Landing a home.

Eve Picker: [00:00:09] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co, or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.

Eve: [00:01:01] Alex Lofton’s Mum was a schoolteacher. That’s who he was thinking of when he founded Landed. Alex is on a mission to help essential professionals build financial security and buy homes in the communities they serve. By essential professionals Alex means schoolteachers like his mom. Firefighters, police and health care professionals. All of those professionals that a city can’t function without, all of whom we take for granted, and many of whom can’t save enough for a down payment on a home. Landed has developed a shared equity down payment product for this target market. Their product might be as essential as the essential workers they serve. With a Series B raise in their back pocket Landed is growing rapidly to put home ownership in the hands of everyone. Please listen in to hear more. If you’d like to join me in my quest to rethink real estate, there are two simple things you can do, share this podcast and go to rethinkrealestateforgood.co, where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies. Hi, Alex. I’m really excited to have you on the show today.

Alex Lofton: [00:02:33] Thanks for having me. Really appreciate you reaching out and connecting.

Eve: [00:02:38] So I reached out because I really want to know what Landed is. You have a company called Landed and I want to know what you do.

Alex: [00:02:47] Well, I’m happy to talk about Landed ad what we do. Landed is on a mission to help essential professionals, think your teacher, your nurse or firefighter buy homes and build financial security in the communities they serve. Recognizing that these folks uphold us every single day and we should do what we can to uphold them, and what we offer is a down payment program, a shared equity, shared appreciation down payment program that helps them get into a home and build wealth and feel rooted in the communities they serve.

Eve: [00:03:21] That’s a very particular need that you’re fulfilling. Can you take me on the journey? What made you decide this was a need worth pursuing?

Alex: [00:03:30] Totally. All roads lead to Landed there’s a lot of them. Some core things are very true about the world we live in. Number one cities and the communities we live in are becoming more and more expensive. And the options for people to be able to afford a roof over their head, especially be able to access homeownership, the pathways that are becoming fewer and fewer and the ways that most people are able to get to being a home buyer and being a homeowner are through having a bank of mom and dad, someone they can go to and help them give up capital to get in. If you don’t have that, you’re kind of screwed. And for me personally and my co-founder personally, we looked around and said, how are we going to be homebuyers someday? We don’t have that option. And so, part of this is very personal. When you look at your personal situation, then you start wondering, well, if we’re wondering now what about the folks who are working in our schools and for our cities, whatnot? What are they going to do if they don’t have a bank of mom and dad? So, some of that is the trends in the market that are that we’re all experiencing are housing being so tight. Another part for me is personal, my mom was a fourth-grade schoolteacher, my dad was a social worker. And I grew up, won the lottery on love and support, but money was always tight. And it wasn’t until Granny died and passed along her home until that’s when things changed for us financially. And so, we were lucky that was intergenerational wealth being transferred. First time that happened to my family. But most people don’t have that access to that, especially people who are kind of in the middle in roles are crucial to thriving community and thriving society, but, yet may not be able to have the fortune my parents had. So, trying to figure out ways to not have it be so granny has to die for everybody to be able to make the decision that they can build a life that they want for them and their families and their community.

Eve: [00:05:14] I can see a TV series coming like Granny has to die. That would be really awful. Okay. You said something really important here about people who are crucial to our society. Can you like just expand on that a little bit? You talked about schoolteachers, so you have a very particular market, right, or target market.

