Alex Lofton, co-founder of San Francisco startup Landed, discusses why he started the company and how he thinks they can use the power of crowdsourcing and community to help teachers own homes in the upscale urban core's where they teach.
TRANSCRIPT
Speaker 1:Hello, this is KLX Berkeley 90.7 FM and you're listening to Metta to the madness public affairs show here at Calex that celebrates the innovative spirit of the bay area. I'm your host Tallinn Huizar and today we have Alex Lofton [00:00:30] with us. He's a cofounder of landed. Hey Alex. How's it going? It's great. How are you doing? I'm good. Alex joins us by phone today. He's traveling on the road, so thanks so much for joining us today, Alex. Of course. And uh, we have a, a kind of a standard question we always start this show with and it is, um, you know, you're an entrepreneur, you're on a journey to change the world or solve a problem that you see. Can you tell us kind of about your problem statement of what, what are you trying to solve? [00:01:00] We're trying to make home ownership more affordable and accessible and really expensive cities, which is pretty relevant in a place like the bay area.
Speaker 1:Um, there's just a lot of, there's kind of two problems when people think about affordability in homes. One is how much it costs to pay on a monthly basis, which is a whole bunch of problems there. Um, and another one is just how expensive it is to actually access home ownership in the first place. To have enough money to get a down payment to get that [00:01:30] first house. And that is what we are trying to address. And we think that if we match people who want to invest in real estate on one side with people who want to buy a home, my other, we can solve that problem. Okay, great. Thanks for letting us know about that. And can you give us a little bit of a background about how you came to see this problem? Well part of it was a personal and another was just hearing reflections of how difficult essential people like teachers were having to, [00:02:00] uh, you know, were, were having when they thought about trying to live in a place like the bay area.
Speaker 1:Personally, the problem came to be when I thought about moving to be up from a renter in San Francisco to eventually being a homeowner one day. I'm wanting to settle down just like everybody else and not coming from a family that could afford to give me a bunch of money for a down payment. I just didn't see a way forward to save enough money, fast enough to buy my own house in the bay area. So a big question mark for me was, what am I going to do? And in talking [00:02:30] with people, especially friends of mine who were teachers, uh, in the area, they were experiencing the exact same problem. They were paying all their money in rent, nothing left over to save. So, uh, you know, for, for, for people like us of my generation, the millennial generation that we're thinking about transitioning from, uh, the shoe box in the city to try to find something to live in more permanently.
Speaker 1:Uh, there just were a lot of options out there between renting and owning. So I just got myself and my co founder, Jonathan, I met [00:03:00] at graduate school thinking about how it is different out there, what could we create that's different out there that would bridge that gap. Okay. And we can mention it even though this is cow's radio station, we can mention to graduate school you went to unfortunately. But I think I'll stay in school and um, tell us a little bit, you know, I think it's really interesting about how entrepreneurs come to see problems and the problem that you just described for us as something that everybody knows about pretty well. You [00:03:30] know, this, um, difficulty fortunately lead from, yeah. Affordability and it's certainly in the bay area. Utu but tell us a little bit about your background and like where did you grow up?
Speaker 1:How did you, um, get to Stanford Business School? Sure. Well, I grew up in the Great Pacific northwest, uh, just outside of Seattle and, uh, from college, uh, onward in my early career, I worked in politics, uh, specifically on national campaigns, [00:04:00] uh, traveling around the country, um, focusing on setting up organizations that could, that could win elections. And through that process also learned a lot about how incredible, uh, American cities are, how exciting they are, but also how many problems they have. And just kinda real big passion and curiosity around solving issues in urban spaces. Um, and, uh, you know, a big part of that for, for, for me was thinking about, uh, [00:04:30] the way that we use space, who, who gets to decide how we use space, where we live. And a lot of that comes down to who gets to be a part of the ownership community in cities.
