Leaders in Lending
Leaders in Lending

Episode 75 · 2 months ago

Tapping into Underserved Homebuyers with Co-Ownership


In the current economic environment, finding an affordable home has become out of reach for many potential buyers. What if a realistic option was to co-own a home or property- instead of pouring money into your landlord’s mortgage?

Underserved homebuyers and renters who can’t afford to buy a home on their own are now multiplying their buying power and making co-ownership a reality.

Eric Chebil Founder and CEO of Cher, does all this for clients, realtors and lenders looking to co-own a home.

Join us as Eric and Jeff discuss:

  • Co-ownership as a way to serve those just out of reach of home ownership in competitive housing markets like California
  • How lending and other agreements works in a co-ownership model
  • Activating more clients for lenders- risks and rewards

You're listening to leaders and lending from upstart, a podcast dedicated to helping consumer lenders grow their programs and improve their product offerings. Each week here, decision makers in the finance industry offer insights into the future of the lending industry, Best Practices around digital transformation and more. Let's get into the show. Welcome to leaders and lending. I'm your host, Jeff Keltner. This week's episode features my conversation with Eric Schavel, the founder and CEO of share. This is a really interesting conversation for me. Eric and share are really at the forefront of the movement towards CO ownership, helping renters purchase homes, even at homes and maybe they can't fully afford, by Co owning with friends, with roommates, with family or even with other party investors. It's really fascinating concept that I think meets the needs of a number of consumers. I've seen a little bit of this in the vacation rental home space Um, but seeing it from primary business was really interesting. So I learned a lot from this conversation and I hope you will as well. So, without further to please enjoy this conversation. With Eric. Eric, welcome to the PODCAST. Thanks for making the time to join me today. Thank you, Jeff, for having me. I'm excited to be here and talk about some some lending and some some changes that's coming in the industry. I can't wait. I love changes in new ideas and it seems like you guys are at the forefront of those. So, before we get into what you do at Your Company, tell me a little bit about how did you get into the entrepreneurial Fintech space? And that's not the not the obvious pathro but we just love to know your history a little bit, how you ended up choosing this. Yeah, so, actually it came back down to a lot of family impacts. So actually it turned out that pretty much everyone in my family are either owners of a company or they're pretty much self driven as an entrepreneur. So it always makes Thanksgiving dinner an interesting an interesting topic for sure, on who's who's leading the charge. But yeah, so you know a lot of you know a lot of impacts from them. My Dad was actually in construction. He's has a company over in the in the Middle East, in Qatar, and so he was a big impact on my uh kind of my my choices for for lending and also, I mean for real estate as well. So, uh, yeah, I mean plus living in Los Angeles, it's it's a competitive space. I mean, if you're not, you know, there's a lot of a lot of hard working, good people here that, luckily, the community of of founders and mentors. Um, you know, you can always lean back on them. So I would say that's kind of a bit, a bit about how I got started. Well, before we get into what you guys do exactly, which I think is is really interesting. Um, I'd like to understand, like I would like to start with like what's the problem you saw in the world, like what was the the issue that the consumer or the business issues say, Hey, there's a problem here that that needs to be solved. What? What for you, is that problem, the kind of the thing you saw in the world that needs to be fixed? How? So, to kind of lead up to that, it's a bit of a short story. So my background is I'm a licensed real estate broker, mortgage broker, an engineer. Went to school at University of Washington Study Construction Engineering, architecture and finance and uh, you know, great university out there. I was I was fortunate enough to have six different job offers before even graduating my senior year. So, uh, yeah, it was. It was a great time. Um. And then, uh, I chose a company called swingterton builders. They're the largest general contractor on the West Coast. It was great. I mean I was start off doing engineering, uh and I was promoted every single year. You know. UH, bust my tail off. Started to manage building dollar projects and uh, from that experience, though, uh, I started to find that, although I was being promoted and I was getting, you know, anywhere between ten increases on my base, uh, I found that my rent was going up almost that same...

