Let’s say you want to buy a home. Let’s call it your first home, so it is a very big deal. The monthly mortgage isn’t nearly as challenging as the initial down payment, which coincidentally is the part of the purchase which usually creates problems and weeds out the buyers from the non-buyers.
So what to do? I’ve often thought that if there was some sort of crowdfunding platform to take advantage of – like, I dunno, you pledge $1000.00 and you can stay overnight in my house and I’ll make you dinner or something to that affect – that it would make purchasing a house a whole lot easier. The problem is that you probably don’t want 400 people you don’t even know purchasing a share in your home.
There are actually a handful of concepts that address this scenario – and the newest one is one of the more intriguing.
Point takes your home and allows individuals to invest in it. They become part owners, in a sense. What part of the home they actually own is negligible. Point makes a provisional offer to purchase a fraction of your home. They provide you with an offer based on the value of your home today. With that money, you can pay off your mortgage or make improvements.
It’s different from home equity because there are no monthly payments. You don’t repay until you sell your home.
If you sell your home within the term, then Point is automatically paid from escrow. If you don’t sell, you can buy back Point’s stake at any time during the term at the then-current appraised property value. Point is paid a fraction of the home’s value. If the home has declined significantly in value, Point may be due less than its original investment.
Show me the money
Point represents an exciting evolution with the real estate industry. Drew Meyers made some keen observations regarding Point, commenting that “making residential real estate an extremely liquid asset is very big shift that will disrupt real estate fundamentals that have been around for a long, long time.
Superficially, Point seems like the real deal and their site does a good job of explaining how it works.
To early to tell?
That said, the future ramifications of partial equity in homes are not even close to being entirely known at this point. Point is one to watch (but not the only one). We’ll have to see how the rest of the industry responds, so stay tuned.