Landa's Downfall: How a Proptech Startup Promising $5 Real Estate Investing Went Dark Amid Lawsuits and User Outcry

The Promise and Peril of Fractional Real Estate: The Landa Story

The allure of real estate investment has long captivated individuals seeking wealth accumulation and passive income. Traditionally, entering the property market required significant capital, often locking out everyday investors. This barrier gave rise to innovative financial technology, or 'proptech,' startups aiming to democratize access to real estate. Among them was Landa, a company that burst onto the scene with a compelling promise: become a real estate investor for as little as $5. It was an enticing prospect, suggesting that anyone, regardless of their financial standing, could own a piece of the American dream, one fractional share at a time.

However, for many users who entrusted their funds to Landa, this dream has dissolved into a frustrating reality of inaccessible investments, unpaid dividends, and unanswered questions. The platform that once offered a gateway to property ownership has effectively gone dark, leaving investors in limbo and raising serious concerns about the viability and oversight of certain fractional real estate models.

Landa's Ascent: Funding, Vision, and Accessibility

Founded in 2019 by Yishai Cohen and former CTO Amit Assaraf, Landa's stated mission was to make real estate investment inclusive. The company emerged from stealth mode in August 2022, announcing a substantial total of $33 million in funding. This significant capital injection signaled strong investor confidence in Landa's approach to fractional real estate. The core of their offering was an app that allowed U.S. residents over 18 to buy shares in residential rental properties with a minimal initial investment of just $5. The platform promised transparency, enabling users to track their investments and receive real-time updates on their properties directly through the app.

The model was designed to be simple: Landa would acquire properties, divide ownership into shares, and allow users to purchase these shares. Rental income from the properties would then be distributed to shareholders as dividends, offering a tangible return on investment. The ability to buy and sell shares within the app was intended to provide liquidity, a common challenge in traditional real estate investment. This low barrier to entry and apparent ease of use attracted a user base eager to participate in the real estate market without the complexities and high costs typically associated with direct property ownership.

The Lights Go Out: User Complaints and Platform Failure

Despite its promising start and significant funding, Landa's operations have reportedly ground to a halt. As of recent reports, the company's investment portal website is down, and the mobile application is inoperable. More critically, users have come forward with numerous complaints, painting a grim picture of the platform's current state.

Allegations from users include:

Unpaid Dividends: Many investors report that dividend payments, which were a key component of the investment model, stopped months ago.
Inaccessible Funds: Users claim they cannot access their invested capital or sell their shares, effectively freezing their investments within the defunct platform.
Unresponsive Support: Attempts to contact Landa's customer service have reportedly been met with generic, deflecting answers or silence.
Inoperable Platform: Both the website and the app are non-functional, preventing users from even viewing their investment status.

One early user, who invested in 2021, shared their experience with TechCrunch, stating they stopped receiving dividends in January and were met with evasive responses when inquiring about the issue. When the app became unusable, the user discovered their ability to sell shares had been disabled. "They have essentially frozen me out of my funds and just shut down the app," the user lamented, questioning the whereabouts of their money.

These individual accounts are echoed in a significant number of complaints filed with the Better Business Bureau (BBB). Over 130 complaints detail similar experiences of halted dividends and inability to access investments. One complaint from May 1st highlighted an investor who had put over $8,000 into Landa, stopped receiving dividends the previous fall, and received only vague assurances from customer service that the company was "working on it."

When TechCrunch reached out to Landa CEO Yishai Cohen in mid-April regarding the downed site and app issues, his initial responses were brief and attributed the problems to server issues, claiming the site would be back up and that the server problems were "unrelated to dividends." A subsequent statement provided on April 18th acknowledged the platform issues and assured investors that the company was actively working to restore functionality and had kept investors informed, including about the "server access issue." However, follow-up requests for updates in May reportedly went unanswered, and the platform remained inaccessible.

Legal Battles: Lenders Take Action

The challenges facing Landa extend far beyond user complaints and technical difficulties. The company is now embroiled in significant litigation, most notably a lawsuit filed by its primary lenders, Viola Credit and L Finance. Viola, which is also an investor in Landa through its venture arm, and L Finance extended over $35 million in loans to the proptech startup.

Filed in New York State Supreme Court in November 2024, the lawsuit accuses Landa of "numerous defaults" on these loans. The allegations are severe and point to fundamental operational failures:

Missing Property Tax Payments: The lenders claim Landa failed to pay property taxes on the underlying real estate assets, leading to forced sales of some properties.
Neglecting Properties: Allegations include Landa neglecting the maintenance and upkeep of the properties.
Failure to Collect Rents: The lawsuit also claims Landa failed to collect rental income from tenants, directly impacting the revenue stream intended to generate dividends for investors and service the loans.

According to reports, after over a year of attempting to resolve these issues and get Landa to meet its commitments, the lenders took drastic steps. They removed Landa as the manager of the homes financed by their loans and appointed an independent property manager and a chief restructuring officer to oversee the assets and attempt to stabilize the situation. This move underscores the depth of the lenders' concerns about Landa's management of the properties.

When negotiations failed even after these appointments, the creditors sought and were granted an injunction by the court. This injunction blocked Landa from accessing bank accounts and interfering with the lenders' efforts to restructure the business and reclaim the money owed, including proceeds from any property sales.

Despite the injunction, the legal battle escalated. In January 2025, the lenders returned to court, alleging that Landa had instructed tenants to send rent payments to a different bank account not covered by the court's ruling. This was reportedly discovered while the independent manager was making repairs to a property's septic system. The lenders further accused Landa's CEO, Yishai Cohen, of attempting to sell or refinance some properties in defiance of the injunction.

