me he regularly invests in estateguru.co and would love to see a regenerative real estate proposal like Kasaba listed there as an investment option.
Meanwhile, ethical investing has also been growing in awareness. I’m fortunate to have met the authors of two books that provide tips and insights into investing in ways that match your values. Michael Shuman explains the importance of investing where you live in his book “Put Your Money Where Your Life Is”.
Similarly, the recently published Active Your Money, by Janine Firpo, is all about making choices that earn you a return, while fulfilling your positive impact mission.
When it comes to real estate, having a net positive impact is harder. The building industry is famously one of the greatest contributors to carbon emissions and the negative side effect of speculation, gentrification and colonization can be seen on the sidewalks of many American cities, with homelessness at an all-time high.
Safe as houses
Let’s take a moment to deconstruct our relationship to real estate investing. For the moment, I’m focusing on real estate as an investment vehicle, rather than buying a home to live in.
Unlike stocks and shares, real estate has generally been seen as the most stable investment. Perhaps the Mark Twain quote “Buy land, they’re not making it anymore”, has had some influence on this mindset.
According to a 2016 Gallop Poll, more Americans chose real estate as the best long-term investment. Meanwhile, demand for housing is outstripping supply. According to this Forbes article “Home prices are up 15.8% on average year-over-year across the country”.
I think it’s fair to say that for those who are willing to move their money out of savings and earn a greater return from their cash reserves, real estate is the most sensible place to put it.
Smarter, not harder, real estate investment
The two pain points I’ve heard from people discussing their real estate investments are the lack of liquidity and the challenges of maintenance.
Liquidity provides the ability to exit the investment quickly and move cash elsewhere. The paperwork and logistics involved with the sale of a property, making it neither fast or cheap.
The second issue is the work and hassle of being the landlord. You have to constantly deal with tenants, repairs, county regulations, rates and so on.
To avoid these challenges many people are choosing to use real estate investment trusts (REITs) and fractional ownership special purpose vehicles. Both enable smaller entry amounts as well as fully-managed investments. In the case of most REITs, you also have the ability to sell your shares at any time.
Putting the real into real estate
Returning to the question of ethical investing, one example of a fractional ownership developer aligning impact with real estate is Open Path Investments. Founded by Gina Borges, they match high net worth individuals with multifamily developments that optimize for community, rather than profit at all cost models.
My company, Kasaba, is also focused on impact for community and regeneration, inviting investors to enjoy a competitive return on investment while contributing to lowering the carbon footprint and creating resilient, community-centered hubs.
This strategy involves a two-fold approach to raising capital and providing a return on investment.
1. Real estate investment
Similar to Open Path Investment, we are offering high net worth individuals the chance to invest into an impactful real estate development with an IRR of 10–15%. We raise the capital upfront and provide the option to return the investment within five years, or to provide annual dividend returns based on the profits from the revenue of the hospitality operations.
2. Tiny home ownership
We are inviting members of the Kasaba community, who want to live in a Kasaba village, to own their own tiny home, have it managed and earn passive income from it when they aren’t there.
Similar to the REITs and fractional ownership, we are selling shares in the holding company, rather than plots of lands with deeds. To some, this might feel a little unsettling, as the legal title and land plots fit into our mental model of what real estate ownership is. However, in the landscape of “retail investors”, and the emerging models of collective sharing, with coliving and cohousing, this is ripe territory for redefining how we invest and own security in the form of real estate.
Our proposition is to provide an entirely new housing model that is collective, flexible and decentralized. Let’s unpack this.
Collective Living
The rise of coliving operators and cohousing developments represent the growing desire of people to live in more communal ways. This doesn’t mean shared bank accounts, but it is usually represented by common areas, group activities, and alignment on purpose and values.
For Kasaba, this includes coworking spaces, large group kitchens, sauna/hot tub, and vegetable gardens. Our default model is to develop environments that orient toward people being around and near each other. To benefit from the interactions that occur naturally as people move around the living spaces. I love the phrase “unscheduled interactions”.
Flexible Choices
For urban dwellers wanting to invest in a second home, we provide the option to own that getaway place, along with the choice of spending time at an equivalent location in another country.
It’s like we are reinventing the timeshare model, but with a regenerative and co-ownership framework that better fits with the values and ideology of our times.
Decentralized and Distributed Living
We recognize that the world is heading towards more decentralized models of finance, decision-making, and living. This means that we are diving into how blockchain can provide more efficient systems for smart contracts, fractionalized ownership, and collective agreements.
Riding the wave of how to best utilize these technologies is part of our core philosophies moving forward.
So let’s put these things together into a neat summary.
Benefits in a nutshell
Secure
- By having asset-backed investments
- By creating places that are kept for the long term
- By underpinning the venture with a profitable business model
- By distributing the risk across multiple properties
Simplified
- By having someone manage the property
- By having a seamless way to move between locations
Impactful
- By having a regenerative and community mission
- By celebrating minimalism and reducing our ecological footprints
- By designing for a significant reduction in waste, water, and energy
Decentralized
- By having liquidity of assets by investing in a company that owns the real estate, rather than the house itself
- By embracing blockchain and other technologies that optimize for trust and efficiency
Our model wraps all these elements together, underpinned by a hospitality and property management service to ensure the dividends are distributed to our investors and we continue to grow and expand the offering to make it even more appealing to the global membership seeking these new spaces.
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