Owning a home is a good long-term investment, but the initial purchase often leaves buyers cash poor and in debt. Fast Company writer Ben Schiller profiles Point, a Silicon Valley startup launched in 2015 that is seeking to fractionalize home ownership in an attempt to give buyers more capital. Meaning owners would sell off a portion of their title in return for an immediate burst of cash.
Point has bought into many Bay Area homes and offers anywhere from $40,000 and $200,000 at a time. Owners can buy back their stake at any point in a 10-year window, and there are no interest payments. Point's plan is to make a profit off of rising real estate prices over time as it automatically takes a share of the profit when a homeowners sell.
Cofounder Eoin Matthews argues that selling a stake is better than taking a home equity loan, as the latter simply adds to the debt pile. Point's customers tend to be people in financial distress who already have lots of debt—whether it's the mortgage or some other kind. By selling a stake, they can clear what they owe and improve their credit score at the same time.
There's a slight catch, as you might expect. After appraising the house, Point adjusts the value downward to make sure it still gets paid if the value of the house goes south. But it also caps its potential upside: Under an agreement with regulators, it's not allowed to make more than 20% on its investment.