Buzzing into action...
A new startup is introducing a novel method to assist first-time homebuyers in entering the challenging US housing market.
The concept, termed ‘fractional ownership,’ allows prospective homebuyers to collaborate directly with investors to purchase homes swiftly. Buyers then pay an amount akin to a mortgage until they can buy out the investors’ equity stake. During this period, the house is held in trust by the investors until the buyers are ready.
This initiative, called Ownify, was founded by Frank Rohde, who aimed to address perceived issues in the US housing market.
“First-time homebuyers are facing the toughest market in over 50 years. Home prices are increasing faster than incomes. High mortgage rates reduce affordability. The mortgage interest tax deduction isn’t helping anymore. Cash buyers and institutional investors are outbidding first-time buyers. The system is broken,” states Ownify on their website.
Even financially stable first-time homebuyers are struggling to navigate the current real estate market. Residential real estate is considered one of the best hedges against inflation and economic instability, making it a prime focus for fund managers. However, record levels of student and credit card debt, coupled with low savings rates, are making it difficult for the working class to accumulate capital.
“The win rate for first-time buyers kept decreasing, with the average first-time buyer in some markets making numerous offers before securing their first accepted bid,” said Frank Rohde, founder of Ownify.
While low down payment mortgages are available, they often result in high monthly payments.
In contrast, Ownify requires a 2% down payment on the house’s cost. Homebuyers find a house they like and notify Ownify, which coordinates with investors to make a competitive all-cash offer. For example, if a house is listed for $330,000, Ownify might bid $340,000.
After the investors secure the property, the homebuyers make their down payment and begin monthly payments until they’ve paid off 10% of the principal. At this point, buyers can either use their equity to secure a traditional mortgage, with the investors agreeing to sell only to them, or they can sell their 10% stake back to the investors and move on.
Investors earn interest on the monthly payments and gain valuable real estate, while homebuyers have the flexibility to adjust their monthly payments and easily relocate if necessary.
Ownify launched initially in Raleigh, North Carolina, due to the suitability of family home prices within the national median. Rohde notes that the model wouldn’t be feasible in areas like San Francisco. The company plans to expand soon to Denver, Nashville, and California.
If you are a proptech company and want to promote your products for free, go to proptechbuzz.com and submit your products. For investors or proptech buyers, sign up on our platform to stay informed about exciting updates and trends in the Proptech Ecosystem.
Explore more Proptech news at proptechbuzz.com/news, for news tips and promotions, reach out to marketing@proptechbuzz.com.
By Proptechbuzz
By Ravi Kumar
