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Investing or Selling? Here’s What the Experts Say



You might be asking yourself, "should I invest or should I sell?" There are many factors to consider before you make this important decision. Listen this episode for advice on how to decide whether investing in a property is right for you!


Noah is a modern finance company helping homeowners tap into their home value to meet their financial goals without incurring new monthly payments or interest. Founded in 2016 and headquartered in San Francisco, Noah’s innovative equity sharing model is a debt-free alternative to traditional home equity loans and HELOCs.


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Investing Or Selling? Here’s What The Experts Say | Zain Jaffer And Sahil Gupta


I agree with the points you are making. We are in a very hot market now, especially for homes. The use case you talked about is very intriguing about taking money out to improve your home. Logic would say in a hot market, “Why take money out and improve your home? It's a seller’s market.” What are your thoughts on that?


A lot of these people who applied for the home equity product are not looking to sell their homes. They bought their home 5 or 7 years ago, so they have been in their home now. They don't want to leave the neighborhood either because if they sell their home for a million, which might be like a 2-bed, 2-bath home in the Bay Area, and they want a 3-bedroom or a 4-bedroom house. Your four-bedroom house is $1.5 million. How are you going to begin to bridge the gap?


It's relatively easy for them to say, “I have a big yard. I can invest $50,000 or $100,000 to do an extension and build an ADU or I can build another bedroom.” That does two things for them. One, it gives them the living space that they want without moving, without uprooting family, and by doing that, the value of the home also goes up. It's a double benefit to them to invest in the property rather than sell it.


Let's talk about an interesting use case here. Someone wants to sell a single-family home that they live in. They could put it on the market now. Is there a play here where they could tap into the home equity, take that money, improve the property, and basically sell it for a profit by doing curb appeal, fresh paint or improving probably? Have you seen that use case because it's a common value add strategy in multifamily and the zone at investors look at things?


One of our clients who lived in Berkeley was working with a real estate agent. The agent said, “I believe this house needs about $50,000 worth of work. If we do that, it's going to be an easier opportunity for us to list the home.” We invested $50,000 into the client's home. They did a bunch of work and did the work over the winter. They said, “We don't want to list the house in November because we would rather wait for the spring season.” They ended up waiting for 4 to 5 months. They listed the home in the spring. They listed the home for $1 million. It ended up selling for $1.4 million.


The client got $400,000 that we are asking, which is 40% of what we are asking. Now out of that $400,000, a small portion came to Noah as well because of the appreciation share. However, it was that $50,000 that the client did not have and wanted to put in the property. We can argue whether the home would have sold for $1.2 million or $1.4 million but the reality is that client was super thankful and said, “The $50,000 that Noah gave was all risk,” like capital for Noah. If the home did not appreciate, Noah would not have made any return on this investment but that $50,000 returned, $400,000 for the client, which was amazing for her.



If you can't live in a home that you love, then at least rent the home that you love.



That brings me back to the very beginning of this thread, which is a lot of people stage their homes. They make it look beautiful. They sink money in as they are selling it. Your logic would say, “It's better to do it whilst you are living in the home, so you can enjoy your home and capture the majority of the added value.” You might not be able to capture 100% of it because of the wear and tear.


Improving your living situation to me, is one of the most important things you can do for your psychology. That's one of the few cases where I would say, if you can't live in a home that you love, then at least rent the home that you love. It depends on who you are talking to but if you only have finite money, renting a place that matches what you want to do in life is a big thing for me.


I tried to stay in places where I felt this was the right vibe, the right energy, and the city views. Even when I was in London and starting my company, I couldn't afford it but found a way to get a room in a flat-share environment with a good view. I didn't have the money to buy it but if I had money to buy, it would have been a not a nice place.


The quality of the real estate that you buy or rent is very important. That bags to the point that tapping your home ownership to improve your home is something that may seem counterintuitive but why do it when you are going to sell it? Enjoy the home you live in. Improve it, and eventually, you are going to enjoy it. You might be able to sell it for more.


That's the thing, which we also do with our clients. We give them home improvement credit. If you take the money from Noah, invest in your home, then whenever you sell the house or whenever you pay us back. We look at the value that $50,000 would have created. It doubles the home improvement credit, and we give it to you. It's a win-win.


As you said, it allows you to benefit from living in a better home. You enjoy those benefits. If it creates a valley on top of it, that's great. Most people always think about it from an ROI perspective. If it's your primary home, the primary purpose of that is to live in the home and enjoy it. If it generates a financial return, that's great but you should not always think of our financial return and optimize that.



