This a16z podcast: Real Estate — Ownership, Asset, Economy kind of blew my mind.
“So, right now when you want to find a place to live you’ve got 2 choices. You can rent, which means you own 0% of your home, or you can buy which means you own 100%, usually from the help from a mortgage from a bank.
But why can’t you own 80%? Or 85%? Not only would this make owning a way more affordable, but, it would also mean you wouldn’t have 300% of your net worth tied up in this one asset which is completely against all standards of diversification.
Mind blown.
I love this post.. They have the idea right insofar that there’s too much friction to “diversify” your home equity. Currently there’s $16T of home equity in the US residential market and there’s only 3 ways to get it out of your home: Debt (Cash-out refi/heloc), Sell, or Reverse mortgage (must 65). The problem with Point in my opinion is that when you dig in to the actual product offering, it’s more like an expensive “fix-your-credit-score” program for sub-prime homeowners…Here’s the pitch: sell a fraction->pay off credit cards->increase your credit score->refi your home and payoff the fraction (point makes margin on the buy, the sell, and everything in between. It’s actually quite expensive..But, it’s a first step from a Fintech innovation perspective to helping homeowners diversify considering that 83% of the average consumers wealth at retirement comes home equity.