HomePace, which is focused on an alternative way homeowners can get access to equity—and investors can get access to returns—recently closed a $7 million Series A round.
The lead investor was LENX, the corporate venture arm of homebuilding firm Lennar. Prior investors Bling Capital, NextView Ventures, and Ride Ventures also participated in the round.
According to PitchBook, the company was founded in 2020 and has 13 employees and is currently generating revenue.
The business model is an unusual one, as HomePace explains it: “We give homeowners or homebuyers funds upfront and become a shareholder in their home. Instead of charging monthly interest, we share in the gains or losses in their home’s value when they choose to sell.”
So, not a mortgage and not a traditional installment loan. Instead, HomePace becomes a co-owner. The consumer looking for money can get up to $250,000 and the company claims to be a “passive investor,” with the borrower remaining “in complete control of their property.” The amount made available depends on the home’s current value. The company becomes a secondary lien holder on the property.
For those looking to buy a house, the company can match of the homebuyer’s down payment, which would enable such advantages of a purchase of a larger house, a smaller monthly payment, and/or a better rate, which, with rising interest rates now, could become an attractive feature to many who have never experienced higher mortgage rates before.
In either case, the company’s site provides an instant quote, then reviewing by phone with the homeowner or buyer. The relationship is over when the house is sold, or the homeowner buys out HomePace’s share. There is a maximum period of 15 years, after which there are three options: a sale, a buyout, or a second agreement “on a case-by-case basis.”
According to the company, it invests only in single-family primary residences in one of the states it does business in, and the applicant needs a minimum credit score of 630.
HomePace currently has investments in Arizona, Colorado, North Carolina, Tennessee, Utah, and Washington State. The money comes from such institutional investors as “family offices, investment firms, endowments, and pension plans benefit from diversifying across classes of real estate” that “often don’t have the resources to select and invest directly into single-family homes themselves.”
HomePace makes its profit from a “one-time origination fee … based on the value HomePace invests, and is paid out of the money we provide you, so there is no ‘out-of-pocket’ payment.”
Equity gained from monthly payments remains with the people paying the mortgage.