Insurance firm American Family led a $60m funding round yesterday for Hometap, the US-based creator of a system allowing homeowners to tap equity, indicating how rising property prices are fuelling new business models.
The round was led by corporate venturing unit American Family Ventures and also featured private equity firm Bain Capital, multi-family office Iconiq Capital and venture capital firms G20 Ventures, Pillar and General Catalyst.
Hometap’s model involves it paying homeowners for a share of their property’s future value, allowing them to access finance without taking on debt or remortgaging.
The company said the round boosted its equity funding to $95m since it was founded in 2017. American Family Ventures had joined G20 Ventures and existing backers Pillar and General Catalyst in its $12m series A round in 2018 before all four took part in a $100m debt and equity round in late 2019.
American Family Ventures managing director Dan Reed said: “Since we made our first investment in Hometap in 2018, we have strongly believed in its mission to give homeowners a more accessible way to create liquidity and financial flexibility from what is oftentimes their largest asset.
“By leading this funding round, we are casting another vote of confidence in the team’s ability to accelerate its progress. We look forward to a continued partnership that makes a positive difference in the lives of homeowners.”
Hometap’s model is fuelled by the continual increase in property prices over recent years. The average US house price has risen approximately 50% in the past five years according to S&P Dow Jones Indices, enabling users to hypothetically get larger sums in the form of equity.
The company’s method is not without risk, however. Users are required to settle the investment at the end of a 10-year period, meaning they may have to take out a home loan anyway, or sell their property in order to pay it back.
Other participants in the sector include Point, which counts Bloomberg Beta and Prudential as backers and which closed $1bn in capital commitments in August this year, and Figure Technologies, which applies a blockchain model to a wider range of areas and which secured $200m in series D funding in July.
Interestingly, the rise in house prices is also fuelling startups at the other end of the market.
Landis Technologies provides a rent-to-buy model through which users can rent properties while saving up for a deposit, helping prospective buyers to pursue deals before they have a full deposit. It raised $165m in a July 2021 series A debt and equity round featuring entertainment management agency Roc Nation’s Arrive unit.
Digital technology is also helping refine sales, with companies like Offerpad and OpenDoor using artificial intelligence and video technology to accelerate the process to the point they can make an offer for a house almost immediately.
The latest funding has been earmarked for geographical growth within the US, but Hometap said it also plans to introduce other additional alternative financing products and services for homeowners.
With house prices not looking set to fall any time soon, the company may well be looking to expand into the sale or buying end of the market, both of which appear to have ample room for disruption. It looks very much as if online real estate portals were only the first step in the sector’s digitisation.
Photo courtesy of Todd Kent via Unsplash.