The court, specifically Judge Jennifer G. Schecter, ordered Landa to explain its actions. However, in early March, Landa responded by requesting a restraining order against Viola Credit and L Finance, arguing that the independent manager had been "installed unlawfully." Judge Schecter was reportedly displeased with this maneuver, denying Landa's request for an injunction and ordering the company to pay nearly $100,000. A few weeks later, Landa filed a formal countersuit against the lenders. The complex legal case, involving allegations of default, mismanagement, and defiance of court orders, remains pending, casting a long shadow over the future of Landa and the investments made through its platform.

A Challenging Landscape for Fractional Proptech

Landa's struggles are not occurring in isolation. The company is one of several startups that emerged in recent years with the goal of democratizing real estate investment through fractional ownership models. This wave of innovation sought to make illiquid, high-value assets like real estate accessible to a broader audience by breaking them down into smaller, tradable units, much like stocks.

However, the economic environment has shifted dramatically since many of these companies were founded or received significant funding. Rising mortgage interest rates, which began climbing sharply in 2022, have significantly impacted the real estate market. Higher borrowing costs can depress property values, increase the cost of acquiring new properties, and potentially reduce rental yields, putting pressure on business models that rely on property performance and appreciation.

Landa is apparently not the only fractional real estate startup to face headwinds. Several others have reportedly struggled or pivoted their business models:

Fintor: This startup also raised millions for fractional real estate investing but appears to have shifted its focus. Its website now promotes an "AI Agent to automate finance and real estate operations," suggesting a move away from direct fractional property investment for retail users. You can read more about Fintor's earlier funding rounds on TechCrunch.
Nada: Based in Dallas, Nada offered "Cityfunds," allowing non-accredited investors to buy into a city's home equity market with relatively small amounts ($250+). Like Fintor, Nada's website now features a new tagline, "Access home equity to finance anything," indicating a potential pivot towards home equity financing rather than fractional ownership of rental properties. TechCrunch previously covered Nada's efforts to make real estate accessible here.
Arrived: Perhaps the most prominent player in the fractional single-family rental space, Arrived seems to be one of the few actively operating under its original model. Backed by notable investors including Bezos Expeditions, Arrived raised significant funding, including a $25 million Series A round reported by TechCrunch in May 2022. According to its website, Arrived has continued to operate, paying out substantial dividends and accumulating a large base of registered investors. Its continued operation suggests that while the model is challenging, success is possible, perhaps depending on execution, property selection, and capital structure.

The struggles and pivots of companies like Landa, Fintor, and Nada highlight the inherent difficulties in scaling a fractional real estate investment platform, particularly when relying on rental income and property appreciation in a volatile market. Managing a portfolio of distributed residential properties is operationally complex, involving tenant management, maintenance, property taxes, insurance, and regulatory compliance. Furthermore, ensuring sufficient liquidity for investors who wish to sell their shares can be challenging, especially if the underlying assets are not performing as expected or if market demand for the shares is low.

The Uncertainty for Landa Investors

As the legal battle between Landa and its lenders unfolds, the fate of the properties and, more importantly, the investments made by Landa's users remains highly uncertain. The lenders' lawsuit and the court's actions suggest a focus on recovering the debt owed, which may involve the sale of the properties. While the lenders are prioritizing their position as creditors, the retail investors who bought fractional shares are left in a precarious situation.

The legal process is likely to be lengthy and complex. The outcome will depend on the court's rulings regarding the defaults, the management of the properties, and the validity of the lenders' claims versus Landa's countersuit. Even if the properties are eventually sold, it is unclear whether the proceeds would be sufficient to cover the outstanding loans, let alone provide any return or even principal recovery for the fractional shareholders. The fact that the platform is inoperable and users cannot access information or initiate transactions only exacerbates the anxiety and frustration felt by those who invested their money with Landa.

The situation serves as a stark reminder of the risks associated with investing in private, illiquid assets through startup platforms. While the promise of accessibility and high returns is appealing, the lack of regulatory oversight compared to publicly traded securities, the operational risks of managing physical assets, and the potential for disputes between founders, investors, and lenders can leave retail investors vulnerable.

Lessons Learned and the Future of Fractional Investing

The Landa saga offers valuable lessons for both investors and the proptech industry. For potential investors in fractional real estate platforms, it underscores the importance of due diligence. Understanding the underlying assets, the business model's reliance on rental income and property values, the company's financial health, and the terms and conditions regarding liquidity and dispute resolution are crucial. Investors should also be aware of the regulatory framework governing such platforms and the level of protection afforded to their investments.

For the proptech sector, Landa's difficulties highlight the operational and financial complexities inherent in scaling fractional real estate ownership. Building a sustainable business requires not only attracting investors but also expertly managing a portfolio of physical properties, navigating fluctuating market conditions, and maintaining robust financial practices to satisfy lenders and regulatory requirements. The challenges faced by Landa and others suggest that while the concept of democratizing real estate investment is powerful, its execution requires meticulous attention to detail, strong governance, and a resilient business model capable of weathering economic downturns.

As the legal proceedings continue and Landa's platform remains inaccessible, the future for its investors remains shrouded in uncertainty. The case will likely be watched closely by others in the proptech space and by regulators, potentially influencing how fractional real estate investment platforms are structured and overseen in the future. While the dream of investing in real estate for $5 captured the imagination, the reality of Landa's current state serves as a cautionary tale about the risks that can accompany innovation in financial markets.

The outcome of the lawsuit and the fate of the properties will ultimately determine if any value can be salvaged for the retail investors. Until then, their funds remain locked in a platform that has gone dark, a stark contrast to the accessible and transparent investment experience Landa initially promised.