Koan: The Real Estate Co-Ownership Platform
What is a real estate co-ownership platform?
I. Koan is a hybrid real estate marketplace that facilitates both the purchase of co-ownership shares in homes and home rentals* - like a mix of Zillow + AirBnB.
*Initially just vacation rentals, long-term rentals to be added in Phase II.
II. Koan is a lifestyle+travel brand committed to delivering exceptional experiences, matching customers-owners with aesthetically-inspiring properties. Koan sources amazing properties in two ways:
- Koan is a developer. Koan buys land to build on and buys homes to renovate + remodel
- Koan seeks out exceptional properties and works with existing owners to add them to the Koan marketplace
III. Koan is a co-ownership innovator. Koan leverages the power of the co-ownership model to build new bridges to help people move from financial insecurity to financial freedom.
- Co-ownership of Real Property: Koan provides the legal and management infrastructure necessary to facilitate a new approach to the ownership of real property.
- Co-Ownership of Koan:
IV. Koan is a financial facilitator. Koan connects buyers with a range of financing tools to support their purchase of shares in a co-ownership property.
Koan: A Hybrid Real Estate Marketplace
Koan opens the door to a new pathway to home ownership. Koan makes it easy to own a small slice of a home. No need to save for a giant deposit. And no more missing out on the rising value of your home or vacation property.
In the same way that you can buy shares in a publicly traded company, Koan makes it possible to buy shares in a home. And your shares grant you the right to use the home as a personal vacation home or as an income-producing rental property.
Imagine that instead of just renting an AirBnb vacation home, your vacation stay buys you an equity stake in that vacation home.
You now own a piece of that vacation home.
This is different than a timeshare in that you get more than time - you actually own a piece of the property. If the home goes up in value, you participate in that increase in value.
And imagine that you were able to build equity in your primary residence instead of just renting and ending up with nothing after each year you're there. Koan creates a new and financially responsible way to build an ownership stake in your home.
We believe there’s a powerful financial and social argument for new models of home ownership, where people can accumulate an ownership stake in a home without going through the traditional mortgage process.
Koan: A Lifestyle+Travel Brand
At core, Koan facilitates emotional experiences through aesthetics, design and financial freedom.
Design is a way to speak to people intuitively, with a message that their heart can feel. Creating places where people feel truly at home, truly welcome, truly themselves. Koan aims to deliver a design language that helps bring people to magical moments - intentional, loving spaces that invite sacred experiences.
Koan properties are worlds where people are deeply at ease, open to personal reflection and reminded of the beauty and love in the world. Places that facilitate meaningful experiences and connections.
- Phase I: Vacation Properties
- Phase II: Permanent Residences
- Koan: Developer + Facilitator
Koan's initial focus will be on vacation spaces/homes. The market-demands and economics of vacation properties allows for more freedom with respect to design/build choices. People are willing to pay a premium for their vacation time and that premium gives us the opportunity to create something truly unique.
In Phase II Koan brings this transformative design experience into people’s everyday lives - to their permanent homes. The physical spaces that most people inhabit - their homes - do not inspire them, do not facilitate joy or support their growth. We believe this is ripe for change.
There’s a tremendous amount of room to do better, to support people through design/aesthetics in their primary homes. Truly building and living in the world as we want it to be - always working towards that.
Koan sources properties from both existing stock and by building new homes or buying+remodeling existing homes. Koan works with current owners to list exceptional properties on the Koan marketplace, giving these owners access to new ownership options and higher valuations/returns relative to traditional sale/rental markets.
Koan is also a developer/builder and will buy+develop raw law or purchase existing homes and renovate them so that they meet Koan's aesthetic standards.
Koan: The Co-Ownership Model and Financial Freedom
- Co-Ownership of Real Property
- Lower financial barriers of entry to ownership: People can start accumulating ownership of any Koan property one share at a time
- Synthetic groupings: These could be professionally managed portfolios or customer-curated portfolios (ex: California Beach Homes - allowing people to buy an ownership stake in 5 California beach homes with one click - you get a 1/365th share in a five homes in Big Sur, Pt Reyes, Malibu, San Diego, Morro Bay)
- An Exchange: One giant lesson from crypto: Exchanges make a shitload of $$$. They have been one of the core economic drivers of the entire industry. People love to trade/speculate. And Koan aims, for the first time, to give the general public the ability to buy/trade fractionalized shares in real property.