Speaker 1:Um, and that is becoming, I noticed increasingly harder in places like San Francisco, New York, Seattle, a lot of, um, major urban centers in the u s and so to me, there was a tie between, uh, experiencing all of the beauty that is, that exists in [00:05:00] urban spaces, but also all of the challenges that could, you know, committed me to doing something, uh, like we're doing now with, with, with landed. Um, I, you know, I also, I grew up in a household with a school teacher as a mom and a social worker as a dad. And I really appreciate it. How, um, valuable, um, people how valuable the lots of different, um, professionals are for [00:05:30] thriving cities. And when you think about those people not being able to stay in those, in those thriving cities, there's a big question mark what the future looks like for where we all live.
Speaker 1:And so that's kind of what really motivated me to kind of work in this space and find a way to build a business that was going to be sustainable and successful that also, um, was meeting real a real need. So when you applied to a business school, this was the kind of, you already kind of thinking about urban [00:06:00] housing issues. You got it. Yup. Yup. And a lot of it was with, was accelerated by work. Um, I had been exposed to, uh, with organizations like, um, therapy and B, Lyft, um, a lot of these sharing economy companies that were thinking differently about how we use space and how we, um, rent stuff, but they're, but the conversation around ownership, um, and how do we think differently about ownership [00:06:30] was, um, would missing there in my mind. And to me that's where the question of, you know, shared ownership or co-investment if that was to be applied to problems like housing and a more efficient way.
Speaker 1:Um, now that we have technology that can connect people more quickly, connect to people with capital more quickly, um, can, can, can help us set and, um, make, you know, make decisions more quickly, uh, that there could be a possibility to rather [00:07:00] than offering people more debt to borrow from banks. And otherwise, if you pair people up as a coinvestment, maybe there's a solution there. And that's where we, where we started headed. Yeah, we're talking to Alex lofty, the Co founder of land. It's a San San Francisco based startup that's looking to solve the problem of affordability of home ownership and urban areas. And this submitted to the Madison KLX Berkeley 90.7 FM. Um, Alex, I can't agree with you more. I think that the sharing economy has been so revolutionary in so many [00:07:30] ways, but it kind of passes on this idea of ownership and wealth building. And I think that's a problem longterm for the people who really embrace that sharing economy. Um, so I think what you're doing is really interesting to find a fill this hole of rethinking and what ownership means. Um, so when you were, um, in a year in business school and you kind of have this thought of you want to attack this problem, can you take us from there to how you kind of formulated the idea for landed?
Speaker 1:[00:08:00] Sure. Um, so sorry, sorry, could you, could you repeat that question one more time? Yeah, I'm just asking, once you're, uh, you're in business school and you already have kind of an own a concept of you want to figure out how to solve this problem of, um, ownership in urban centers. How did you go from there to constructing the company and the actual, um, method through which you want to solve that problem? [00:08:30] Great question. So one of the first thing that we, you learn about when you start a company, it's just you got to go out there and find out what's out there already. And, um, as much as you can start prototyping and start creating some sort of example of what you want to do and see how people respond to it. One of the first things that we thought about as a team was, hey, if we're going to be thinking, asking people to think differently about home ownership, that's a pretty big leap to the, to ask [00:09:00] of consumers.
Speaker 1:So what if we, you know, what if we focused on creating a brand, uh, that people trusted in the realm of homeownership and eventually get to asking them about, uh, changing their mind about home ownership. So I thought about that was, well, let's go and create a business that focuses on helping renters who are having bad experiences as renters, have a good experience as a renter and really be a po. The best property manager that's out there for the best property manager that's out there that people will trust us and they'll, [00:09:30] they'll, they'll want to do what we, we, we suggest they do like co-invest with other people. Well you can tell that, you know, that was a pretty long leap or pretty long chain of things that would have to happen for, for us to be able to directly influence how people are buying homes today.
