Tech News

Can’t Afford a House? Buy a Piece of One Instead

Nancy Chockley’s $12 million home sits next to a ski slope in Vail, Colorado. It has a chef’s kitchen with sleek appliances, a family room with a modern fireplace, a balcony with mountain views, and four bedrooms that sleep up to 12 guests. But when Chockley packs up to return home to Washington, DC, she puts family photos back in her assigned cabinets; clothes and skis go into her family’s storage locker. That’s because she and her husband don’t really own the house—they bought a fraction of it, and they spend six weeks a year there. Once they leave, every trace of them is scrubbed from the property. She’s never met any of her co-owners.

Chockley, a health care executive, bought a portion of the house through Pacaso, a brokerage firm that buys what many consider second or vacation luxury homes, sells them in fractions, and manages them. The company bought the Vail house in 2022, and by sharing it, Chockley says, she was able to get a luxury home in a high-end vacation destination for a price that would have only bought a condo in the area.

“When I go out there, I feel like it’s ours,” Chockley says. She’s so taken with the model, she even invested in Pacaso, she says. There’s all the perks of a vacation home with no repairs or upkeep to worry about. “When we leave, our footprint is gone.”

Pacaso is just one of the ways that people are adding parts of a house to their real estate portfolio. Other companies, like Arrived, Lofty, Landa, and Mogul, allow people to pay a few dollars or a few hundred dollars to buy shares in a property that is rented out to tenants or vacationers; investors then collect dividends and benefit as the home’s value appreciates.

The fractional trend is tech’s immediate answer to the protracted housing crisis. High mortgage interest rates (now inching above 7 percent in the US) and a lagging supply of new, affordable homes have wreaked havoc on the market and shut out many prospective home buyers. A recent analysis from Zillow found that there are now 550 cities across the US where the typical home costs $1 million or more. Most are in California, New York, and New Jersey. The median price for an existing single-family home is nearing $400,000 and continuing to rise in most cities, according to the US National Association of Realtors. The majority of first-time home buyers make purchases with someone else, and more than a quarter of home buyers are buying with friends, siblings, or parents, rather than a romantic partner, a survey from Opendoor shows. There are also companies in Europe that offer both fractional ownership and low cost fractional investing, suggesting the trend is taking hold elsewhere.

Fractional investing is just a small sliver of the housing market—but it’s growing, and new companies continue to enter the market. Rising interest rates have disrupted housing, and that’s “caused people to try to figure out different options, to get creative” in how they invest in real estate, says Casey Berman, founder and managing partner at venture capital firm Camber Creek, which has invested in Fundrise, another investing platform that allows people to buy into real estate, private credit, and venture capital.

But these fractional investments come with risk, particularly for people who buy shares in homes rather than a fraction of the property itself, Berman says. “The retail investor has to truly understand the asset that they’re buying. Is it the underlying house, or is it some type of security owned by a startup backed by a house?” The shareholders may not always have a say in how the property is managed or when it’s sold, and if market conditions change or it sits without a tenant, their investment could fall into the red.

Those high interest rates recently hobbled one fractional company., a Miami-based platform that worked in the fractional ownership of short-term rentals, announced its closure in January, citing “current interest rate environment and economic conditions.” The company said it would sell the properties within six months—but would not distribute funds back to investors until all of its properties had sold. did not respond to a request for comment about the state of its property sales.

That’s a different model from Pacaso, which sits at the high end of the market and allows people to own a portion of a house, rather than a share. If an owner wants to exit, they can sell their individual share to a new buyer. In a recent push, Pacaso increased its home offerings by 200 percent, with some starting as low as $200,000 for an eighth of the home. The company is focused on “making a second home possible for more people,” says Austin Allison, Pacaso’s CEO. Some homes are far pricer: For example, a one-eighth ownership of a house on Cape Cod is listed for nearly $1.6 million. But Allison argues that by splitting these second homes among several people, they’re occupied more days of the year, which benefits local economies that rely on tourists.

There’s another set of firms that cater to the retail investor. Arrived, Lofty, and Mogul offer shares or tokens in homes that start at around $50 or $100. Many of the homes bought and sold in shares by these companies are more modest; they’re typical single-family starter homes, rented out to either full-time tenants, and others might be larger homes decked out for short-term rental platforms like Airbnb. On Lofty, people can buy tokens in homes starting around $50, and then use those tokens to vote on management decisions about their properties, including repairs. Fundrise, possibly the largest of the companies, is fueling “build for rent” communities with more than $700 million of backing from JP Morgan.

At Jeff Bezos–backed Arrived, the high interest rates are “a big reason why more and more have joined,” says CEO Ryan Frazier. For a low price, retail investors can reap the benefits of putting money into the housing market—Arrived sells shares in houses, many valued between $200,000 to $400,000, and they draw around 100 investors each. The share prices in many are low, some for $12, some for $25. But some invest more, and there’s now $150 million invested across about 400 properties on Arrived, says Frazier. The number of investors and amount invested has nearly doubled in the past year, and the high mortgage interest rates paired with a low supply of affordable homes only make it more appealing as people struggle to afford homes, Frazier says. Returns on a few of the company’s longer-held properties have topped 70 percent, although a number of other properties sit in the red.

Arrived drew ire from Congressman Ro Khanna last year, as it launched its Single Family Residential Fund, which throws more than a dozen properties into a bundle and lets people invest in the asset class, like a modern REIT. “The last thing Americans need is a Bezos-backed investment company further consolidating single-family homes and putting homeownership out of reach for more and more people,” Khanna said in December. “Housing should be a right, not a speculative commodity.” In response to such criticisms, Frazier argues that the Arrived model democratizes real estate investing. Instead of a few hundred people owning these 400 properties, he argues, now 38,000 people have a piece.

At Mogul, which widely launched its platform last fall after a private beta, people can invest as little as $250 in homes scattered across the US Sunbelt. Typically, these become short-term rentals, including a stylish five-bedroom house in Southern California that rents for $800 a night on Airbnb. Mogul has just four properties available currently, but its CEO, Alex Blackwood, says the company plans to have as many as 20 to 30 within the next month or so. But they aren’t all retail investors, and some instead pour tens of thousands of dollars into the properties. It’s a way for those with more money to find passive ways to invest in real estate instead of becoming full-time landlords or short-term rental hosts, Blackwood says.

He argues that the trend of fractional investing is picking up steam because people are still seeking the feeling of the American Dream of home ownership. In a chaotic housing market, investors are taking a glass half-full approach. The housing market outlook may be bleak, but, Blackwood says, the young people shut out from the housing market “want to buy a part of something rather than nothing at all.”