What, in your view, if we look at the advice you would give to people who are looking to buy their first home? Any key pieces of wisdom you can share from the platform that you stand on Noah? You see so many transactions. You are powering a lot of transactions on both sides. What advice do you have and anything unique you can add?


That brings me to the product that we are launching, which is called Down Payment Assistance. We are able to leverage the same concept that Noah provides capital in exchange for future appreciation of the home. We are now applying it to the purchase market. Both of us have seen that Millennials and professional, who represent the largest segment of buyers after the Boomers have strong financial profiles. They have strong income but they don't have a lot of savings.


This market is challenging for people to be able to buy a home without 20% down. 1) You have lenders who don't want to lend to those people. 2) Because it's a seller’s market, they don't want any contingencies. They want to sell a house to somebody who has a conventional ETLTV mortgage, and that's it. They don't want those high LTV loans because they may not close sometimes.


When we looked at that, we said, “We can solve this affordability problem by offering down payment assistance.” What we do there is we say, “Noah will provide up to 75% of the down payment on your behalf.” You can be a potential buyer. You only put 5% down. Noah will put the balance 15% down on your behalf, which means you now get to the magic 20% number. It enables you to qualify for a conventional ETLTV mortgage with a loaded balance, a better interest rate, and no PMI. You can start your home ownership journey there. That is something that we are launching to help more people get started on the journey of homeownership.


This trend of down payment assistance is something I'm excited about as a venture capitalist and PropTech. Part of the reason too is the normal math doesn't apply here because of the quality of the partner or tenant. I don't want to call them tenants because they are not a tenant. They are the owner. They are going to take care of that home. I'm also wearing different hats. I also wear the hat of a real estate investor. I own a lot of multifamilies. We have Blue Field Capital, which owns a lot of real estate throughout the US.


Renters can trash an apartment. It's like a car or something that you don't own. The wear and tear and the depreciation are quite heavy because people don't respect that. When you partner with them and help them own their home, they will look after it. It will be in prime condition at least, usually. Most sensible people will take care of the home. I know there are plenty of people who won't but renters will not care for the home in the same way an owner would.



Tapping your home ownership to improve your home may seem counterintuitive, but if you sell it, enjoy the house you're living in.



That's what we've seen. Even in the case, I said, where you, as a buyer, only put 5% down. You technically are putting only 25% of the down payment. If you look at that 20%, I will export with Noah. You still capture 50% of the future appreciation. Relative to your capital contribution as a buyer, you are always getting maturity of the folded appreciation of the property. That is something which we think a lot about. At the end of the day, we view the buyer and Noah as partners.


They are the partner who is living in the house and obviously, are paying the mortgage. They get the benefit of no payments. They get the majority of the appreciation. We are the capital partner who provides them with the money upfront and with other services over time. We always get minority appreciation when it comes to our down payment product.


There's also an extreme in the spectrum of homeownership where you rent, and you own nothing or you take the debt on, and you own eventually 100% of the home. It's refreshing to see new products and services like yours amongst this big wave in PropTech of home ownership and the residential. Speaking of that, there's a neighbor who's doing renovations. Trying to improve their own value of the home. It's refreshing to see new models of homeownership. It's needed and powerful.


You have interesting companies as well. Like the companies I say, was zero down which was doing a rent to own. You have DV homes and land. You have a couple of companies that are helping people get started through renting but also you are building a level of equity. You have companies like us. We are saying, “You don't necessarily need to do rent to own. You can own with as low as 5% down.” I think that the opportunity here is created. Historically, a lot of the government programs where I know that the City of San Jose has a down payment assistance program or the County of Santa Clara.


One of those programs, while well-intentioned, doesn’t always have the maximum impact because of the objective that comes with qualifying for something like that. The maximum contribution under those programs is $20,000, $30,000 or $50,000. In San Jose, the median home price is $1.2 million or $1.3 million. $30,000 doesn't go along with down payment assistance early. Did you need to be contributing $200,000 or $400,000 on somebody's behalf to be able to do this? That’s what was created tremendous opportunities for companies in Silicon Valley and outside to help everyday Americans with their homeownership dream.



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About Zain Jaffer:

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780m.  


His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as "Forbes 30 Under 30", "Inc. Magazine's 35 Under 35," and the "SF Business Times Tech & Innovation Award." He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.



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