Speaker 1:And so, uh, you know, we, we, we found that out by throwing this idea out there, starting to build a property, a property management company, but quickly realized that if you wanted to get to people thinking differently about ownership, we've got to start. We actually got to start [00:10:00] there. And so, um, what does the first thing that we did was go and just match investors that were interested in our concept with home buyers. We actually did that first with the home in Berkeley, so right down the street where you are, um, uh, with, uh, some homeowners that were there trying, trying to preserve, uh, the house they were living in as renters with an investor who really wanted to be invested in property in the area, just to get experience of what that's like can match to match people. Um, and, and, and [00:10:30] that kind of has ballooned and blossomed into, uh, us working more generally with communities that care a lot about, um, both, uh, the people that are living and want to live in their community, but also that their own opportunity and making money, investing in real estate and matching those with people actually who are going to be the homeowners.
Speaker 1:Okay. So that first deal that you guys did in Berkeley, it was, you weren't necessarily looking for a, a, [00:11:00] a match between renters in a potential investors, just those who are in your network and you guys are trying different things. And that's what kind of came out, is that what I'm hearing? Yeah. Yeah. You got it. I mean, we, we, we, we knew that in the future we'd have to, you know, um, do more marketing, do more outreach to find new, um, new potential home buyers to match with, uh, new investors. But to start, we just used our own, you know, our own network and, uh, the people who were interested in what we're doing, um, and wanted to be a part of it themselves [00:11:30] and made the ask to them to be a part of this with us early on. And I think that's one of the things you learn really early on.
Speaker 1:We were starting something is you can't be afraid to ask and asking can be not just something that is, um, a one way street where, where you're asking somebody to do something for you and they get nothing out of it. You know, you, you ask an investor to be a part of this set up, they're going to get a out of it. You ask a home buyer to trust us to help them figure out a way to stay in their house and a and B [00:12:00] be a homer homeowner that, you know, they get the benefit of home ownership at the end of that. So, um, being an aster in that way is, is a, is a good thing. Yeah. I mean, I can't agree with you more. As someone who I've done startups and interviewed a lot of founders, um, you know, there's that kind of a little bit of bravado that everybody has to have to not be afraid to go and ask.
Speaker 1:And what's great about, um, the bay area is that people are used to being asked. It's a, it's a very collaborative place and it's one of the special things [00:12:30] about why our region has done so well over the years is because people are willing to help. If someone has a new idea that sounds a little bit maybe crazy or whatever you want to call it, people are open to it as long as it makes sense. So I'm glad to hear that Berkeley Berkeley was a first deal you guys take, they represented. That's great. Berkeley is treating us well and we're talking to Alex Loft and he's a cofounder of landed to San Francisco based startup. It's kind of rethinking how we can make home ownership affordable for urban [00:13:00] centers like the bay area. So let's talk about, let's fast forward to where you guys are today. So well, how long ago did you start the company?
Speaker 1:We started just over a year ago. Okay. So in that year, a lot has happened and I was reading through your website and I wanted to, um, have you take us through your model a little bit. You have, um, and the website is landed.com if anybody wants to check it out. Um, great. Great URL by the way. And thanks if you got a, so it starts, you asked the [00:13:30] question, how do we help? And the first step it says is create community funds. So what's a community fund for landed? Community Fund is basically a pot of money that, um, individuals who have money to invest in real estate have capitalized. They put the money into the pot. Um, and their expectation is that money is going to be going to be, it's going to be invested in several [00:14:00] different homes, um, in and around, uh, a community that they care about.
Speaker 1:That community can be defined geographically, but also more, um, more relevantly today is, is, is defined as, um, say a school where their kids go to school or maybe, um, they graduated from in the past. Uh, and they will really want to see a quality education to continue at that school. Um, that money is going [00:14:30] to be invested in people who are making that community great. So in the case of the school, but the people who make the community great oftentimes have great teachers and preserving those teachers, making sure those teachers stay in their own community requires people feeling like they had some hope to settle down. They have hope to, in this case, buy a, and so in turn, uh, the money that these individual investors that put into a fund that's offered up as down payment help to these teachers [00:15:00] who can go ahead and cover half of their down payment with landeds support with this fund support and in the future they pay back, uh, some of the appreciation of the, some of the growth of the value of the home to that fund when they sell.
