Tech Startup Puts New Twist on Unlocking Home Equity

A technology startup that aims to revolutionize how U.S. homeowners access their housing wealth today raised $8.4 million in Series A funding, with one of the world’s largest private equity firms leading the way.

The company is Point, a Palo Alto, Calif.-based firm that launched in 2015, which touts itself as the first financial technology platform that allows homeowners to unlock their home equity without taking on new debt.

“Point is fundamentally transforming the home equity financing landscape,” said Point Co-Founder and CEO Eddie Lim in a press release. “Homeowners can now access their home equity wealth without a loan, without monthly payments, and without a fixed interest rate.”

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The way it works is Point’s customers sell a fraction of their home to investors in exchange for a lump sum of capital—between $40,000 and $250,000—without interest rates or monthly payments. The customers then repay the lump sum within 10 years after selling or refinancing their home.

“This is truly a revolutionary product that aligns the investors and homeowners in a way we haven’t seen before,” Lim said. “There’s $18 trillion of U.S. residential real estate equity wealth that is locked up. We want to put that wealth to productive use.”

Homeowners can use the capital in similar ways that reverse mortgage borrowers would use their loan proceeds, that is, to diversify their wealth, renovate their homes or pay off any existing debts.

Point’s target consumers, however, fall shy of reverse mortgage eligibility. Rather, customers largely fall within the ranges of 35-55 year olds who have been living in their homes, on average, for 10 years, Lim told RMD during an interview Tuesday.

Having accumulated equity in the home is a defining characteristic of the consumer Point is trying to reach. A “sweet spot” for Point, Lim said, are homeowners who have anywhere from 30-45% equity in their home.

“We’ll be buying 8-10% of that,” Lim said.

The company underwrites all prospective customers who wish to use its services, subjecting clients to the “usual” Fannie Mae underwriting guidelines, Lim said, as well as additional vetting by Point at the local housing market level.

For investors, the draw is that with Point they can now buy fractional interests in owner-occupied residential real estate through a digital platform, thus giving them access to a new asset class.

Investors may range from larger institutional entities, like mortgage hedge funds and large asset managers that have structured credit expertise, to smaller investors like net worth individuals.

Silicon Valley-based venture capital firm Andreessen Horowitz led the $8.4 million Series A funding that Point achieved Tuesday. The firm, which has $2.7 billion under management, according to data and analytics on Crunchbase, also led Point’s seed funding round in 2015, now bringing the total funding to $15.4 million.

“The progress since the company’s founding has been exceptional and has surpasses our expectations,” said Alex Rampell, general partner at Andreessen Horowitz, who has taken a board seat at Point.

Andreessen Horowitz was also joined by the company’s earlier backers, Ribbit Capital and Bloomberg Beta. Individual angel investors include Orogen Group CEO Vikram S. Pandit; Airbnb CFO Laurence Tosi; LendingHome Founder/CEO Matt Humphrey; and Invitation Home’s Co-Founder Brad Greiwe.

“Point provides homeowners with a solution to create liquidity through an aligned investment that will provide more options for safely managing their wealth and investing in their future,” Airbnb’s Tosi said in a release. “For investors, Point offers above market, risk adjusted returns from a diverse and stable set of assets. In short, the platform is a unique win-win for both homeowners and investors.”

Point reached several milestones in its development, including building a proprietary pricing engine that unifies property risk and homeowner risk; investing in over 50 properties across California; and bringing investor capital to its platform.

The Series A funding will enable the company to expand its geographical footprint, as well as assist with continued technology innovation and will help bolster marketing efforts, the company stated in Tuesday’s press release.

Currently, Point serves homeowners in California and Washington, with plans to expand to at least three additional states by end of 2016. Not coincidentally, the company began its rollout in states where home values are high and where there is a potential for greater home equity.

“Largely speaking, we’re going to start on the coast and work our way in,” Lim said. “We’re going state by state to get operations ready, as well as to prepare from a regulatory and licensing perspective. Eventually, this is a solution that can be provided nationwide.”

Written by Jason Oliva