- Co-Ownership of Koan
TBD - A ton of legal issues to sort out here. Some of these goals may only be achievable over the long term
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Basic idea: Liquid fractionalized crypto-ownership stake in an LLC that owns real property
Similar to the Pacaso co-ownership model, but instead of 1/8th shares, Koan would support much smaller ownership stakes, perhaps 1/1,000,000 shares that would allow almost anyone to participate in the appreciation of real estate, anywhere.
Fractional shares open the door to a few interesting opportunities:
The current model for private companies tends to concentrate the rewards for innovation in the hands of a very, very few. Founders and funders of successful companies can become billionaires. And some early employees may do very well too.
But the users - and these businesses are nothing without users - all they get is the benefit of using the service.
We believe this traditional model is outmoded and that it’s in the early phases of the process obsolescence.
Koan will be one of the first startups that fairly rewards customer/contributors with equity. Those who help to get the company off the ground, will be rewarded for their contributions.
Instead of a founder getting $100B. Maybe they’ll get $50M. And the rest of that money - $99.55B - will be shared with other contributor/users.
And this doesn’t just make sense because it’s more ethical / fair. Rewarding users with equity can inspire those users. They can become super-users, evangelists for the service, active participants in identifying/solving issues - they can start acting like owners. Their success is now deeply aligned with Koan’s success.
Done well, the sense of community and purpose that can come from this are very powerful. Dramatically different than the standard relationship between customer and company.
This new co-ownership approach further supports our goals of financial security and freedom. When every customer becomes an owner, then we all participate in the growth of innovative companies. It’s not just founders. or venture capitalists. or a few lucky early employees. or those folks who know investment bankers and get in on the pre-IPO price. or people who have $$$ to invest in riskier growth-oriented companies - everyone who uses the product/service can participate.
Koan - Phase I: Co-ownership of branded premium vacation rentals and second homes
Koan is a curated marketplace of amazing vacation properties. Koan homes are beautifully designed, thoughtfully furnished vacation retreats in inspiring locations. Delivering exceptional experiences and exceptional value.
Koan homes are either developed, designed and managed in-house or carefully selected homes that meet strict aesthetic and experience standards.
In the last decade there has been extraordinary growth in the vacation home rental market. AirBnB is the obvious leader of this trend - unleashing a level of demand that has created an industry that’s estimated to generate $15 billion in 2021. We believe that the vacation rental market is still in its infancy and that there is tremendous
The vacation home rental experience is often unpredictable and there are few standards in the industry to ensure that a renter can be confident in the quality level of the property prior to booking. Yes, there are some amazing homes on vacation rental marketplaces, but these magical rentals are a rarity. And they typically rent at a substantial premium and are often rented months in advance. The rest of the marketplace can be uninspiring - a place merely to lay your head, not a place of inspiration. A home that’s been turned into a hotel room. And sometimes not even that. Too often we show up and find that the kitchen is almost empty of basics or that you’re stuck with a warped $5 grocery store frying pan for the week. Or that the sheets might be made of cardboard and the bed’s like a marshmallow. Or that the aesthetic experience is … a thoughtless mishmash. …And the level of services available is typically minimal.
- Seamless financing: Make it ridiculously easy to buy a stake in a vacation home. Hard to overestimate the power of this.
- Use Koan rental marketplace to generate income
- Low friction re-sale: Reduce cost/time involved in selling real estate.
Market Opportunity: Co-Ownership of Homes
Homes are becoming more & more expensive - outpacing inflation and increasingly unaffordable. But people still very much want to own a home. With prices continuing to rise we need new ownership models to make home ownership accessible again.
Koan is a co-ownership platform that offers the opportunity not just to rent an extraordinary vacation home, but to own a portion of that home.
Real ownership in a real asset.
Owners may use their home for vacations, they may generate incomes by renting it on the Koan marketplace or sell their ownership stake and realize any increase in the value of their equity stake.
Market - Macro Trends
There are a number of major macro trends that point to continued growth of the home rental marketplace and rising home prices:
Housing Prices Poised to Continue Rising
- Increased competition for housing stock from (i) vacation home rental marketplaces, (ii) institutional investors and (iii) private equity
- US economy and tax system strongly incentivizes home ownership
- Persistent housing supply shortages in major markets. We’ve been experiencing a housing shortage in most major markets for decades and the regulatory, political and economic hurdles that have created this shortage are not going to just disappear. We’re likely stuck with this supply shortage for at least a decade.
