Last year, Jonathan Asmis and Alex Lofton, the co-founders of Landed, began making presentations to school districts in Mountain View and Los Altos to get early buy-in on a teacher home-buyer model that's been in the works for years. The specific details and fine print of the plan get complicated quickly, but the framework is relatively simple: residents in a school community put money into an investor fund, and prospective home buyers living on teacher salaries can tap into that pool in order to make a 20 percent down payment on a house. Investors have a stake in the equity of the home, and share in the future profits, or losses, when the home is sold or refinanced.
The company's model is based on the idea that teachers on the Peninsula and the South Bay make enough money to handle mortgage payments, but have difficulty building up enough money for a sizable down payment. The Los Altos School District was the first local district to sign onto the idea, and community investors were able to pull together $500,000 in just six weeks. The Mountain View-Los Altos High School District followed suit, and recently built up a similar funding pool for its teachers. Checks from residents typically range from $25,000 to $100,000.
Lofton said progress has been great so far, and that the initial investor money should be enough to support the "lowest hanging fruit" in terms of teachers who are ready to purchase a home. None of the dozens of interested teachers have actually bought a house yet, but Landed has been careful to let teachers move at their own pace, Lofton said.
"We have a few people who are looking at homes right now, but the reality of this is that home buying is a very personal process," he said. "Even with our help, it's difficult to buy a home."
With a healthy supply of investor capital, what's the demand look like? In the case of Mountain View-Los Altos, Landed has been in touch with 40 or so prospective staff members who are interested in getting help on a down payment. Most of the informational sessions hosted by Landed have been less about how the company works, and more about what it means to buy a home and take on a mortgage. Any teacher who decides to use investor money to buy a home needs to be fully aware of what they're getting themselves into, Lofton said.
School districts throughout the Bay Area have struggled for years to find ways to support teachers in a region where the cost of living has fast outpaced teacher salaries. The problem is only made worse by California's statewide teacher shortage, which makes attracting new teachers a protracted and painful process. A survey by the Mountain View Whisman School District found that most teachers and staff rent or lease their homes, and just shy of 60 percent had a desire to buy a home in the next five years.
Whether Mountain View Whisman will jump on the opportunity to create its own Landed investor fund is still up in the air. The company only presented its model to the school board last week, and district staff are still having an "ongoing conversation" with Landed about whether to follow its neighboring districts, Lofton said.
At the May 18 meeting, board members asked pointed questions about what kind of risk teacher home buyers, as well as the investors, put themselves in when they participate in Landed's model, particularly when there's a risk the housing market could tank. Board member Tamara Wilson wondered why, for example, home buyers are asked to pay Landed back within 10 years by either refinancing, selling their home, or paying off the investment with cash.
Lofton said the 10-year time period is an important mechanism in order to make sure investors have the option to get their money back in a timely manner and see a return on their investments.
Most people are likely to pay the money back within four to seven years, he said, and once teachers are able to pay off Landed's investors, they have 100 percent of the home's equity. What's more, he said, property values historically climb over a 10-year period even with dips in the economy and the local real estate market.
Over the last few years, Lofton told the Voice that Landed has taken plenty of time to consider all of the things that could conceivably go wrong with its model, and build a structure that hedges against those pitfalls. He said it can be a little frustrating that it's taken so long for the company to finally get up and running, but that it's understandable. Unlike Silicon Valley consumer tech products, if Landed has a critical flaw, it means they've potentially ruined someone's entire life savings.
"It can get frustrating, but you have to remember that if you do it right from the beginning, then you've got a better shot at the long game," he said.
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