Speaker 1:So, if I'm a, um, I'm a resident of Berkeley and I have a little bit of extra money to invest and I am not necessarily have enough to go buy a bunch of apartments to rent out to people, [00:15:30] but I really want to be invested in real estate. And I also, uh, really want to help my community, cause my kids go to Berkeley Unified School district. And I could potentially give that the chunk of change that I have to invest into a fund that would be specifically for Berkeley unified schools versus waivers. You got it? Yup. You got it. Okay. And you know, and, and we, we like to emphasize this gives people more choice in ways that they can invest [00:16:00] their money. So people may already be investing elsewhere with rental properties. This is a, a is another option for them to do that. It could be the first time somebody decides to invest in real estate period.
Speaker 1:Um, but, you know, it gives people a more diversified way to, uh, have their money, uh, w grow their wealth basically. Yeah. And how do I, um, uh, do you, is there like a annual kind of dividend [00:16:30] type payment that comes or how does, if I'm the investor, how do I get that money back? You get that money back when the home buyer, uh, sells or refinances in the future so that they sell the home and they get, you know, paid for that transaction. Then, um, for every dollar that the house grows in, in value, um, used an investor would get 25 cents, uh, back. The same thing would happen if the dollar, if the house goes down in value can don't look so good. [00:17:00] Um, you would, uh, as an investor sharing that loss with that home buyer buyer and that's why why this is very much not, um, debt is not loaning out money.
Speaker 1:This is a co-investing in the equity and the value of the home because it depends if the value goes up and goes down. There's not a dividend. It's not that the home buyer is not paying you rent on a regular basis. Um, that they, you know, cause the home buyer has responsibility, the mortgage already, if they've gotten with the bank, they already have payments, they're servicing that whole time that they're in the house. The time that you get paid [00:17:30] as an investor is in the future when the home is sold or refinanced. Okay. So it's um, I'm, if I'm the investor, I'm completely betting on the appreciation of the home. That's how I get my money. That's correct. Okay. And um, the, um, the assisting of the home purchase. So when landed, so when I asked you guys have on this, on your website, this question, how do we help?
Speaker 1:So the first step it says create community funds. [00:18:00] I think I understand that. Then number two is assist home purchases. So, um, that's when you were talking about half of a down payment would come from a, like a school teacher and half from the landed fund. Is that right? Yeah, exactly. So, and for those who are familiar with the home buying process, this will be old happen. I know a lot of people, including myself, when I started to really dig into what the process of home ownership entails, are buying home entails, don't always realize this, but [00:18:30] you know, there's a process of getting all the money that you need in order to buy a home. That's kind of what you need to figure out first. And that's where we sit in getting the money that you need to buy a home usually involves getting big loans or bank a mortgage.
Speaker 1:Um, in places like the bay area where home prices are so expensive, but even just generally to get the best rates for mortgage, to, um, make sure that, um, you're not having to pay for extra things like private insurance, etc. You want to try to get to 20 or 20% [00:19:00] down payment, which means a, just to make math really simple on a $1 million house, you need $200,000 up front. And that's just, that's just a, a hill, that's too steep decline for most people. So in this case, even though it's still a lot of money, if you're going to buy a million dollar house, you're, you're expecting a home buyer to save half of that down payments, $100,000 and Landon puts in the other a hundred thousand dollars that comes from one of those funds that's been capitalized or been filled [00:19:30] up by, um, a bunch of, uh, investors from the community who care about that community.
Speaker 1:And then once that money is, oh, sorry, then once that money is actually provided to the home buyer, so the home buyer can go to a real estate agent that we work with. They find a home that they really are excited about buying. They turn around, get the mortgage from the bank, buy the home and Bam, they're off to the races. Okay. Well, um, I have to ask then, cause I, for someone [00:20:00] who has bought a home before, I know that the biggest stumbling block is sometimes that other, the $800,000 that's coming from the bank and they have to feel comfortable about the, um, homeowners potential ability to pay that mortgage. And many times, you know, that 20% they're asking for is really just, uh, that, that they have the right kind of person. So how do they feel about this whole pro program or how do you get around them knowing that the, [00:20:30] this school teacher in this example we're kind of using is only giving 10% if we don't get around it.