- Work From Home pt I: The home has become more than a home. With WFH, homes are increasingly serving as a part-time or full-time office
Vacation Rental Marketplace on Track to Continue Rapid Growth
- Work from home pt II: Strong signs that remote/flexible approaches to work are here to stay and this gives people more freedom to spend more of their year in a vacation home.
- Gen-Z and Millennials are demanding a different vacation experience.
Fragmented and Immature: Current State of the Vacation Rental Marketplace
- There are 9 million second homes in the U.S. 44% of these are professionally managed, and 25%-35% of them are rented out (2018) (cite)
- The total number of vacation rental companies in the U.S. is currently at 23,000 (cite)
- A recent poll by Vrbo Software revealed that more than half of property managers (57%) adjust their rates once per quarter or less frequently each year (cite)
- Just 43% of homeowners use professional photography (cite)
- 31.6% of property owners said they spent four or more hours creating their vacation rental listing (cite)
- 2.25 million or 25% of second homes are used both as a rental property and professionally managed (cite)
- 70% of vacation rental companies are small businesses, managing 1-19 units (cite)
- 20% of all vacation rental companies are medium-sized and manage about 20-99 units (cite)
The market vacation home rental market is growing fast and poised for disruption.
- ***Not sure where this note should go. or just delete: Historically home ownership has been a major driver of middle class wealth creation, but when homes are financially out of reach, this path of financial growth disappears.***
Pacaso: A Co-Ownership Success Story
Real estate co-ownership is common, but has yet to reach the mainstream. Tenancy-in-common and joint tenancy are two longstanding legal paths to co-ownership but neither form has been widely adopted. Time shares have been around for decades, but timeshares aren’t true co-ownership arrangements because they do not involve an ownership stake in real property and as a consequence are widely recognized to yield poor financial returns.
Pacaso, fastest unicorn in history, represents a shift in the co-ownership marketplace. Pacaso is a vacation home co-ownership startup, selling fractional ownership in high-end second homes: “Pacaso purchases luxury homes and brings together up to eight people who want to own a share. The company then creates an LLC for them, does criminal and financial background checks on each party and guides them through all paperwork. Then, Pacaso manages the home while the owners are away—furnishing, cleaning, maintaining and paying the bills on time. The company makes money by charging a 12 percent fee for the sale and an ongoing fee for management afterwards.” Malibu Times
“Co-ownership, simplified We manage the home, and you own it. It's the modern way to buy and own a second home.”
- Founded by ex-Zillow CEO/Co-founder Spencer Rascoff and ex-Zillow exec Austin Allison
- Pacaso “achieved unicorn status faster than any other company” TechCrunch
- Raised $90M in equity, $1B in debt.
- Pacaso reached sustained EBITDA profitability in the first quarter of 2021
- Sell 1/8 shares in luxury homes (equates to ~44 days per year)
- Collects a 12 percent fee from buyers up front and charges $100 per month in management fees
How is Koan different from Pacaso (DRAFT)
- Koan co-owned properties can be rented like AirBnBs. Pacaso doesn't allow rentals,
- Pacaso ownership shares are 1/8 shares minimum. Koan would support much smaller ownership stakes (1/365. or even 1/10,000),
- Koan develops+builds properties, Pacaso doesn't have a development arm.
- Koan is a marketplace for both vacation homes and permanent homes, Pacaso is solely focused on vacation homes
- Koan is co-ownership focused to the core, allowing customer/contributors to own a portion of Koan itself, Pacaso is a traditional VC-funded startup that doesn't give users an ownership stake in the company**
- Koan is building a more flexible real estate co-ownership marketplace - an actual exchange where a 1/1000th ownership share in a Malibu beach house can be as easily bought/sold as a share of Apple or Tesla stock. Pacaso doesn't appear to have any intention to create a marketplace for micro-shares in real estate**.
