Landlords love embedded finance

Buying a home is more complicated than it needs to be

The ordinary Joe doesn't speak LTV and APR and won't go near SDLT, in case it's contagious. The ordinary Josephine won't either, and who can blame them?

Like millions of renters, they'd rather be owners but there are some distinct advantages to being a tenant.

Here's how we modify the rental process to create a more seamless home-buying journey.

A traditional landlord finds a home, sets the rent then hunts for a tenant who can afford it.?We do the same in reverse order. We find a tenant who sets their own rent, then we work together to buy a home that suits their needs.?With me so far?

Since nobody should pay rent forever, we agree on the exact date on which we'll sell you the title deeds for a peppercorn. That's a complete description of our home-buying journey.

True, the buying process remains more serpentine than digestive transit but all our applicant needs to do is pick a location, set their own budget, then choose a place that suits them from a list. We take care of the rest.

We make buying as easy as renting

In a world dominated by technical marvels, it's easy to forget that process improvement also plays a role. Millions of amateur landlords buy homes and offer them to families moving from one property to another.?If a mortgage is a distinct financial service, our lease embeds dozens of financial and other services over the decades it takes to get to full ownership. Blink and you'll miss them.

It can take the landlord months to locate, fund, acquire, and prepare a property for their tenants. The landlord pays legal fees, survey fees, land reg fees, and the dreaded stamp duty. A responsible landlord checks the gas, the electricals, insulates the roof, lags the pipes, and does a dozen tiny things to upgrade the energy performance certificate. They do all this before the eventual occupier sees the place listed on Zoopla. If all the stars line up, it could take hours, not days, for a tenant to find that home and sign a lease agreement.?

In our model, we do all this after the eventual occupier sees and selects the place listed on our site – which shows properties listed on Zoopla, Rightmove, and two dozen other sources. Giving one-click access to a million properties, listed on different platforms, is yet another embedded service. Blink and you'll miss it.

The most common reaction from user testing is:

"OK. I get it. Now tell me the details..."

Except there aren't any. If you pay rent by direct debit and don't plan to move, that's it. Forty years later we'll sell you the title deeds for a peppercorn.

Here's the fine print. We start with a standard shared ownership lease. These contracts, typically used by housing associations, require the tenant to look after the place. We add a provision giving the tenant a guaranteed pathway to ownership. Taken together, these two provisions (a) eliminate the landlord's obligation to fix all those dickie boilers and plug all those leaky roofs and (b) radically simplify the buying process for the occupier.

This can only happen if we work with specialists who can buy bed-and-shed single-family homes up and down these fair isles at a moment’s notice. It's not straightforward but a thousand first-time buyers a day figure it out.

There are very few problems a billion pounds can’t fix.?

If the typical starter home (outside London) costs ￡250,000 then a billion pounds funds sixteen of those thousand houses a day. ?Sixteen. With a Fordian assembly line and a dash of #fintechinnovation, a highly motivated company can absorb sixteen new projects. Move to London, and that drops to eight complex but somewhat repetitive projects a day.

This vast, lucrative space needs some 2023 tech. But lift your head away from the keyboard. Some of the required solutions don't need sophisticated tech, cloud storage, or five nine's accuracy.

Relentless #fintechinnovation and a decent assembly line will soon address our broken #homebuying system. I'm tempted to say this is not your father's Oldsmobile but that would be gilding the lily.

Ike Udechuku | Cofounder | CEO | Pathway Points

Postscript:

House hunters affected by these issues should join ThePathway.Club, subscribe to the newsletter, and await further instructions.

If you want to get a jump start, before we open the waiting list, get yourself a RentPassport and sign up to track your rent using CanopyGrow Premium. This gives us the data we need to auction off the right to receive your rent.

It will take a while before we're ready to buy your home. Meanwhile, go to getnude.com and learn how to build your savings.

We make deposits optional but, if you have a Lifetime ISA, you'll miss out on a fat cheque from the government unless you use your ISA to buy a home. The folks at Nude will sort that out.

Do tell them we sent you.