Speaker 1:We, one of the most important players at the table for us is our banks who are willing to work with us. And that's a large part of also when we talked about trading this company in the early days, we started off just doing one off transaction between investors and home buyers was to prove out what this actual model looks like. So that, so that we could find banking partners and get banks comfortable with what we're working with. [00:21:00] Um, you are absolutely right. And one of the things that we want it, we always emphasize is we are not interested in putting people into home ownership that shouldn't afford home ownership. And we, we saw what happened, uh, around that, uh, most dramatically, uh, in 2008, 2009. And what's really important is making sure that people can afford, you can afford the home ownership. And so a big part of that is what you can afford on a monthly basis.
Speaker 1:What does your income look like compared to all of that standing debt that you have? And that's what [00:21:30] our banking partners look at. Um, when they first, the first one, the first thing they look at is to make sure someone can actually afford, I'm on a ship. And then they want to make sure that the person who's getting in the house has skin in the game, has, um, you know, enough invested in the home that they won't walk away if the market starts to change. And that's where at home prices, as expensive as they are in places like the bay area, um, banks are comfortable with, um, you know, looking at a home buyer that's putting in 10% of their own equity and saying that looks, you [00:22:00] know, that, that that's basically enough to to make that person feel committed to that property. And then by having another 10% put in by another entity like landed, that's great because that just means there's more equity, there's more money in the beginning in the home rather than it being a, a, a mortgage for 90% a mortgage that is covering the entire rest of the value of the home and no home buyer only puts in 10%.
Speaker 1:Instead. There's actually a whole lot more money as 10% [00:22:30] more in the house already. That's, that's um, that's equity and that for the bank makes them very comfortable to loan money because in the long run, um, that arrangement can withstand the ups and downs of the housing market more than if somebody took out a, a jumbo loan where they're putting down only 5% or 3% a to buy a home. Yeah. And I guess you guys are, you're almost underwriting it in some ways where you're, you, you're a very interested [00:23:00] and motivated to make sure that this home doesn't go into foreclosure or anything because you guys only get paid or the where the advisors only get paid if home a gets three into this are sold. So you got anchors. Yep. And so I guess you're providing more than just a 10% down payment. Sounds like you're providing an agent in banks that are unfamiliar with this.
Speaker 1:You kind of have an ecosystem around the transaction. Is that right? Can we got, yeah, we've got to create an ecosystem, make it work. Um, and that's the challenge of building a company in this space [00:23:30] is that it's not, um, just one player or, uh, one dimension plug and play. Um, there's a lot of, there's a lot of people who, uh, do have skin in the game in this transaction and we see ourselves as a coordinator that as an organizer of this, um, ecosystem so that it just works better for everyone, especially the home buyer. Okay. Yeah, we're talking to Alex Loft and he's the cofounder of landed in the San Francisco [00:24:00] based startup that's attacking the problem of an affordable home ownership in the bay area and urban centers beyond. Um, and so in this kind of central question you have on your website, how do we help?
Speaker 1:We talked about you first create community funds, then you assist the home purchases, and then this number three is make sure things go right. So, so it sounds like you stay kind of involved for a while. What does that mean? Where there, you know, we really see ourselves as a partner to the home buyer. So whether it [00:24:30] be questions around, uh, you know, after they've entered this arrangement and moved into house, they have questions about, well, what happens if I renovate the home or what happens if, uh, you know, some things changes, um, with my circumstances and I now have a lot more money than I thought I did. And I wanna I want to buy you out. I want to just be the sole owner or what do I do? Um, all those kinds of questions, whether it be related to this physical house and it changing or the arrangement that, [00:25:00] uh, the financial arrangement with us where, you know, we're there for, for the home buyer to, um, kind of be a concierge service to them to answer those questions.
