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Home Co-Investing [Podcast Episode 15]

In this episode, I’m going to be talking about home co-investing: what it is, what companies are doing it and how those companies are a little bit different from one another.

So first, what is home co-investing? It’s where a company invests in a home with you, and, it’s not debt. Instead, the company that invests then owns a portion of your house. In other words, they have some equity in your home.

So again, it’s not really a loan because they’re investing in the home with you and then you pay them an agreed upon monthly fee. But again, this isn’t set in stone because it varies depending on which company you’re working with.

So the first one I’m going to go over his Haus.

On their website, they say, “Haus, isn’t a bank or a lender. We’re a co-investor. We share in the equity of your home. And in exchange, you get real-time access to your equity plus discounted monthly payments. Now that’s something different.”

They go on to say, “We’re changing the way people live with a new type of ownership that’s more flexible and affordable than ever. No more waiting to access the equity you own today. It’s waiting for you now in your Haus account.”

And then they continue on.  “When tapping into your equity, you receive your cash within days. You need to maintain a minimum percent of ownership and your payment will adjust based on the amount you’re withdrawing, but we make sure you understand your new adjusted monthly payment before you cash out.”

So essentially what you’re doing is you’re getting…you’re giving them equity in your home in exchange for cash that you can use right now. So in other words, you’re, taking out the portion of the equity in your home.

They go on to say, “Haus makes it simple when you’re ready. We’ll list your home on the MLS. Plus all the major search sites for free. You can use a realtor if you choose, but you’ll be responsible for those costs.

Once you sell you’ll immediately receive payment for your portion of equity minus any applicable selling costs. Haus gets the remainder. ” And just a quick note, the way they spell house is H-A-U-S so it’s like “Haus.” 

The next one I’m going to cover is similar, but you’ll see soon, how it’s different.

It’s called Knock and it deals with swapping your house.

On their website, they say, “Since 2015, our mission has been to empower people to move freely by bringing convenience, certainty, and cost savings to home buying and selling. That’s why we invented the Knock Home Swap.

With it, you can move into your new home before selling your old one.” So in other words, they’re saying that you can get rid of your current house, they’ll cover the mortgage, and you can move into the next one and start paying the new mortgage.

They continue on to say, “With the Home Swap, you only pay one mortgage at a time. You’ll pay the mortgage of your new home, immediately building equity, while Knock covers the monthly mortgage payments of your old house.”

Then they go on to say, “For all of the convenience and certainty offered with the Home Swap, Knock charges a 1.25 convenience fee on the purchase of your new home. You can either pay this at closing, or roll this up into your equity advance.

This convenience fee is similar to an origination fee, which many lenders charge. This is just Knock’s fee for the loan and is not inclusive of real estate commissions charged by our agent or closing costs.”

So again, there’s a little catch there that, you know, you have that convenience fee of 1.25%. So as you can see, Knock assumes that you’re moving into a new house, whereas with Haus, that’s not the case.

With Haus, they are simply letting you buy into your current equity. Knock has to deal with moving into a new home before selling your previous home. 

The next one I’m gonna be talking about is called Divvy.

On their website, they say, “Rent your dream home while we help you save for a down payment. You can buy the home from us whenever you’re ready or walk away and cash out your savings.”

They go on to say, “Some call it rent-to-own, but we’re a new kind of real estate company that makes it possible for you to build your wealth while living in your dream home.”

Then they have a series of steps that they have, and again, this is directly off of their website. It says, “One: Apply in minutes. It’s free, fast, and will impact your credit score. Once you qualify, receive a home budget and start shopping.

Two: Choose your dream home. Don’t settle for less. With Divvy, you get to pick the home and we buy it for you.

Three: Rent while you prepare to buy. You’re not in this alone. Rent the home from us and build your savings while we help you get mortgage-ready.” So really, in a nutshell, what they’re saying here is that they’re going to help you pay for the home by buying it first, and then you can basically own it after paying rent if you so choose.

That last part’s important because they don’t hold you to buying the home. You’re able to walk away from it. However, you have zero equity in that home then because you’re renting it the whole time. 

The next one I’m going to be talking about is ZeroDown.

On their website, they say, “Pick the perfect home. We’ll get you the keys with 0% down payment. You pick any home on the market that meets our property guidelines and we’ll buy it with a cash offer, then lease it to you.

You’ll pay us a simple starter cost that covers our services and the premium ZeroDown experience (see simple pricing). Once you get the keys, you’ll have the exclusive option to buy the home from us anytime after 30 days and up to three years.”

So, again, they’re, buying the home. Then they lease it to you and you have the option to buy. Now it says, it continues on and says later on, “Buy it from us at a predictable purchase price. You can purchase the home from us anytime between 30 days and three years after you move in.

The purchase price of the home is fixed at a 2.5% annual increase.” So that means every year it’s going to go up 2.5%. And then they say, you know, you can walk away from it, just like, as you would have a lease, but again, with this, you have zero equity because they’re buying it and they’re simply renting it to you. 

Next, I’m going to be talking about Unison.

They say on their website,  “We help unlock your home’s equity in exchange for a portion of your home’s appreciation when you sell. No extra debt, no interest, no monthly payments. Plus we share in the upside and the downside.” So, what they’re doing is they’re taking the equity in the home that you already own.

They buy it and then they convert part of that equity to cash for you to use. 

And then, finally, Hometap.

It says on their website, “Hometap is a way for homeowners to be paid today for equity they’ve accumulated in their property without getting a loan. We invest alongside homeowners providing cash today and participating in the proceeds at the time of sale.”

Then they go on to say, “What’s the difference between Hometap and a loan? Unlike a lender we received no monthly payments or guaranteed return on the money we’ve invested.

For some, taking an equity investment can be an intelligent way to fund the opportunities and needs that come up in life while eliminating the ‘debt stress’ of increased monthly payments.”

So again, this is, very close to what Unison does. They’re buying into the equity of your home and then give you some of your equity, that you can use for cash. And then they share in the appreciation and depreciation of your home, of course, in the hopes that if the home appreciates, they’re going to make money off of the exchange.

So that’s kind of home co-investing in a nutshell. You can think of this as like home equity financing, equity sharing, there’s many names for it.

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