Fintech-know
Welcome to a special write-up of The Inner Loop, showcasing some of the awesome up and coming Fintechs in Australia in extra detail. Sometimes I get really excited about a Fintech and need more than a few lines to cover their story. In this edition, I am looking at ‘OwnHome’ - a Fintech/Proptech that could genuinely solve the housing affordability crisis in Australia.
Disclaimer: The Inner Loop’s mission has always been to write about, analyse and promote the burgeoning Australian Fintech community: whether it be showcasing companies, to Cool Fintechs, to original write-ups like this. It’s a genuine passion of mine and has been for the last three and a half years. I am not incentivised monetarily or otherwise, to promote certain companies through me or my employer.
What is OwnHome?
OwnHome represents a new path to home ownership, through a structure that allows customers to move into their home right away, without the typical 10-20% deposit. OwnHome is a rent-to-own model that fast-forwards homeownership.
Customers direct OwnHome to the property they want, and OwnHome buys it but hands over the keys. You then have the option to buy the property back from OwnHome at a pre-agreed price, and make monthly payments that build your stake in the home. This means that you’re paying your way to a home - not paying off someone else’s mortgage.
How do they make money?
OwnHome’s revenue model is not dissimilar to that of typical financiers. OwnHome makes a margin on the difference between its cost of funding and the monthly payments from customers, along with the small ~1.3%p.a capital gain locked in with the pre-agreed price.
OwnHome covers all costs that a typical landlord would during the rental years, including maintenance, strata fees, council rates, land tax and water. Each year customers are accruing 2.5% of the value of the property as purchase credits, which serve as an offset to the pre-agreed price, thereby reducing the amount that a customer needs to finance for their buyback from OwnHome.
Want to see the video format? Check the end of the email 👇🏽
More Details & Purchase Credits
With each monthly payment you earn purchase credits. Each year, you accrue 2.5% of value of the property in purchase credits, meaning these build up the longer you’re with OwnHome.
The easiest way to think about this: each year, you pay about 3.50% of the purchase price as market rent and about 3.55% of the purchase price as options fees (totalling 7.05%), and accrue 2.50% of the purchase price in purchase credits.
When you decide to exercise your option, your purchase credit balance represents an amount of the OwnHome price that you don’t have to pay to OwnHome.
A quick example, with approximate numbers - imagine OwnHome bought your home off the open market for $1,000,000. After 5 years with OwnHome, the OwnHome price on that property would be $1,200,000. At this point, you would have accrued $150,000 in purchase credits. This means you only need to finance $1,050,000. At the point you exercise the option, you would also need to pay stamp duty to the government for the transfer of legal title.
Journey so Far
OwnHome has secured $3.6m seed funding (one of the largest seed funding rounds in Australia) and were part of CBA’s x15 Xccelerate venture builder. OwnHome is run by James Bowe and Tim Harley who have domestic and international experience in Finance and Fintech.
Jim-my’s Take
I think the insurmountable barriers to the property market are encouraging a generation of renters (‘Generation Rent’) and an innovative financial and tech solution to alleviate this gap is a brilliant idea. If OwnHome can package the experience to be approachable to a layman (which is never easy) then the experience will be incredibly popular among potential buyers from all walks of life. As a 27 year old in Sydney, trying to purchase a house is an incredibly daunting and expensive idea. A solution like this takes the daunting-nature of home buying and ownership wrapped in an approachable, rewarding and guided experience.
OwnHome Video
Thoughts on OwnHome? Throw them in the comments 👇🏽
Fin
That’s all for this special edition of Fintech Spotlight. The information above was adapted from OwnHome’s website and my own personal analysis on top - after hearing the news I wanted to write something juicy! I’d love to hear your feedback on this new style and as always, would be all ears on up and coming companies! 🕺
Additional Resources
OwnHome website. Link
Fear and Greed Podcast: Can OwnHome solve the housing affordability crisis? Link
OwnHome raise. Link
OwnHome write up in CBA’s x15. Link