StrideUp, a U.K. startup founded last year by Sakeeb Zaman and Rohan Trivedi, both formerly of Deutsche Bank, wants to make shared home ownership more readily available within the private housing sector.
The company, which launched in the summer, lets you buy a portion of your home while you continue to rent the remainder. The idea, Trivedi tells me, is to provide an alternative to a mortgage, a form of financing that is increasingly out of reach for many.
Citing official figures from 2016, the StrideUp co-founder says that house prices in the U.K. are an average 7.6 times the average annual salary, more than double the figure for 20 years ago. Conversely, average mortgage amounts offered to first time buyers sit at just 3.6 times salary.
Shared ownership — where you and your landlord both own a percentage of the home you live in — is one solution to this problem. As and when you can afford to purchase more, you increase your stake at the current market valuation (and, in turn, reduce your rent), until eventually you own the home outright or can secure a conventional mortgage to do so.
“Our typical customers are first time buyers in their mid/late 20s to late 30s. They have spent five-plus years renting and want to get on to the property ladder but traditional mortgage finance is unable to bridge the gap between where they want to live and what they can buy,” says Trivedi.
“StrideUp breaks down the binary nature of homeownership where you rent (and own nothing) versus trying to buy a home using a mortgage and owning a 100 percent. With StrideUp people can start by buying a portion of their home, say 10 percent or 20 percent, and as they live in the property, they gradually increase their ownership”.
On competitors, Trivedi says the closest offering in the U.K. is the Government’s Shared Ownership schemes, which are well liked but constrained by supply. “StrideUp offers a significantly more flexible product, where home buyers are able to pick their home from any property on the open market. They can live where they want, in the type of property they want and not have to be on a waiting list for years,” he says. Another startup eyeing up the space is Unmortgage.
The way StrideUp works is that as a prospective homebuyer you sign up and apply via the startup’s website. You then get assessed by its tech/algorithm and receive a budget or the maximum property value you should target. Next you are tasked with finding a property on the open market that best fits your needs and then submit it to StrideUp for approval.
The startup’s data models will then help you determine what is a fair offer on the property, before you make an offer to the seller, as you would however you were financing your property. Once your offer is accepted, StrideUp will support you through the buying process (where you’ll need to arrange a surveyor and solicitor etc.) and provide the additional financing when you’re ready to exchange.
Meanwhile, StrideUp’s business model is akin to a property investment platform. This sees institutional investors stump up much of the capital required to finance the homes the startup is partially buying and pocket most of the returns (ie the rent plus any increase in each property’s valuation, which is realised as an occupier increases their stake over time or the home is put back on the open market for sale). StrideUp itself makes money by charging an origination and management fee to investors.
To that end, the U.K. company is disclosing £1.6 million in seed funding. The round is a mixture of equity and debt financing led by Picus Capital, along with an unnamed group of angel investors with technology, finance and real estate expertise.