- Koan will support the creation and trading of Synthetic Pools (ex: California Beach Homes - allowing people to buy an ownership stake in 5 California beach homes with one click - you get a 1/365th share in a five homes in Big Sur, Pt Reyes, Malibu, San Diego, Morro Bay). Pacaso has no declared intention to support Synthetic Pools**
**NOTE: There are legal/regulatory issues to navigate. We are in the early stages of exploring the legal landscape with respect to real estate and securities law. There is still significant work to be done to determine the exact shape of (i) user/customer/contributor equity-based rewards in Koan, (ii) the sale/re-sale of co-ownership shares in real property, (iii) the creation of synthetic instruments and their sale/re-sale.
Legal / Regulatory Pt2: One option could be to use Regulation CF, the equity crowdfunding pathway established by the SEC (https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding). Each home would
Tidbits: Someone like SeedInvest may be a great partner. SeedInvest is an equity crowdfunding platform that was purchased by Circle in 2019. Circle is a crypto company founded by Jeremy Allaire. In April 2019, the SeedInvest received approval from FINRA to operate an Alternative Trading System (ATS) to create a secondary market for equity in early stage-crowdfunded startups.
Koan - Co-Ownership to the Core
Incentives Matter
One of the most important lessons from crypto: Get the incentives right and you’ve got a rocket ship for growth.
Cryptocurrencies like bitcoin and ethereum gave early users a chance to own a stake in an exciting emerging technology. Ownership in early stage growth-oriented technology companies is typically only available to founders, early employees and institutional and venture investors. Crypto upended the traditional approach and let anyone buy early. And that ability to become an owner was critical to success as those early owners became the innovators, the builders, the believers, the users and the evangelists that are essential ingredients in every technology success story of the last 50 years.
Koan aims to reward all contributors in proportion to the value that they create through their use of the platform. When a home owner lists their home for rent on the Koan marketplace, they will be eligible to earn equity rewards. When a family rents a vacation home for their winter ski trip, they will earn equity. When a home owner sells a portion of their second home on the Koan marketplace, they will earn equity. These owners will become engines of growth - driving new users to the platform, listing more additional rental properties, —
Koan founders will forgo the traditional giant ownership stake and the vast majority of their stake will instead be shared with Koan users. In the case of Airbnb the top three executives/co-founders own equity worth ~$30B (cite) - Koan will share that bounty more equitably - rewarding the people who actually use the platform and make it come to life.
- Use of property
- Ownership stake in property
- Ownership stake in Koan, the company
Koan - A Step Change in Real Estate Marketplaces
Koan represents a revolution in real estate transaction costs. Purchasing a home can be one of life’s most stressful events. And with brokers/agents fees and loan closing costs it is also one of its most expensive too. Buying a home is a complicated dance of financing, legal hurdles and matching buyers with the right property. It’s a stressful, expensive, time-consuming mess.
Co-ownership offers a streamlined path where Koan creates an LLC to hold the property and then sells shares in the LLC that owns the home to buyers. The process is similar to buying a share in a publicly traded company, but instead of buying a share of Tesla or Apple, you’re buying a share of in an amazing vacation home. The Koan process is less complicated, less expensive and significantly faster.
There’s a lot more to get into here, but this is a big deal imo. Co-ownership stakes in homes will be tradable just like shares of stock in public companies. Or like crypto. This will open up a giant new wave of activity as retail investors begin to take part in real estate investment (speculation).
Crypto: Two Lessons
- Get the incentives right and you’ve got a rocket ship for growth.
- Digitally native assets are a revolution in ownership - assets as software
Ethos (DRAFT/placeholder)
Guiding Principles
- Learn
- Incentives
- Give Back
Appendix
- Fundraising
- Phase I: Financial Model - Vacation Home Co-Ownership
- Phase II: Beyond Vacation Homes - Co-Ownership of Residential Real Estate
- Phase II: Financial Model: Residential Real Estate Co-Ownership
- The Revenue Story
- Legal Research
- City/County Level: What power do city/county authorities have to influence/control the shape of real estate co-ownership offerings? Can localities ban LLC ownership? Can localities limit the number of LLC owners/shareholders? Can localities regulate co-owned properties as "vacation rentals" - where a locality could place limits on the number of residents per year per property? Or would co-ownership models allow multiple LLC shareholders to use a property as a vacation home even in cities like Santa Monica which have a ban on short-term rentals? Which opens a broader question: Would co-owned properties that are used as vacation properties be legally defined as "vacation rentals"? How are property taxes assessed? and would the sale of shares in the LLC be cause for a valuation update and an adjusted tax-assessment?
