Historically, homeowners could only access the equity of your home by taking out a home equity loan or refinancing it. But in recent years, a new category of startups has emerged that are giving homeowners more opportunities to cash in on their homes in exchange for a share of the future value of their homes.
One such startup is in Palo Alto. Dot, announced today that it has raised $115 million in Series C after a year of rapid growth. The company declined to disclose its valuation.
Interestingly, the startup was founded by a trio that includes Alex Rampell, who is today the general partner of Andreessen Horowitz (a16z) and co-founder of the giant Buy Now, Pay Later. He teamed up with Eddie Lim and Eoin Matthews will launch Point in 2015 before joining a16z. Rampell sits on the company’s board of directors but is not involved in its day-to-day operations.
So what exactly does Point do? In an interview with TechCrunch, CEO Lim describes the startup as a marketplace that brings together homeowners and institutional investors. The company’s flagship product, Home Equity Investment, is designed to allow homeowners to receive cash in exchange for a percentage of their home’s future value. Point says that last year, it received over $1 billion in new capital commitments from real estate and mortgage-backed securities (MBS) investors.
The principle of operation is that Point first assesses the financial situation of applicants and makes a preliminary offer. Point then evaluates the home—often with a home estimate—and updates the final offer. Once all closing conditions are met, Point says it will fund the investment within four business days. On average, Point’s home equity investment (HEI) is 15-20% of the value of the property.
His average investment is around $100,000. According to Lim, the average cost of homes in his market is about $700,000. Investors usually invest about 15-20% of the value of the house. So if the house is worth about $1 million, they will invest $150,000 or $200,000.
Homeowners, according to Lim, use cash for a variety of purposes, such as home renovations, starting a small business, funding a child’s education, or saving money for retirement.
“We have $250,000 homes in our market, as well as multi-million dollar homes and everything in between,” Lim said. “It can be a very attractive way to get cash.”
“The homeowner is not obligated to repay us for 30 years,” Lim told TechCrunch. “Of course, most people do some kind of event, sell their house or refinance it well before age 30.”
Executive compared the process to a venture capitalist backing a startup.
“What is it like [an investor] making venture capital investments in the house,” Lim said. “We invest in your home and share its future appreciation and growth.”
Since its inception, Point has invested in over 5,000 homes. While Point has been around for a few years, Lim said that according to Lim, “the vast majority of that” growth has happened in the last year. In particular, he said Point’s funding volume grew more than 5x in the first quarter of 2022 compared to the first quarter of 2021.
“WeThis is sort of a tipping point for the US housing market, and has probably been for a year or two now,” Lim told TechCrunch, “where home equity has never been so abundant and at the same time so unaffordable.”
Really, recent report indicates that “Americans are sitting on $26 trillion of net worth.”
The company believes that the benefit of using Point for the homeowner, compared to getting a home equity loan or refinancing, is that it has “no monthly payments, no income requirements, and no need for a perfect loan.”
Lim describes Point as “fintech with easy assets for equity.”
“We don’t own any assets, but rather connect homeowners with investors,” he explains. “As a marketplace, we charge a fee on both sides of a transaction. We also charge an investor a management fee.”
The company currently operates in 16 states, including California, New York, Florida, Massachusetts, New Jersey, Washington, Colorado, Pennsylvania, Illinois, Maryland, Michigan, North Carolina, Arizona, Minnesota, Oregon and Virginia, as well as Washington , COLUMBIA REGION By the end of the year, the company plans to enter 11 more states, including Ohio and Nevada.
Rising mortgage interest rates have taken a toll on digital mortgage startups as refinances and new home purchases decline. But in this case, it could be a tailwind for Point and its ilk, though Lim emphasizes that Point is not going to replace refinancing, for example.
“People can still refinance and use Point,” he told TechCrunch.
Other companies in the space include HomePace, which just last week raised $7 million Serie A led by Lennar’s corporate venture arm, LENX. home tap In December, the company raised over $60 million in funding. Last October, Point announced $146 million securitization. And in February Unison completed a $443 million securitization..
WestCap led the C Point Series, which also featured existing sponsors a16z, Ribbit Capital, mortgage REIT Redwood Trust, Atalaya Capital Management and DAG Ventures. New investors include Deer Park Road Management, The Palisades Group and Alpaca VC.
The investment has increased the startup’s total raised to date to over $170 million in equity capital.
Point plans to use its new funds to scale its offering so it can “support more growth” as well as launch new products and expand its presence in the country. She also naturally wants to hire more “shooters,” as Lim called the company’s staff. The startup currently has 210 employees.
“AT in many ways, we’re just getting started,” Lim told TechCrunch, “in terms of how many homeowners are out there and how many shares are out there. We are ultI really want to bring this to every homeowner in the United States.”
“WestCap is leading this round at Point because they have developed the best and most convenient solution for consumers with the most flexibility and the least financial burden,” he told TechCrunch. “Point allows homeowners to securely manage their wealth and invest in their future, even when unforeseen circumstances arise.”
Tosi, former CFO of Airbnb and Blackstone, believes that Point’s offering sets itself apart from the competition in that it works with regulators, has securitization capabilities, and has a “best-in-class investor base” while “offering investors higher market returns with risk adjustment.
For his part, Rampell, who managed the seed and Series A rounds and also invested in the Series B, said in a statement that “the strength and depth of the team that Eddie Lim has assembled at Point and its innovative approach in providing funding to homeowners was evident.” .
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Credit: techcrunch.com /