...rate. And so I started actually, I kind of came to this conclusion. I did it just a basic, you know, Napkin and figure out some mass saying okay, Eric, let's think about this logically. If I can do this, get promoted every single year, then I think if I become the youngest CEO in a two year old company, I'll be able to buy a home when I'm thirty six. So I thought, okay, let's let's let's let's set some expectations. And so, uh, I started looking into well, what are some other alternatives? To buy a home. And so, Um, you know, I can neither continue to rent, I can add more roommates and and which is I guess I can start doing some couch surfing if I need to, Uh Huh. And then, unfortunately, I could move home with my parents, which we're seeing around fifty young adults are now moving home with their parents. At people doing and I something tells me it's not because they want to. Uh something tells me that they you know, it's the only choice. So uh, given that background, that's that's kind of my pain points were I want to solve a problem for for no one myself, because I can never afford a home of my own. I'm already living with roommates. So why is it so crazy to pay my mortgage instead of my landlord's mortgage? And that was one side of things. And then the other side is for real estate agents and brokers. Uh, you know, a startling stat is that of real estate agents and brokers will actually never make a sale in five years and completely quit. That's per the National Association of Realtors. And maybe seven percent will fail. So you really let that resonate like okay, so when you're I'm sorry, for all the people who are, you know, watching those shows on Netflix. It isn't but in a shave in the future. So uh, yeah, it is. It is a brutal world out there. You're competing against so many other people who are doing just very similar things, and so, uh, I wanted to do something that was helpful for them by now being able to access this pool of essentially not only underserved home buyers but renters who can never afford a home on the on their own, by now co owning together as an option, multiplying their buying power, it frees up an entire new streamline of revenue for these realtors. So talk to me now about what you guys say. You founded a company called share. Yes, it is. Yeah, so it's called share and uh, I named it not because I love the singer. Uh No, no, H. Yeah, so C HD r. You can find us at at share a home. So, C H R a home. Uh. And so, you know, first my first company before this was should be a realty. It was my first, my first company I ever found it as a small real estate mortgage brokerage company and I wanted to think of a way. Well, how could I consolidate should be a realty. And UH. And what was something that that shared, that a company can help co own? And so the name share came about where, uh, that's what you have to do now to get into home ownership. So it's it's good. We felt like it's a great name. So what share does is it helps individual renters co own homes together. So, whether that be a single family residential home or, if you would like a multifamily home, we do both. Uh. And what we've what we found is that, uh, individuals, typically, they can don't come to us and say, Eric, I'm pre approved for four thousand dollars and we say that's we'll call him James. We say, James, that is terrific. Uh. And they say I want to buy home in downtown L a.

We say, James, that's great. It's gonna be about a million dollars. How do you want to come up with the other six? And they'll say, okay, oh, there is there any is there anything else that's more affordable? And I say, unfortunately, there's. I mean, it's gonna be that's L A and that's gonna be tough in California. So, uh, we asked them, James, what about. Have you thought about CO ownership? UH, and they'll say, you know, well, what is that? And and we'll explain the benefits and the UPS. Of course there's there's a risk to everything and the pros, of course, of getting in a homeownership now, uh, and Co owning with either friend, family members, significant other. We can co own with up to four different people. But also there's a splip side of things where if you just moved to a new area or as you kind of get older in your life and you get married and things like that, um, those early childhood friends and college friends you may not it's hard to stay connected with them sometimes, and so we also offer an opportunity for these first time home barers to be able to co own with people they don't know. And that's a it does seem like a big paradigm shift and wow, those are that's a risky component, Um, and what we've done to to to mitigate that is we really push the duplex triplexes of CO ownership with with people who don't know each other. Because, you know, the last thing we want is the small friction points to deteriorate a good investment such as look, Jeff, why they're still dishes. You've made less on your last night man like why you're not cleaning it up. So you know, those small pain points can can be easily addressed by having your own space and still building equity. Interesting. How do your current programs breakdown? Is it? Is it more family? Is it more friends? Is it more investors that are the CO owner? Is there any kind of focus, or at least um I'm an importion to what you're seeing happen in the market right because it's a fascinating idea. Um to come, but idea. You know, I'm curious how that really is. It's like parents helping with the helping with the purchase and going in have these or what does it look like? Yeah, so, I mean we've had a wide, like a wide variety of different types of clientele. It's come from a parent co owning with their college student or their their their college kid. Uh, and that's because, you know, as a or going through their graduate school, they've got multiple years sitting there, renting out in dorms, which is I mean the cost of living there is pretty ridiculous. So shout out to the universities for monetizing off of that. But that's, you know, tough for the students. Uh. So we've seen that type of relationship where a parent realizes how long that they're gonna be renting, uh, and instead of just giving them a down payment, they have an opportunity to say, look, why don't we call own together now, you can actually build your credit much faster. I can at least get maybe that down payment back in in equity and appreciation and when, when we sell. So you know, we're looking at the majority of of of down payments that are coming from gifts, and so the problem with that is that a gift is great, but you know, I don't ever expect that to come to come back. And so we we have that type of persona. We're also seeing a lot of existing roommates just realized, look, we've been renting for how many years, and right now in the US, uh, typically leases are being renewed longer than two years. And so, you know, recognizing that pain point, they kind of rented the starting to realize, well, I didn't think this was an opportunity. In fact, uh, some stats are that there's been a seven hundred and seventy one percent growth amongst roommates co owning their first home as a single family residential home in the last six years. I know it's it's startling. So we have we have we have that. That's kind of...