Alex: [00:05:37] Particularly, so the folks that we work with, our customers, are people who are employed by institutions in education, in health care, or in the public sector more broadly. One thing is we all have essential people in our lives, right? That’s not to say that these are the only essential people, but these roles teaching our kids, helping us when we’re sick, helping us in an emergency, and making sure that we have the transportation that we need, the roads, we have all these things that we don’t have, this basic infrastructure. It’s basic infrastructure. The plumbing that we take for granted every single day, then the outlook doesn’t look very great if you don’t have all those things, right. And at the same time, these are roles that while arguably should be paid more, I will be the first to say teachers should be paid more. They oftentimes have salaries that allow them to, say, afford rent to be able to live somewhere, but they may not have enough to do that and save for a down payment. This group is one that is thinking about something like home ownership. They’re oftentimes not at a point of thinking about do I even have a roof over my head? One of the questions like, okay, I have a roof over my head, but do I kind of have a pathway to owning that roof? And so, if that’s where your head is at, one of the core barriers to being able to move from being a renter to an owner is having a down payment, that’s the number one reason why people aren’t able to buy a home is having capital upfront. And there are many tools out there that have been built to be low down payment options for folks. But there are a lot of reasons why those are blockers. Number one, they can get really expensive on a month-to-month basis. You’re borrowing more money or you’re taking out private mortgage insurance or whatever. The month-to-month cost goes up and then all of a sudden you look at your monthly budget and you say, oh my gosh, I can’t afford, then, my car payment. I can’t afford, you know, the food that I’m trying to buy. So, no, I’m not going to be a homeowner. And so, if you can move people to having a larger down payment, then their month to month cost will go down. And so that’s the mechanics that we’re trying to work on.

Eve: [00:07:45] So this is a real equity down payment that you participate in.

Alex: [00:07:48] This is a truly, yeah, true equity is not debt. The idea is how do you get more equity in the transaction on the front end to help make sure homeownership feels on a month-to-month basis more like renting than owning from a dollars’ point of view. And then when you’re able to, as soon as you’re able to, you exit that partnership, that equity partnership, so you can be the full owner of your home. I’ll stop there. I’m happy to go into details now.

Eve: [00:08:13] That’s really interesting. The other thing that you didn’t say is these essential people, they’ve chosen professional lives and careers that, really, are not going to give them a lot of upward mobility. Being an educator or a health care professional or in the public sector, you kind of know what you’re going to be paid going in and it’s never really going to change very much.

Alex: [00:08:31] Well, you’re right. You’re right that either, you know, working in the public sector or the quasi-public sector, because a lot of America isn’t all public that provide these services. But you’re right, you have a little bit more of a predictability of what you’re going to make over time. There’s a challenge with that when you’re what you’re making over time isn’t rising at the cost of everything else. There’s also just the reality that the way that our home ownership system has been designed. You know, I think the romantic story is that you can save hard. Save a little money. Work hard, save a little money, buy that house. Which used to be the case many, many decades ago. But now the way it is, is you really need to have an infusion of cash to get started. And so that falls along the lines of families who’ve been able to build wealth over time in our country that oftentimes falls along race lines, too. And so, a lot of what we found is that this is a product that anybody can use, any essential professional can use. And the folks who oftentimes find it being the most game changing are those who haven’t come from families with wealth. And the difference between black families and white families in this country is something like 35, 40% swing between those families who are black and have been able to pass along intergenerational wealth and those who are white, and they will pass along intergenerational wealth. And this is a replacement for that. This can be someone who comes, this can be something that can come in and try to replace it. So, there’s a lot of layers here as to why, you know, it helps various individuals. But the main point is without some sort of pathway to having a sustained.

Eve: [00:10:03] Yeah. You know, I interviewed someone you probably should meet in Australia. An architect.

Alex: [00:10:07] Oh, interesting.

Eve: [00:10:08] Who’s building condominiums for exactly the same segment of society, because those essential workers are being pushed further and further out from the major cities. They’re just like in our major cities. And when you have a two-hour commute and you’re on a nightshift at a hospital, as a nurse, it’s just impossible, you know? So, he’s tackling it from a physical end.

Alex: [00:10:30] Well, we had the story of an employee at a school in the South Bay of San Francisco near San Jose that drove two and a half hours each way to work and multiple times just chose to sleep in his car during the week because it was a much better choice than trying to go home and come back, right? And he actually had a home two and a half hours away, but his lived experience was much closer to homelessness than it was being able to come home to the place where you can call your own that we all kind of dream of.

Eve: [00:11:04] Which is important at the end of a long day, right?

Alex: [00:11:06] Right.

Eve: [00:11:07] So who are your customers and where are they?