- State: Property tax issues. Many questions around the treatment of real estate marketplaces and the sale of shares in LLCs that hold title to real property. What is the role (if any) for licensed real estate agents/brokers? Does sale of a share in an LLC that holds title to real property require a licensed real estate agent/broker? What requirements are there around notice/disclosure? What about escrow requirements (if any)? Valuation assessments for financing? Will LLC shares qualify for listing on MLS services? What kind of cultural/industry resistance might emerge?
- Federal: Income tax questions re a partial sale of a home - how is the owner taxed if they sell 20% of their home? or 50%?
- Taxes: Carving this out as its own category bcs it crosses local, state, federal lines. Lots of tax questions. Lots of minutiae here bcs real estate tax law can get fairly complex.
- Securities Regulation: Would shares in an LLC that owns real property be considered securities? Would shares in a Fund that owns shares in multiple single-property LLCs be considered securities? Where is the line? What role might Crowdfunding regs play? And marketplaces in crowdfunded shares?
- SecReg II: What are the viable paths for distributing equity stakes to users/contributors? What is the fastest path to active trading in Koan-shares in the United States? On foreign exchanges? Role of accredited investors? Foreign investors? Listing on Binance? Listing on Uniswap?
- Lots of good info: Fractional Ownership, Answers to Frequently Asked Questions
- Classic Exchange / Reciprocal Exchange: Two families exchange each others' homes, whether simultaneously or on different dates. This is called a "reciprocal" exchange.
- Exchange with GuestPoints / Non-Reciprocal Exchange: What happens if you find another Member with an available home, but that Member doesn't want to stay at your home in return? You can offer them GuestPoints...
- Review from Men’s Journal: “For a non-reciprocal “swap it forward” stay, the network imposes a scaled system—with each listing being assigned a certain value of GuestPoints based on how many people it can accommodate, its location and amenities. When you arrange a GuestPoints exchange, the amount you transfer to your host is the value of the GuestPoints assigned to their own home, multiplied by the number of nights you are staying there. For example, if you make a non-reciprocal exchange at someone’s house valued at 200 GuestPoints per night for five nights, 1,000 GuestPoints will be transferred from your account to theirs at the end of the exchange... If someone stays at your place while you’re away, you earn GuestPoints—which can then be applied to future HomeExchange bookings. Like Cash, Only Different. No money is ever earned by hosts or paid by guests through HomeExchange, just GuestPoints. This allows the service to be legal in most markets. Moreover, given that the listings are typically “lived-in” apartments, they’re not technically displacing neighborhood residents—and thus can generally get around laws that impact homestay rentals or income reporting. You do need to make sure that your lease doesn’t specifically forbid outside guests of this nature—a rarity. On the other hand, you don’t need to own your home in order to legally use HomeExchange.” link
- Legal issues around home swapping. How will local jurisdictions (cities + counties) view home swapping if it becomes more common? What power do these localities have to control/limit/tax home swapping? Are there any income/tax implications with respect to reciprocal swaps? Non-reciprocal swaps? Are non-reciprocal swaps more analogous with traditional vacation rentals? home rentals?
- “Is Home Swapping Legal? The problem with home swapping is that it may be considered illegal, depending on which jurisdiction(s) it occurs in. For example, the arrangement may be considered a “short-term” rental arrangement, which is illegal in many states. For example, in New York, a rental agreement for less than 30 days illegal; thus, the parties may become subject to legal liability for home-swapping. In addition, there are many concerns regarding the safety of such practices. Oftentimes, the parties may barely know each other, having met and exchanged over the internet. The living arrangements likely aren’t covered by insurance, and one or both parties can be subject to theft or other types of real estate fraud. Lastly, some states are beginning to impose taxes on persons who engage in home swapping. The justification here is that home swapping is basically the same as an illegal hotel, which can be taxed by the government for illegal operations.” link
- https://www.accountingweb.com/tax/irs/irs-launches-tax-hub-for-the-sharing-economy
- Regulation strictness and supply in the platform economy: the case of Airbnb and Couchsurfing
- Why hasn’t this market taken off yet? It feels like there have been a few good-sized players in the market, CouchSurfing and HomeExchange. but they haven’t reached anything close to the scale of AirBnB. May partially be an issue re lack of coincidence of wants.. I also suspect inadequate incentive systems of early players like CouchSurfing. AirBnB had the benefit of a very clear financial payoff for early team members + investors IF the project achieved scale. and that kind of incentive can really help drive growth.
