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No, a Point investment doesn’t mean Marc Andreessen will own your home

Andreessen Horowitz led the $8.4 million A round for Point, which is offering an alternative to home-equity loans. But that doesn’t mean the VC firm could end up owning your house.

Andreessen Horowitz is one of many investors in Point, said Eoin Matthews, co-founder and chief business officer. A mix of sources — wealthy individuals, family offices, asset managers and residential-mortgage-backed-securities funds — are backing its investments. “We expect some insurance buyers in our near future, too,” Matthews said.

So far, Point has raised a total of $15.4 million. This includes the $8.4 million Series A, plus $4 million in venture debt, announced this week. Point collected $3 million in seed funding in 2015, Matthews said.

In addition to Andreessen Horowitz, investors include Ribbit Capital and Bloomberg Beta, as well as individual angels such as Orogen Group CEO and ex-Citigroup CEO Vikram PanditAirbnb CFO Laurence Tosi, LendingHome founder and CEO Matt Humphrey and Invitation Home’s co-founder, Brad Greiwe.

Point doesn’t offer loans to consumers. Rather, the Palo Alto, California, company invests in real-estate properties, particularly houses and condos owned by consumers.

The company has made 50 investments; the average check size is about $80,000, Matthews said. Most of Point’s investments are in California properties, but the fintech company plans to go national, he said. Point just opened an office in Washington. “We have a roadmap of different states we want to work in,” he said.

Point will likely do more rounds, he said. It will use the Series A to “scale up and take in more volume,” Matthews said. “We would expect to go back to the equity markets in 18 to 24 months,” he said.

‘Different reality’

The idea for Point took hold after Matthews invested in his friend’s home in 2011. It wasn’t a loan. Instead, Matthews owned a right to 12 percent of his friend’s property, which he could buy back at any time. The friend sold the house in 2014 and Matthews got 12 percent of the sale proceeds.

“It was a much more informal precursor to Point without all the data science and technology,” he said.

Eddie Lim, Point’s co-founder and CEO, also wanted to refinance his mortgage after he sold Yub in January 2014, Matthews said. Lim had a healthy balance sheet but was still rejected. The bank had “very stringent underwriting that didn’t allow for a different version of reality,” Matthews said.

Point allows for that different reality. To be eligible, homeowners should be able to retain at least 20 percent equity in their home after Point’s investment. Credit scores count but are just “one parameter” within the evaluation, Matthews said. Point also doesn’t have a cutoff, but scores in the low 500s are “challenging to finance,” he said.

After an applicant fills out a short online questionnaire and has a 30-minute conversation with a Point executive, an appraiser will visit and assess the homeowner’s property. Point looks closely at the appraiser’s report, Matthews said. “The appraiser is our eyes and ears on the ground,” he said.

If all goes well, Point will invest in the home. The deal is typically 5 percent to 10 percent of the property’s current value. Each investment lasts 10 years. The homeowner makes no monthly payments to Point, Matthews said.

Some homeowners use the proceeds to pay off their debt, to pay for a major expense or as a bridge for their next home purchase.

Homeowners pay no penalty if they pay back Point before the end of the 10-year deal period, Matthews said. But there are costs: Homeowners pay a processing fee of 3 percent of the investment, he said. They also pay for the appraiser, typically $500 to $700, as well as an escrow fee, usually $450 to $500.

Once the homeowner sells the property, Point gets its principal back plus part of the appreciation. But if the home doesn’t do well, Point may get back less than the principal and no appreciation, Lim said.

“We’re sharing in the downside,” he said. “Our interests are aligned with the homeowner. If the homeowner does well, then we do well.”

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