Alex: [00:11:10] Great question. So, our customers span a wide range. We have people who are first time homebuyers much closer to earlier in their career. We have people who are looking to retire and have never owned a home and wanting to do that or have owned a home and maybe even downsized at one point. But then because of the economic realities of their family, kids are moving back in. They need a bigger house and so be able to afford a bigger house because prices have gotten more expensive, they need support to get in. So, we have a wide range of folks, but typically 68% of our home buyers are first time home buyers. They are purchasing properties that are condos, town homes, single family homes, predominantly single family homes, but a whole variety of types of homes. We started our work in the most expensive metropolitan areas in the US, starting in California. So, a lot of our homebuyers in California, in and around San Francisco, L.A., as well as places like Seattle and Portland and Denver. And then as we have expanded the operation, we’ve gone further and further east, even further and further west, we’ll launch in Hawaii, but also on the East Coast, New York and D.C. and very recently are expanding our work to go much more national. But all of those cities are where primarily, where our homebuyers are purchasing. And they tend to be not only your teacher and your nurse, but also everything from a janitor or someone who works in food services, who is employed by that institution, to administrators. What those folks are purchasing is different because depending on their family situation, you know, oftentimes they’re dual income households, but not always. And some of our less expensive markets comparatively to San Francisco, you have more single folks purchasing homes. In the more expensive markets, they tend to need to be double income to be able to afford anything. But depending on where you are or what your financial situation is, will kind of dictate what level of support you choose to take out.

Eve: [00:13:12] So how many families have you helped so far?

Alex: [00:13:16] With our down payment program we’ve helped over 1000 folks purchase homes, which is very, very exciting. Big milestone and it’s just getting started. We’re right at that sweet spot.

Eve: [00:13:26] That’s even more exciting, right?

Alex: [00:13:28] Yeah, it’s showing that people want it and need it. And it’s been an awesome journey so far. But that’s why now we’re focusing on expanding our operation nationally. A partnership, so, the way that we are able to make this whole thing work and part of the innovation I like is, beyond the actual housing down payment support innovation, is our business model where you can actually think of Landed as two parts. One part is a operating company that is called Landed Inc that is a real estate brokerage. That also has a joint venture mortgage business associated with it. There’s a set of products and value that we’re trying to offer individual consumers, and every time we offer that value in the home it’s purchased, then we receive some revenue.

Eve: [00:14:13] Right. So, you get commissions like any other real estate brokers.

Alex: [00:14:15] Real estate agents or, yeah. So, the more transactions happen, the bigger the business becomes. So that’s the business side. And then on the other piece is our property business, propco, as the industry likes to call it, which is basically an investing business. So, investors who are excited to invest in residential real estate can put their money into this company and we can distribute that money in the form of the down payment support. And then when the home buyer decides to end their contract with Landed, they share back in some of the appreciation of the home back into that fund. And that’s where our investors are able to get their return. So, we are able to balance the interest of the partnership between people who want to invest, and people want to buy homes. And that’s kind of almost a separate entity or operation from us as a business growing. Our interest is just impact, scale. You know, the more folks that use it, the better. So…

Eve: [00:15:11] So who are your investors?

Alex: [00:15:14] Wow, what a great question. I spend a lot of time talking to all sorts of folks.

Eve: [00:15:18] I’m sure you do.

Alex: [00:15:20] We have venture capital investors who invest in the operating company.

Eve: [00:15:23] I heard. And congratulations.

Alex: [00:15:25] Thank you very much. And that helps us grow and scale. But then the investors in our propco is a pretty wide range of folks. It started off focused primarily impact investors, people who are interested in the opportunity to help retain and attract talent to these sectors in our expensive markets. The biggest one that people will know is Chan Zuckerberg Initiative, the philanthropic arm of Facebook founder, and they wanted to see this model take off. Their interest wasn’t to make money off of teachers. Their interest was, hey, is there a sustainable model here that, if proven, could actually take shared equity from being what it has been, which is a very localized tool? Since the seventies, some great programs out there have existed for a long time. Cities have done it like San Francisco. Universities like Stanford have done it for their employees for quite a while, but it’s never been scaled. So how do you actually do that?