...our second persona, and then our third persona are the types of investors are kind of there. Either impact investors who want to help the underserved, who are doing kind of a uh with his multifamily, they buy out the other unit and they'll do kind of a least to own option. So in the end there's still, you know, they did something for the community and it's not just an investor straight up owning half the home. And then we also have those other investors, such as Um more of the traditional property investors who are looking to co own and access those first time homebuyer you know, three down programs that are, you know, from the G Sp. Got It, Um that's fascinating. I'm sowhat familiar. So I've seen in my world this kind of CO ownership concept more in the concept of vacation homes. I get it. I must be in the wrong advertising seven because I get this kind of various companies that are, you know, buy your multimillion dollar vacation. How else with your four friends and then it's kind of managed and structured. And so I imagine two kind of questions for you from from what I've seen in that which is, Hey, I imagine your customer is quite a bit different than the customer for that. So I'd love to understand what the demographics look like, what kind of consumers you're really serving with this product, how that looks and what the risk profile and those those loans looks like into you know, whenever I thought, when my friends called and said, Hey, let's find something together on man, we've got to figure out that, like it's always it always sounds good in theory, but then stuff goes wrong and you need the right legal structures infrastructure to to make sure that when when there's a disagreement, when something does go right, that everybody's properly protected, that's properly papered. So I'm curious what kind of services you provide to those borrowers too, in terms of the and not just the like a loan that's got to two people on it, but the kind of legal infrastructure for how you actually have some protection for both parties when there might be a disagreement. And conversed question. Let's go back to the first one, like, who are the customers you're serving? I'm assuming they're they're not like me. These are not vacation homes, right. So what does that typical customer look like? Yeah, so, so, you know, traditionally it's not like Elon Musk or Jeff bezos. Those guys typically don't want to go on. Maybe not calling together, who knows? But no, well, what we're seeing are are either high income earners, such as essentially either millennials who have either a software Dev job maybe work at startups. That's what what we have seen. We've also seen, Um, you know, those who are earning, you know, anywhere between six D K and up. We can we can definitely help. When you get a little bit below uh, it's it becomes challenging making those mortgage payments. And so from a risk from a risk profile, Um, we do we do originate and fund loans with credit down to a five credit score. Wow. So, yeah, so that a lot of folks don't realize that they can do that, and especially, you know, as you're getting out of you know, if you're a recent Grad from from college or if you have some savings and things like this. Um, you may not realize that you don't need a five eighty or perfect credit score. If you missed the payment, you and you don't need to enter into these long, you know, credit boosting. I don't want to want to call them schemes, but, uh, these types of programs. So that's that's that's one thing. So there is a slight risk that we do take on from taking on that. Right now, we do ask for a minimum three percent down. Still, but when you when you divvy that up amongst your co owners, you're looking at one point five percent, or or even less if you split up, you know, even more. Um, we are coming out with some new no zero down programs as well. Uh, but that of course, that it does increase that risk, risk aller.