Speaker 1:Um, but kind of come up with the best path forward are, you know, we, we ultimately will thrive as a company if we are a really good partner. So we don't, um, you know, cheat any of our, any of, uh, any of any either side of this transaction, whether it be the investor or the home buyer. And so, and, and that we've actually provided a really good [00:25:30] service to that home buyers in the house. So they feel confident in the process of, of being the kind of Stuart of the home. Well that's great. I can see so many different angles for you guys to help them with making decisions and renovations and what will help the value of the home more than other places. And I'm sure over time you guys will get lots of great data to be able to help people make really good decisions.
Speaker 1:So that's very exciting. Can you give us this, um, a little bit of sense of, uh, what's happened in this first year? [00:26:00] How many transactions have you done or investors interested in this? It's a little bit of a different type of model for investors. So how are you Howard? What kind of reception are you getting out there? Great question. So today, um, we've only done a handful of transactions that, uh, are anywhere from people who are in the process of putting out bids right now for homes to actually purchasing homes to get that experience, uh, of what, what the actual product is when you bring two people together around the house and an investor on a home buyer. [00:26:30] And it's only been about six months now that we're really been focused on partnering and Building Partnerships with Public School districts, independent schools, charter networks in the bay area, um, to, uh, just to help them, help their teachers stay in the area and recruit new ones, uh, by offering this benefit for their employees, for these teachers who in staff, members of these schools who want to stay here.
Speaker 1:And so right now we're, uh, about to launch with our first, um, five pilot, [00:27:00] um, pilot schools and those schools each have their own fund. So we have been, um, working with their communities to capitalize those funds. Those funds are ready to go to offer to teachers. Um, so this fall is a big one for us. And going from the process of starting a fund to providing the benefit to, to, uh, to our first home buying teachers. I needed those funds in Berkeley. Um, well one of the, one of the school, [00:27:30] uh, school networks we're working with has schools in Berkeley. So, uh, it's not with the Berkeley School district yet. Uh, but, but hopefully soon. Okay, great. And, um, how do people, if people listening want to understand what funds there are, aren't if they want to invest or are getting involved, how would they get involved?
Speaker 1:They'd check out, check out our website, landed.com, and that's where we're, we're, we're updating it on a regular basis. That's where, um, all the information will be, uh, about how to get ahold of [00:28:00] us. If you're interested, either as someone who is looking for a house and thinking about creative ways to, to afford it. If you're interested in supporting your community and you, um, you know, our accredited investor, that money to invest in, in your, in your neighborhood, that's great. And especially if you're a school or school district, um, employee or, or administrator who wants to help out your community, get a hold of us. Okay, great. And Alex, I always ask this last question of entrepreneurs like, [00:28:30] and we're speaking with Alex Lofton co-found over landed San Francisco based startup. Uh, this is the last question and it is, everything went totally right on your entrepreneurial journey, uh, over the next five years, where would you see landed be? What would, what would, what would it be doing five years from now?
Speaker 1:I really want to get to the point where this is just the default way people think about buying their first home. So if the millennial generation especially, but anybody who is a new home buyer is thinking [00:29:00] about how do I make that leap that I've been thinking about making myself in San Francisco but feel very little hope to do so, had landed to have that hope to move from a, from a renter today to an owner in the future and landed helps me get there. Uh, I'd be really proud. Okay, great. Well, a great vision from a great young entrepreneur. Really appreciate your time today, Alex. Um, and as I mentioned, we've been speaking to Alex last and he's the cofounder of landed. It's a San Francisco based startup trying to [00:29:30] solve the problem of the home ownership affordability issue in the bay area. Uh, you can check them out@alanded.com. My name is Eileen is our, I'm the host of method to the madness yarn, k, Alex Berkeley,
Speaker 2:90.7 FM. Thanks everybody for joining and have a great Friday.
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