Eve: [00:16:24] I was a recipient of a program like that when we moved to Pittsburgh, so.

Alex: [00:16:27] Oh, really?

Eve: [00:16:28] I think the Redevelopment Authority had down payment programs. I mean, there had been tons of them around.

Alex: [00:16:33] Lots of them around.

Eve: [00:16:35] They’re local, right?

Alex: [00:16:36] Yeah, they’re local. As a result, they tend to run out of money because there’s only a limited amount.

Eve: [00:16:41] And they also usually get their money, which, in a very targeted manner. So their money has restrictions on it.

Alex: [00:16:48] Lots more restrictions.

Eve: [00:16:49] Yeah. So that really impacts who can access that.

Alex: [00:16:53] That’s right. And then the reality is, given today’s markets in real estate, if you can’t transact in a quick manner, in a manner that leads the fewest number of hurdles to making the transaction happen, you’re going to your bid isn’t going to be chosen. Your bid is going to be the first one to go out the window. So, part of our goal is to fit into that, but back to the investors. So, there’s a combination of those who are interested on the impact side and then those who want to make money off of real estate for their investors. So, we have organizations that are investing pensioner money that say, hey, my job as a fiduciary is to grow the money, these retirees of other teacher retirees. And we’re going to invest their money into real estate. And this is one of the ways that we’re going to do it is through this shared appreciation program, we have a variety of interests that are investing in the down payment program with the idea that eventually this should sit alongside any proper investment strategy that can help diversify an institution that’s interested in investing in real estate. It could be alongside any other strategy like single family rental strategies that’s existed for a while, where people, institutions buy properties and rent them back out to folks. This is a different way of doing it. Way that I would say is a little more cooperative with the home buyer instead of maybe competing with the home buyer to buy the same property, you’re actually saying, hey, we’re going to help you get into the home, become a home buyer, and then at some point you exit the partnership, you become the full home buyer, and then we’ll share a part of the appreciation between that.

Eve: [00:18:23] So I have to ask a question that’s always on my mind because I’m all about democratizing investment. So, the investors, the propco investors, any everyday folks in that or is that all accredited investors?

Alex: [00:18:36] Yeah, great question. So far, no everyday folks. It’s all accredited investor.

Eve: [00:18:40] You and I have to talk about that.

Alex: [00:18:43] So part of the reason I got really excited, the original, one of the original concepts here is that can we build a market for this type of investment so that if I had an extra five K and I wasn’t an accredited investor, why not share 100 bucks? And I wasn’t an accredited investor, and I wanted to put some money into a fund that was distributing into residential real estate in a way that I felt good about it, helping other people become homebuyers. I’d love to do that. Still, something I hope we can help usher into the world. What I see is we’re just building towards that, building towards something like that. It’s all sequencing. You’ve got to start somewhere, prove it out, build, and it’ll come. And we’re kind of on that path but haven’t quite made it there yet.

Eve: [00:19:25] Because really, you know, then your impact is not just on the people you’re helping with. Yeah.

Alex: [00:19:30] Totally, totally. I mean, I will say to the extent you want to make the argument that because we have partnerships with institutions that are investing retirement money of teachers, you’re helping a similar group.

Eve: [00:19:42] You’re really getting triple bottom line there, I guess.

Alex: [00:19:44] So you’re able to go to both. But I think even being able to put the decision-making power into the consumer to be able to participate in this would be really cool. But again, there’s a lot of economic and regulatory reasons why you have to build towards that thing. You can’t always just jump straight there.

Eve: [00:20:00] I totally get that. Okay. It’s really pretty exciting. So, it’s a complicated model and so I want to know how you landed, no pun intended, on this model.

Alex: [00:20:13] I will say what they really love about our name, is it’s just surprising how many times the word landed comes up in language. Funny story. At the airport, Sea-Tac Airport, you land and it says landed on the board. I’m like, oh, wow. What great advertising right there.

Eve: [00:20:29] Exactly. Exactly.

