Since the housing crisis in the late 2000s, real estate has continued to evolve rapidly which has only been accelerated by the impacts of the pandemic, further acting as a catalyst for change. Paired with developments in technology, which are lowering the barriers to home investment, it is also changing the way that people view investment as more and more opportunities arise.
Co-investment has been rising in practice due to the fact that the housing market continues its meteoric rise and prices are not being regulated, especially in North America. Between 2005 and 2014, homeownership rates dropped a total of 9% between those aged 24 to 32 in the US. According to official statistics, many of those who are unable to afford housing are riddled in student loan debt.
While many may dream of owning their own place, the truth is that it’s much cheaper to rent and to co-invest, especially since millennials are more likely to prefer urban areas where home prices are sky high. Furthermore, the costs of maintaining a house are often disregarded, resulting in 68 percent of millennials who are actually homeowners regretting their decision to purchase their home.
Traditionally, buying into real estate has meant purchasing the whole property outright and often taking on a large amount of debt to finance the purchase. This all-or-nothing approach prevented many from participating in real estate investing because of the high capital requirements for a down payment in order to qualify for a mortgage. Co-investing treats property investment more like how a company can issue shares to multiple investors, mitigating the need for saddling home buyers with high debt and allowing investors to participate with smaller amounts of capital – opening up the asset class to many who have been traditionally prevented from participating.
Recent reports also show that there has been a significant increase of institutional investors investing in the real estate market. Traditionally, institutional investors had an easy time managing their large funds thanks to beneficial interest rates across the entire spectrum of assets. However, after the plumet in interest rates that followed the peak of the Covid-19 pandemic, the investment landscape changed dramatically. Institutional investors were forced to find new places for stable yield — thus the move to real estate. Although the institutional investor presence in the global real estate market is most likely relatively small at this point, the upswing could make the market even less accessible for the lower and middle classes as inflation climbs even higher.
Christopher Saunders, self-made tech-entrepreneur and founder of Divisible Inc goes on to explain that “Crisis breeds change. We’ve undergone some major overhauls due to the global pandemic, people are now working from home, digitization continues to take the center stage, but wealth accumulation is still at the forefront of every industry and economy, and financial advisors have long pointed to investing as one of the best ways to generate passive income. We’ve lived through the crypto bubble and we’ve seen how receptive the public is to these micro investments. We firmly believe real estate co-investing is the next big thing to hit the market because it’s feasible, it’s practical, and it’s much more tangible than a virtual coin.”
The real estate market has long gone unchanged by modern technology with the industry holding on stubbornly to traditional ideals. “Modern real estate still largely revolves around secured loans, that we know as mortgages, which as a concept has existed unchanged for thousands of years,” says Saunders, “It is literally a multi-trillion dollar market, and one of the last big markets that has not been fundamentally changed by modern technology.” Along with his three co-founders, he discovered this phenomenon and they came together to found Divisible Inc. in order to increase efficiency in the real estate market and create a new system that isn’t dependent on debt products like fixed loans and mortgages.
With flexible financing options, more people will be able to convert their savings into investments. Instead of saving up a large amount of money for a down payment, co-investing lowers the burden of creating a lump sum to participate, and lets several smaller investors pool together their assets, which in turn lowers their entry barriers and creates new investment opportunities for those previously excluded.
“Through our digital platform and flexible financing options, we are working to make it as easy to access your home equity as it is to access your chequing account through online banking,” Saunders elaborates.
Prior to joining the real estate and investing sector, Saunders originally worked with smartphone maker BlackBerry on their software development, namely BlackBerry Messenger, which many modern messengers were based on. He was also an app developer, long before smartphone apps became mainstream. As the app industry developed, Saunders took on the role of consultant to advise and support app developers. As the industry evolved, Saunders discovered that he needed in-depth business training and earned an MBA to solidify his own skills. This led him to eventually put all his knowledge and expertise into practice, and Divisible Inc was born.
“We have an entire generation of potential homeowners who are unable to afford housing. Divisible is building fractional real estate products to help people get into homes by providing down payment assistance, stay in the homes they have by releasing equity without debt or repayment, and allowing anyone to invest into real estate in far more accessible amounts than traditionally available.”
The company strives to create lower entry barriers through co-investing, which will increase purchasing power with younger generations. It is thought to be the future of investing, especially for newly graduated employees with a lower income or net worth. By giving opportunities to everyone, it will in turn build a much more sustainable economy in which no one is left behind.
The Divisible team is constantly working on improvements to the platform, and they are hoping to connect with other techies and engineers who are interested in participating in the success of this cutting edge company. If this sounds like the right fit for you, then reach out to Chris directly on Twitter.