And so Um, that would we had. We would be, you know, a higher credit score in turn. So Um, we are continuing to be on the forefront of even developing some new coning loans. Um. And so, you know, for any lenders listening to this, if your clients, which I know many, many lenders, have this problem, they're they're acquiring a ton of homebuyers who are sitting in their incubation phase. They have no idea how to activate them, and so this is a great opportunity for them to either partner up with share or, alternatively, Um help and develop a potential coning loan product, using and leveraging us as their partners. So, uh, yeah, that's I guess that that was a long, long winded answer for the first part of the question. Yeah, well, so, lenders who are paying attention, do you partner? I'm curious, how do you fund your Lans today and are you partnering with Um any originators or funding sources or banks or mortgage companies that are actually taking some of the you know, putting up the capital for some of these lungs or anything like that? We we are. So we do use, uh, some large wholesale lenders right now that do have strategic partnerships with us. Uh. And, of course, you know, we're always looking to diversify more. We don't have any exclusive partnerships to keep our options open because, of course, what matters to us most is the clients. So whatever the best loan product we can provide them, that's what we're gonna go ahead and go with. Got It. Now a second question. What's the set of not just the you know, Alan, but what is the set of things that you're helping these clients to to, you know, make sure the coding, I imagine you know. Actually, you know, you get the advice never mix Um, you know, family and money, uh, or that kind of thing. So, like you know, and I had that concern. We talked about doing something and jointly with some friends, you go hey, like, I know, it sounds great, but then if we have a disagreement on how to repair something or if we want to do a renovation or we need to like, you know, all of a sudden there's these these difficult questions that are not obvious and how they're answered. So I do think there's more than just a loan involved in making a CO ownership thing function. What are the sets of things you help with to make sure that, Um, you know, people can make their way through even when not everything goes exactly as planned? To be clear for for the listeners is that if you wanted to go out and buy a home, uh and just use a bank, you know there's a traditional retail lender. Uh, you can do that, but the steps and the hurdles are are challenging where you have to open potentially a joint account. You have to have the same lender Um and there's a lot of a lot of friction and you most likely will have to have a six to credit score higher. So this you can do this. But the way that share adds value is having it all centralized in one one platform. So, uh, from first of all, from just setting up your account, we have our own LS system. Our Tech is patented. So, from a user sperience, meaning a homebuyer's experience, when they come on to share, uh, it's a quick social sign on, meaning they provide their facebook or google or just one of their email addresses. Uh. From there we see where they want to own. They'll be contacted by one of our either L S or brokers, uh, to help them get pre approved and figure out, okay, do you need to co own it all, or are you? In many cases they do. They do need to co own. Ah. We have access and partnered with a variety of different MLS organizations. So our data feed is very robust. We don't don't pull from any other really third party. Um. And then, of course, the platform itself is is centralized around this co ownership where, Jeff, I don't know if you've ever worked like A. UH. Well, I mean I'm sure you've been exposed to this, but when a client comes to you in their first early funnel and they're trying to figure out, okay, I want to buy home in L A, you're thinking, great, does a million homes. which...

...which ones should they send you? And they say three bedroom, too bad, awesome, that's Nand you know, is there anything else you can give me? And so, uh, what share allows the L's and the brokers to do is actually see your homebuyer's profile and see which homes they flag, what they post on their news feed and a lot of their activities and who they just connected with as a CO owner. So, Um, it's very cowner centric and for the CO owner themselves, the value prop is that if you're looking to buy a home, it's it's I mean right now the market slow down a bit, but let's think realistically. How are we going to communicate the homes that we love? Um, probably gonna do it on Excel or. We're gonna irritate the hell out of our realtor or broker and just keep sending them back and forth. So share you can go ahead and centralize all of your properties that you like and collaborate much easier in a jet, in a crew, in a group conversation with your broker and L O. Uh. And then, of course, so going back to kind of the core of it, and then once you are pre approved, your code buyer is pre approved as well. We do provide you custom tenants and common agreements, which lay the foundation. So I would say a good, a successful co ownership relationship is one that first has some sort of legal protection and also one that has the right, uh, equal mindsets on what you want to do with the property. So is this going to be a fix and flip, Jeff, or is this going to be more? So I want to. I just I'm looking for a way to build equity from give me three to five years, and then I want to fractionally sell or sell completely. And so Um really comes down to first our contracts. We can, and we do pay if you like for a one year LLC. So we will create that LLC for you, uh, and I mean outside of that. Uh, the other benefits is that when you want to fractionally sell, how, how the hell do you do that? And so you know, you know traditionally how it's been is you'll post you'll have an agent post to the MLS and it'll say it'll sit on the market for eight, you know, past days. It'll say, hey, there's a joint venture opportunity, come check out, hit me up and I'll connect you with my client. So what we've been able to do is we've been able to reduce that substantially by I would say, over by now having a buyer when they want to sell using our agents. They can also be a four sale by owner which gets blasted out to our crm of sixty other CO buyers. But they want to use one of our agents, which we encourage them to do, they will go ahead and list it on the MLS as well, because now Rezo real estate standards operate. Organization has adopted this new fractional listing designation. So shout out to the all the secondary vacation property, property companies out there because with their help they've been able to really leverage this this uh, this program and so, Um, yeah, the infrastructure and and you know, it really required a big push. And so, Um, the benefit there is that. Yeah, so we we are able to reduce days on market for that seller, get their money out faster and, in turn, build wealth in a way that they would never have been able to otherwise done. So very cool. I think. I think I got it. Is there anything else you wanted to talk about or share about the program or think people out to know? Yeah, I mean, I would say the big ones are look, we're always looking to partner with new lenders, especially those who are on the forefront thinking outside the box around around this co ownership market. Uh, if you're an insurance company looking for trying to diversify and think of maybe a new P M I product. Uh, I'm telling you right now, as I mentioned, just those stats alone, you'll see in the mark get place.