Alex: [00:20:30] How do we land on this model? Complicated. I mean, that’s part of the thing here. What we’re trying to do is move a what is considered a relatively sophisticated economic model into the hands of more people in the hands of average, everyday people. My story here is I was sitting in intro to finance class at business school, not a place that people usually associate with being inspired. But I can say I was inspired in this class because we were talking about the concept of diversification. And what struck me is that I am an overly educated kid, but I come from a middle-class background, lower middle class background. No one was talking about concepts of diversification, spreading out your money in different places so that you can make sure it grew even if the economy went up and down in different ways. I didn’t have a concept of that. All I knew is that people were trying to get enough put together enough money to try to buy a home if they could even do that. And so the question was like, why? Why is there such a difference in the tools that are available between those who have money and those who don’t? What can we take, some of these tools that people usually are able to use when they have money, make them more accessible to folks so it met them where they were financially. Buying a home, going from a renter to being an owner is an example of where we still have a zero and a one. There’s not much of a gradient between those two things. And so, you go from being solely a consumer to jumping to in the Bay Area, trying to buy over $1,000,000 property. No financial council would ever tell you that’s a good idea to concentrate all your money that fast. So how could we be a part of starting towards building products that move people from a zero to a one in a more gradual manner in a way that stair steps them into ownership and allows them to properly fit their financial situation. But that does mean taking a relatively sophisticated financial tool and moving it into the hands of more folks. That’s also why we’ve cared a lot about doing this right, having a set of values, a company we felt good about that we could stick to finding what’s fair between our homebuyers and our investors, etc., and then doing a lot on making sure that we are taking the best lessons from the past where there were challenges or problems that people face as a result of new financial tools and make sure that those don’t pop up so that people don’t look up one day and be like, Oh, I thought it was a good idea, ended up really screwing me over. And so, a lot of this has been about how do you make sure people know what they’re getting into, educated around it, also encouraged to move on from a program like this when they can financially do it because they don’t want to share appreciation forever. So, all these types of things that we really take a lot of time to make sure this product is truly helpful for consumers because it’s also good for investors. You don’t want a product that blows up in a consumer’s face, it will blow up in the investor’s face. So really making sure that’s done properly has been a focus of ours.

Eve: [00:23:24] I appreciate that. My parents were refugees, so they were in the zero group for a long time and actually real estate was their pathway to the middle-class for sure. But you know, at a time when real estate wasn’t so expensive, I don’t know if that would be true even in Australia nowadays. So, um, so I have to ask is there anyone else working in this space that you know of?

Alex: [00:23:48] There are other people who offer products that are some version of, taking the equity in the home and either breaking it up, sharing it with others, whether it be shared appreciation models, equity takeout models, shared equity, other types of shared equity models. But no one’s really doing it in a way that’s targeted around a specific group of people. Thinking of this as a starting point for a specific group of people to really have a wider set of tools to help them become financially secure. Like I like to think about organizations like USAA and what they did for the military. When I think about the work that we’re doing, you know, they started with an insurance product for a very long time for military families, vets, and then they expanded the set of products that they have to do more, wrap around financial services for that specific group. And that’s more how I like to think about what we’re trying to do. Our down payment program is, is the anchor helping people with the biggest transaction of their life. And if we do that well, we can also introduce other products to them that help them build either before they’re a home buyer or help them build towards being a home buyer or after they’re a home buyer. And that’s different. That’s different that a lot of folks are thinking about it in who are thinking also about shared equity.

Eve: [00:25:00] Yeah, I think it sounds like you’re being successful because you’ve got a very clear niche that actually has a very big return.

Alex: [00:25:08] You know, I think about the down payment program. It’s I mean, I’m a nerd. Help think about this a lot as a product. Of course, I like our product, but I think it’s one thing to be oriented towards I’ve got this product and I have to shove it in everybody’s face. And it’s another one to say this product really enables people to do something in their life. How do we help people do more of that, and be a little less attached to the product and a little bit more attached to the consumer or the outcomes they want to have. And when you focus it in on a particular group of people with a particular role in society, then you can really tailor what you offer to them to the realities of their life. And that’s what we’re trying to do.

Eve: [00:25:47] Are there products you’re thinking about?

