What if Investors Could Help You Buy Your House?
"A nation of homeowners is unconquerable." -Franklin D. Roosevelt
NEW YORK ( MainStreet)--Homeownership is a daunting, at times seemingly unattainable dream for many Americans--what with total student debt at $1 trillion , a national unemployment/underemployment rate at 14.3% and median household income dropping 7.8% since 2007. The average home price in the U.S. is a whopping $202,000, and the subprime mortgage crisis did nothing to quell anxiety. In fact, this year the American homeownership rate dropped to 65%, its lowest point since 1995.
But what if instead of taking out a mortgage from a bank you were able to go in with a number of investors and be the majority stake holder in the home equity?
That's the new system proposed by PRIMARQ, which is a capital market system that uses equity share finance to achieve two ends: first, to allow a person to become a homeowner of a property that otherwise would have been difficult or impossible to attain and second, to provide a platform whereby investors can gain exposure to the residential real estate asset class.
Whichever side of the equation you're on, this is a framework that is turning the housing market as we know it on its head.
If you don't have 20% to put down on your house, you can simply co-own your house with investors. Or, say you're stuck in a 6.5% mortgage but don't have enough home equity to refinance? You can sell shares in your home to investors and make your domicile a joint venture.
Essentially, the home occupant can supplement a down-payment or qualify for mortgage refinancing such that he doesn't have to put all of his liquidity in a single basket.
When the house is sold and the bank is paid back, the owner-occupant and the investors share the profits.
Simply put, it works like so:
- 1) A residential property for purchase or refinance is submitted onto the PRIMARQ exchange, packaged with third-party data and posted as an offering to the investor side of the market.
- 2) Investors bid on a "Q" position, (1Q = $10,000 purchase equity holding), and submit funds to escrow on acceptance of that bid.
- 3) Funds are present and financial contingencies associated with PRIMARQ are met. The loan is approved based on lower LTV and DTI ratios.
- 4)Escrow and closing honors current methodology and schedule and homeowner enjoys full occupancy and improvement rights.
- 5) Each investor enjoys appreciation and liquidity through access to the secondary market for Q trading.
Put another way, this is crowd-sourcing capital for your home.
In fact, twelve years ago, PRIMARQ CEO Steve Cinelli, a veteran of the banking world and private equity, founded Off-Road Capital, a crowd-funding site (a decade early) that leveraged the power of the Internet in capital formation--to connect those in need of funds with those in possession of them.