Business Idea: An exchange to sell pieces of home equity
When people cash out of their houses without sellng their house they always do it in the form of debt. If you have $1 million in equity in your house and you need $200,000 then you borrow the money.
Another common form of fimancing that happens, for instance, with companies in the form of stocks that trade on a stock exchange. In other words, companies can raise money through debt or by selling equity (ownership in their company).
But with houses, you can only raise money through debt.,
Well, why not equity? Not sure why any of these business ideas have not been creatied.
1. The idea: sell shares in your house
For example, a home can sell 10% of their equity (there are limits because the owner should own most of the home so there is incentive to maintain it).
Let's say his house is worth $1,000,000. 10% is $100,000 so they want to raise $100,000 and they do not want to do it as debt.
I come along and think this home is in a good city that I think will grow. So as part of a portfolio hand-made by me I buy $1000 worth of shares in the house.
2. How does it make money?
Let's say the house sells for $,2,000,000. Twice the value of when you bouught shares in it. If you bought shares worth $1,000, then you can now sell your shares for $2,000. 100% gain.
3. An exchange. If threre's an exchange for these pieces of home equity then...
financing would be much easier for a homeowner, and price for a home would be much more market-oriented since shares of houses would be trading everyday.
4. Why would people do this instead of a REIT
A REIT is a real estate investment triust. The REIT buys 100s of properties, buildings, etc and collects rent. The rent is distributed in the form of dividends and the REIT goes up in value if the houses go up in value.
But in a REIT you relying on the properties bought by the REIT (you might not like the choices) and you depend on them to not take on too much leverage
5. In this home equity shares model, investors can hand-pick houses and properties as if they are making their own REIT
If I feel I have a special information about the growth of a city, then I mught buy a bunch of shares in various hoes near the city. I diversify by buying houses of all income levels and all areas around the city.
This might reduce risk and increase returns
6. How can you implement this
The simplest format would, of course be crypto.
Create your own coin. LIke, JamesHomeCoin. Issue 100,000 of them to represent 10% of your house. The market determines price but let's say it's $100,000.
A DeFi exchange would agree to sell them.
The house is now "owned" by the token and the original owner owns 90% of the currency out there.
Any proceeds from a sale or rent go into the token and then gets distributed to all the token holders.
The token would also rise in value if the percieved value of the house goes up.
7. Company opportunity
Create a company that easily tokenizes percentages of houses and has relationships with DeFi exchanges to trade these tokens.
8. Another opportunity
Hedge fund buying individual home tokens all over the country.
9. One more
Subscription service revealing significant due dilgence for every property that has been tokenizes. So people can trade tokens to make money.
- homeowners have faster opportunity to cash out on their house
- investment opportunity for small investors or even hedge funds.
- not as volatile as stock market with historically steady returns.
- will make interest rates lower since debt will now be competive with equity
11. This seems like an obvious idea. Which means...
there;s probably something wrong with it. Why hasn't this business been done yet?