Alex: [00:25:49] Oh, yeah, I’m thinking about all sorts of products, everything. I mean, the reality is when you look at what is holding people back from building wealth, even becoming home buyers mean anything that help manage the process of home buying and then being a homeowner in a way that’s more streamlined and more cost efficient. I mean, there’s so many different pathways there. We’re still at a point where we want, we have a really great down payment product and we’re just getting started. We’re only serving a very small percentage of the people who could potentially serve. The opportunity is still huge to continue to focus on what we already do. But the more, you know, the more customers we have, the more we are hearing from them, about what would be most helpful. So, trying to take that information in and design towards more products.

Eve: [00:26:27] That was going to be my next question. What potential does this hold, this product?

Alex: [00:26:32] I think the shared equity or shared appreciation, I get really excited about it because I see it as a cooperative model between investment capital and individual consumers. And if we get it right, which includes having a supply of housing so that there are things to buy, right? I care a lot about that.

Eve: [00:26:54] That’s the really wrong thing at the moment, right?

Alex: [00:26:56] Yeah.

Eve: [00:26:56] Yeah. I don’t know whether we’re going to be able to fix it.

Alex: [00:26:58] Care a lot about that. We don’t build homes, right? We are helping people buy homes. We need homes to be built in the grand ecosystem of housing we’re big proponents of supply growth, but if we get this right, then there is a pathway for the investment part interest in residential real estate to actually be paired with the individual to help them on their path to growing wealth. And that’s just that’s a win-win on both sides. And that kind of helps to spread out risk, spread out reward, which means more balance. Any natural system that you look at tries to spread out as much as it can so it can balance. And that’s what we want our economy to be doing. So, I think that that’s what’s really exciting at the heart of something like shared equity. It just could be really great for our economy and really great for individuals as well as investors. I think this on the ability to focus on the financial health of our essential professionals and people we rely on every single day who are upholding our communities. I think it has an opportunity to have our communities thrive more. When you have more people who are rooted where they live, whether it be the teacher who lives in the community in which they teach and has a special relationship or a deeper relationship with the place and the people that they are working with every single day, or the policemen on the corner who actually lives in that community. There’s a lot of implications there that are very different than when people are traveling two and a half hours or leaving the profession altogether and you don’t have anybody, right? So, I think there’s a ton of potential here, not to mention it’s a huge market, right? So, if you, if we actually as a business fill the need for the 25% of salaried workers that are your essential professional and in these industries, that’s a huge business opportunity to deliver a whole lot of value to folks.

Eve: [00:28:50] I have one more question for you, and that is what keeps you up at night?

Alex: [00:28:56] Oh, man, I have two answers to that one. One is we need to make sure that this country continues to have a exemplar democracy that allows for organizations of all sorts for profit, nonprofit, public sector alike to thrive and to allow us to continue to have the marketplace of ideas and the marketplace, the literal marketplace of stuff to thrive as a society. And there’s a lot of signs with that that’s being that’s being been under attack for a while and more intensely recently. And so, I think we should all be paying attention to that and do what we can to make sure we still have that as our playing field to work on and live in on the Landed side. You know, I’m so excited. This is such an exciting moment at the company because for a long time we’ve been very restricted. Where we can serve folks. Capital has been much more conservative about where it would go when we certain markets now we have capital partners that are much more interested in going wide saying, hey, this is a need in many, many, many places besides our just our most expensive cities. How do we get it out there? Which is such an opportunity. And it also means national scale as whole another level operation. So just building an organization that can sustain all that is fun and is hard and keeps me up at night. But that’s the good stuff. That’s why we that’s why a start-up people get into start-ups. It’s really, really a fun, fun ride.

Eve: [00:30:20] Well, you’re a rock star and thank you very much for taking the time to talk to me.

Alex: [00:30:25] I appreciate you taking the time. Yeah. Thanks so much.

Eve: [00:30:34] Alex Lofton is passionate about helping essential professionals in education, health care and government unlock the financial benefits of home ownership. And he’s built a rapidly growing business, Landed, around his passion. Landed is taking off.

Eve: [00:31:03] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music, and thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.