...coning is absolutely happening everywhere. So this is a great opportunity for uh, an insurance carrier, to get involved now and and we would love to pilot with you. And then, lastly, for for any L OS and or real estate brokers, reach out to us and you know whether that be an affiliate partnership. If your clients, if you have a big pool of clients that are being outpriced or you can't activate those clients to buy now, leverage, leverage our CO ownership material. Look, your clients are your clients and we would love to help you at least close some some transactions. So, uh, yeah, other than that, I would say visit our website, share home dot com, uh, and and sign up for free, and we would love to take any other questions and help you, help you make some more sales and make homeownership of reality. All right, well, I got I got three questions I ask everybody at the end of this podcast. Here, here we go. See if you're not. They're not. They're not always surprises. So I get surprised sometimes at these. But here are the three. Well, what's the best piece of career advice you've ever gotten? So your time now is less valuable than it is tomorrow, so meaning that if you are, if you're thinking about starting something, start it now while you know you're you're still learning and things like that. Um, I'll give you an example. When I got my real estate broker's sicence when I was twenty three. Looking at it now, I'm I'm thirty two now, I don't know if I would want to go through all those courses again, to be honest. Um, and now that I've gone through all my experiences, let me give you Frank Uh. You know, it was a kind of a bear and so, uh, you know, I was younger then and now my time is better spent doing other things interesting. All right, that's that's what's the best piece of advice you've gotten about, you know, the industry you're in, call it, you know, real estate or or kind of mortgage lending or the CO ownership spaces? Any interesting advice you've gotten or or would give about that space? Actually, I got one interesting piece of advice in share was a lead Gen provider, uh, and what we found were we were our home buyers were coming to us and we were giving them to outside agents who were paying a subscription service. But we found that, since this is a paradigm shift, so for for anyone who's for anyone who's doing a parent uh, you know, changing something dramatically. Uh, not only, you know, test your audience before, but it's gonna require a lot of hands on support, and so that's why we we do have a lot of brokers and l's in the house. So, UM, make sure in there, make sure don't don't go into all these different verticals, channels of revenue. Uh. You know, we've seen so many failures. Like you know, your Zello offers for instance. Uh, they thought they could do some some great success there. But uh, I would say just just focus on one thing and be great at that, and and shout out to all the all the players who are pushing co ownership today. Yeah, focusing on one thing and being great at it is uh, there are a lot of companies who die from expanding too many places too early without really owning and understanding your your core products set, and I think that's a great piece of advice for anybody who's starting, whether that's inside a company or an entrepreneur, eventually figuring out what it is you're gonna be really good at and being it absolutely is. And I listened to Um, I don't know if anyone here is listening from or Mark Zuckerberg Fan if you had mentioned that's that's always a founder dilemma. Let's start massive. I want to fix the world by this APP and then you have to just chisel, Chisel, Chisel, focus on then be fantastic and great at one thing. It's hard to do. The temptations are great, but it pays to it in all right, last question for you. What is one bold prediction for the future? That Co ownership will be a dominant player, challenging rent as a as a new...

...avenue into as an alternative into renting. So in lieu of renting, we definitely want to make a big impact and uh, you know, if we can take five of that, that's obviously a smash. It's a huge market. It's a five percents a pretty big deal. Eric, thanks so much for making the time to day. That was that was all my questions, so I appreciate your being here and sharing your insights with the audience. Thank you, Jeff. It was a pleasure and I hope the audience I got some value. Please reach out to US anytime at share at shared at APP. That's C H R at C H R DOT APP. Up Start Partners with banks and credit unions to help grow their consumer loan portfolios and deliver a modern all digital lending experiments. As the average consumer becomes more digitally savvy, it only makes sense that their bank does too. Up Starts AI lending class orm uses sophisticated machine learning models to more accurately identify risk and approve more applicants than traditional credit models. With fraud rates near zero. Upstarts all digital experience reduces manual processing for banks and offers a simple and convenient experience for consumers. Whether you're looking to grow and enhance your existing personal and auto lending programs or you're just getting started, upstart can help. Upstart offers an end to end solution that can help you find more credit worthy borrowers within your risk profile, with all digital underwriting, onboarding, loan closing and servicing. It's all possible with upstart in your quarter. Learn more about finding new borrowers, enhancing your credit decisioning process and growing your business by visiting upstart dot com slash four dash banks. That's upstart dot com slash four dash banks. You've been listening to leaders and lending from upstart. Make sure you never miss an episode. Subscribe to leaders and lending in your favorite podcast player using apple podcasts. Leave us a quick rating by tapping the number of stars you think the show deserves. Thanks for listening. Until next time, H.

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