- There are 9 million second homes in the U.S., and 25 percent of those are rented through property management companies (cite)
- According to NAHB estimates, the total count of second homes was 7.5 million, accounting for 5.5% of the total housing stock in 2018, the most recent data available (cite)
- Revenue in the Vacation Rental segment projected at $15,338M in 2021
- Projected 7% growth rate
- 79% of Vacation Rental revenue generated through online sales by 2025
- There are 9 million second homes in the U.S. 44% of these are professionally managed, and 25%-35% of them are rented out (2018) (cite)
- The total number of vacation rental companies in the U.S. is currently at 23,000 (cite)
- 45% of investment property buyers purchased to generate income through renting the property (as opposed to flipping or only seeking price appreciation) (cite)
- 49% of vacation home buyers plan to use their property for vacations or as a family retreat. (cite)
- 29% of vacation properties are owned by more than one person (cite)
- 42% of investors and 39% of vacation buyers paid all cash for their property purchase (cite)
- A recent poll by Vrbo Software revealed that more than half of property managers (57%) adjust their rates once per quarter or less frequently each year (cite)
- Just 43% of homeowners use professional photography (cite)
- 31.6% of property owners said they spent four or more hours creating their vacation rental listing (cite)
- Vacation rental managers may spend 5%-15% of revenue on commissions to vacation rental platforms (cite)
- 63% of Vacation Rental bookings are made by 18-44yr olds (skews younger) (cite)
- 81% of Gen Z travelers have stayed in a vacation rental like a home or condo (HomeAway)
- 74% of millennial travelers have rented a vacation rental from an online marketplace like Airbnb or HomeAway (Hipmunk).
- 38% of Gen-X travelers have rented a vacation rental from an online marketplace like Airbnb or HomeAway (Hipmunk).
- 20% of Baby Boomers have rented a vacation rental from an online marketplace like Airbnb or HomeAway (Hipmunk).
- The top amenity cited by 64% vacation rental travelers for booking a vacation rental is the kitchen (Bookfull)
- 600,000 Americans rent out their homes or private properties to short-term guests (cite)
- 2.25 million or 25% of second homes are used both as a rental property and professionally managed (cite)
- 70% of vacation rental companies are small businesses, managing 1-19 units (cite)
- 20% of all vacation rental companies are medium-sized and manage about 20-99 units (cite)
- Vacation rental companies account for 31.3% of all privately owned accommodation* establishments nationwide (cite)
- 6% of vacation home buyers bought their property to generate income through renting. (cite)
- 30% of vacation property owners and 32% of investment property have shown interest in renting their homes as short-term rentals (cite)
Basic idea is to copy what Pacaso has done, a mix of equity and debt financing. Equity financing to fund the startup and debt financing to fund the real estate portfolio portion.
This section can include a simple breakdown of (i) goal size of initial equity round, (ii) proposed use of funds / year 1 budget, (iii) goal size of debt round, (iv) proposed use of debt funding / timeline
*** Insert mind blowing financial model here ***
Need some narrative exploration of assumptions behind models + projections
Basic idea: The co-ownership model can work for regular residential real estate too. As an alternative to renting and whole-home ownership
Explore the fundamentals residential real estate marketplace, especially in markets that are radically distorted bcs of long term supply issues (i.e. California)
*** Insert another mind blowing financial model here ***
And more narrative explanations of the choices behind the models
Three core source of revenue:
Like AirBnB, Koan is a vacation home rental marketplace and will charge fees to home owners who rent their homes.
Like Pacaso, Koan will charge management fees for co-owned properties that it manages on behalf of the owners.
Like Zillow, Koan is a real estate marketplace and will charge fees to home sellers and home buyers for any property sales that it facilitates. And because buying/selling a co-ownership share is so much simpler and cheaper than the traditional home-buying process, we anticipate that shares in Koan homes will trade much more frequently - more like stock in a company than the sale of a home. And this exchange activity will drive revenue :)
Koan can also assist in financing a home rental or the purchase of a share of a co-owned property, Koan will earn fees when it connects renters/buyers with lenders.
