Partial Home Ownership, Equity, Down Payments — Thoughts on Point

Real breakthrough innovations don’t come along very often, in any industry.

Real estate is no exception.

What gets me excited is when products / businesses enabling consumers to do something they can’t do today (rather than just recreate the same wheel that’s been created 10 or 20 times before).

Point is certainly one such product / business that fits the bill for me. What exactly is it?

Point is an alternative to traditional home equity loans and HELOCs. Point buys into a fraction of your property. There are no monthly payments.

A few of you may have seen that Andreessen Horowitz led their latest funding round ($8.4 million round, 15.4 million total funding). They are correct, historically, there were two ways to “live” somewhere:

Renting, in which case you own 0% of your residence

Owning, in which case you own 100% (typically using a bank mortgage as a 30-year crutch to owning all 100%)

Being limited to 0% or 100% doesn’t seem right. There’s 99.9% difference, which could be divided among numerous people.

I’ve long thought a sort of stock market for real estate was compelling (remember Realius?, which I referenced again recently). Many years ago, I wrote a blog post about a “fantasy” real estate stock market (I couldn’t find last night) — think Wall Street Sports (sold to Sandbox in 1998), but for real estate.

This isn’t just a “fantasy” version. This is the real damn thing.

Tack on top of that my Kiva for real estate (aka home ownership) blog post awhile ago. The super compelling use case, to me, is using a partial equity mechanism like Point to fund down payments (which I believe to be the big barrier to home ownership earlier in life).

I’m offering 10% equity in my house in exchange for the cash for a down payment.

I think it would be pretty damn cool for my parents able to easily own 3.5% of my home, a best friend owning 1.5%, my sister and brother in law owning 1%, and a collection of 10 other friends owning 4% (as some random figures).

Or having the ability to own .2% of my friends home.

Of course, the other angle is taking money out of your house by selling equity stakes. That’s cool, but not quite as interesting to me personally.

Where could the model break down?

The same place equity breaks down when it comes to founders and investors in startups. If the home owner ends up only owning a small percentage of the home, then at some point they may deem their time is better spent elsewhere than maintaining their own home. This plays out in startups when founders take big funding on bad terms and end up giving up substantial percentage of their company. If their equity stake is sub 3%, as opposed to 20% or 30% or 50%, the “walls” they are willing to run through to succeed/win are invariably different because the potential pay off is vastly different. Why put in all the work needed, when your investors are going to see significant more returns with a tiny fraction of time spent?

That said, making residential real estate an extremely liquid asset is very big shift that will, dare I say, disrupt (geez, I really hate that word) real estate fundamentals that have been around for a long, long time.

It’s early days. The future ramifications of partial equity in homes are not even close to being entirely known at this point. The more I read and think, the more intrigued I am with everything about Point. This is one to watch, no doubt — and it’s a virtual certainly I’ll write further thoughts on this in the future once I’ve had more time to grok the implications for the industries numerous stakeholders.

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