The real estate industry may rival food+farming and trade as one of the oldest forms of human economic activity. It can be useful to see the current market as built on centuries of cultural and legal precedent. A market of longstanding traditions and norms, where many of these precedents, traditions and norms have been woven into a complex fabric of legal and regulatory requirements at all levels of government.
The Koan model both rests on and challenges the existing cultural and legal landscape. In some instances Koan's is merely combining a variety of existing legal structures into a new recipe in order to create novel product offerings. This is the case with Koan's basic co-ownership structure, where an LLC holds title to real property where shares of the LLC are offered for sale to the public and those shares grant specific use-rights to share owners (i.e. rights of use as a home or right to rent).
Koan also intends to create more disruptive offerings, including "fund" offerings that, through the purchase of a single share of the fund, give the share owner exposure to multiple real property LLCs. As an example there might be a "California Coast Fund" ("CCF"), where a single share of CCF would represent an interest in a dozen of more coastal properties in California. And that shares in these Funds, like shares of individual homes, would be as easily tradable as a share of stock in Apple or Tesla.
Navigating these spaces will require careful analysis of the local, state and federal regulatory landscapes. Much of this work is in the earliest stages - at this point we are exploring the outlines of these spaces, there is still a tremendous amount of work to be done with respect to the design specifics of each product/service.
Research Questions
Legal Research - Resources
Competitive Landscape
NOTE: Looks to be dormant since 2020. And was targeted at accredited investors. Low-liquidity too (time horizon of 3-10yrs)
“PeerRealty is the premier real estate crowdfunding platform. Join your peers in high-quality real estate investment opportunities on our marketplace.”
“With our streamlined, online portal, PeerRealty offers a marketplace where investors can participate in high-quality real estate deals with the nation’s most reputable developers, deals that have been historically difficult to access.”
“..(T)he PeerRealty platform allows for a new market of investors (“Peers”) to invest alongside elite individuals and institutions. This provides eligible investors with access to some of the world’s greatest wealth-creating investment opportunities.”
“How is PeerRealty different than an REIT?
When investing in a REIT, most investors have little to no information regarding actual properties the REIT invests in and cannot select their own investments. With PeerRealty, investors can invest in individual properties, giving added transparency and control over the investment process. In addition, REITs are such large entities that they can rarely participate in many of the mid-market investments PeerRealty will be including in the marketplace such as retail centers and multi-family buildings.”
“The investment period varies widely depending on the type of investment. Equity investments can range from 3-10 years. Please review the expected hold period for each investment before making an investment.”
Arrived Homes
“Easily invest in rental homes.”
“Buy shares of properties, earn rental income and appreciation — let Arrived take care of the rest.”
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“Residential real estate has proven to be the best long term investment in modern history, providing returns in line with stocks, but with half the volatility. The problem is, the majority of people who want to invest in real estate aren't able to do it. Most people are prevented from participating due to the high initial investment needed for down-payments and the many operational requirements of managing a property. That's why we're building a new way to invest in real estate that makes it easier for people to start their investing journey today. With Arrived anyone can buy shares in income producing rental properties starting at just $100. Arrived takes care of all the real estate operations so that investors can sit back and collect net rental income and their share of the home's appreciation.”
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“Our goal is to make the wealth building potential of owning rental homes more accessible. We believe we can do that by simplifying the process, and lowering the cost to get started.” CEO
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Arrived was founded by tech veterans including CEO Ryan Frazier (Simply Measured and Sprout Social); CTO Kenny Cason, (Simply Measured); and COO Alejandro Chouza, (Oyo and Uber). High-powered backers include the venture capital arms of Jeff Bezos (Bezos Expeditions) and Marc Benioff (Time Ventures); former Zillow Group CEO Spencer Rascoff; Uber CEO Dara Khosrowshahi, and other longtime tech execs.
Roofstock
“a five-year-old, Oakland, Calif.-based online marketplace where buyers and sellers buy and sell rental homes in more than 70 U.S. markets — homes with tenants residing in them oftentimes. The idea: Both institutional and retail investors can buy and sell homes without forcing renters to leave their homes; buyers can also presumably generate income from day one.
It’s a huge market to chase after. Though there’s an assortment of (huge) estimates out there, Roofstock pegs the single-family rental market at a whopping $3 trillion. Investors just gave the company a fresh $50 million to go after it more aggressively, too. Earlier backer SVB Capital led the round, but it was joined by Citi Ventures, Fort Ross Ventures and 7 Global Capital, as well some other earlier investors, like Khosla Ventures, Bain Capital Ventures, Lightspeed Venture Partners and Canvas Ventures. The company, which says it has facilitated more than $2 billion worth of transactions since launching, isn’t willing to talk about its post-money valuation (it has now raised $133 million altogether).” TechCrunch
Fundrise
We set out to build a better way to invest
Real estate has historically been one of the best performing investment assets and a core part of many of the most successful investor’s portfolios. 1
But investing in real estate (the way institutions do) traditionally hasn’t been available to most investors without either meeting high net worth requirements or going through a complex and inefficient process, riddled with high fees and outdated middlemen. 2
We started Fundrise with a simple idea: to use technology to make high-quality real estate investments available to everyone at a low cost.
In the beginning, we faced our fair share of skeptics, especially within the institutional investment industry. They said our idea wasn’t possible. Turns out, they were wrong.
Since launching our first offering in 2012, we’ve invested in more than $4 billion worth of real estate across the country. Today, we manage more than $1 billion of equity on behalf of more than 210,000 individual investors.
Quality assets. Low fees. Smart technology.
We blend our investment expertise with smart technology to provide our 210,000 investors with the buying power and investment opportunities traditionally reserved for billion dollar institutions.
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Point
“We pay you today for a share of your home’s future appreciation. There are no monthly payments; you have the flexibility to buy Point out or sell the home at any time; costs are capped so that if your home appreciates in value a lot, you don’t give up too much of the gains. We do well when you do well. Now, that’s quite revolutionary.”
Gain early access to your home equity
Point will invest in a slice of your home equity, paying you cash today. You can get $25,000-$500,000, depending on your home value and the amount of equity you own. Point is not added to the title of your property.
Free yourself from monthly payments
Since Point is investing in your home, there are no monthly payments, ever. In fact, homeowners who use a Home Equity Investment (HEI) to pay down their existing debts increase their monthly cash flow by an average of $1,413.
Repay when it’s convenient
You can buy back your equity any time during the 30-year term, typically via a refinance, home loan, or sale. There is no pre-payment penalty.
Repay in proportion to your wealth
When you exit the contract, your buyback cost will depend on your home value—the cost will be the amount originally received plus a portion of your home’s appreciation since partnering. If your home has appreciated past a certain threshold, your cost will be capped. If your home has depreciated, your buyback cost will be smaller.
Home Swapping
Software is lowering the cost of long-standing practices like home exchange / swapping - connecting homeowners across the world who are interesting in swapping homes in a 1-to-1 reciprocal exchange: You stay in my home / I stay in yours.
“HomeExchange is the world leader in home exchange vacations. With over 400,000 homes in 187 countries, discover an affordable, authentic and safe way to travel the world. Discover how you can exchange homes for your next vacation.”
Members pay $150/year to access the platform
Two Options
Members can offer their whole home or just a portion of the home: “A "hospitality exchange" consists in offering not a whole house but only a part of it (usually a bedroom, but it can also be a separate wing, etc.), to welcome guests staying on site during the exchange.”
NOTE: “HomeExchange does not allow exchanges between acquaintances or friends since, to organize an exchange, it would not be necessary to use the HomeExchange platform to contact each other.” link
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HomeExchange is also branding itself as “a social network” - a community.
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It does not feel like this platform has really taken off. Some portions of the site feel fairly dated. And the CEO’s twitter has been inactive for 18mos+.
HomeExchange acquired NightSwapping in 02.2019
Legacy platform. Pioneer in the space, but feels like it’s lost its way
BeWelcome
“BeWelcome lets you share a place to stay, connect with travellers, meet up and find accommodation on your journey. It is and will always be a free, open source, not-for-profit, democratic community.”
“Sharing, hosting and getting people together.”
“Travel anywhere and easily find great people who want to meet you as well. See where other travellers are and help each other out, whether through welcoming them to your home, sharing your stories or becoming friends. Trustroots is over 65,000 members strong and growing!”
Open Quesitons