HomeSlice Berkeley 2016

1. First.. A quick video

2. HomeSlice
• Primary homes
• Peer-to-peer financing
• Mortgage brokering service
We talked to 101 people!
Making real estate more
accessible through
fractional ownership
• Investment properties
• Lender financing
• End-to-end home-buying solution
Making real estate more
accessible through
fractional ownership
A $518B market

3. The Team
Anna Roumiantseva
Product
Anne Ready
Marketing
PJ O’Neil
Finance
Raj Agrawal
Tech
The Mentors
Rick Lazansky
Mike Olson
Lev Mass

4. You saw how we pivoted to focusing on investment
properties…
…but there was a lot more to our journey than
that.

5. Week 1: To be in real estate, you need to know
something about real estate?
• What the home-buying process looked like
• How mortgage underwriting worked
• Who the key players were
• Where the money was made in the real estate
industry
• What do we even really mean by a fractional
mortgage

6. This market is highly regulated and has more than 2
sides.. And they’re each motivated in different ways!
Mortgage Title of House
Loan
Servicer
Lender
Institutional
Investor
Real Estate
Agents Sellers
+ Mortgage brokers
+ Title companies
+ Lawyers
+ Appraisers
+…

7. Starting Business Model Canvas

8. Starting Business Model Canvas

9. Customers are interested…
Not interested: 8%
Definitely Interested:
22%
Potentially interested:
70%
We asked over 100 customers.. how interested are
you in using HomeSlice?

10. …So why don’t they do this today?
Our first MVP was a card sort to get potential
buyers to show us what their biggest barriers
are today to shared home ownership
4.2 3.9 3.8 3.2 2.8
Liability in case of co-
owner default
Finding a reliable co-
owner
I won't be able to exit
when I want
Structuring co-owner
agreement is a
hassle/awkward
Difficult to find a
property everyone
likes
Where we focused
much of our energy
Upcoming MVP:
Co-owner
Matchmaking
Upcoming MVP:
Secondary
Marketplace
Q. Rank the following concerns about co-
ownership in order of importance to you, 6
being most important

11. Additionally, concerns about co-owner agreements
dominated customer feedback
“I've always talked about co-owning a property with friends
from high school and college. This is a great idea! … The only
downside, from my perspective, is that people have different
personalities and preferences and sometimes they have
struggled when deciding what to do in terms of
remodeling or improving certain things on the house.”
-C. Toscana-Rodriguez, Haas MBA 2017

12. So we made a second MVP….
We Learned:
Helping users understand and decide on all of the
necessary details of co-ownership provides significant
value when pursuing real estate investments via LLC.
“It was incredibly difficult for us to draft our
co-ownership agreement until we brought
in expert advice. We also didn’t initially
have the right connections to lenders – a
platform like this would have been a big
help.”
-Victoria Volkar, Haas EWMBA 2018

13. Customer Archetype
Millennials:
People aged 25-34 who
haven’t owned real estate
before...
Investment
Properties:
…seeking hands-on
real estate
investments…
$
Coastal / Expensive
Cities:
…in popular cities with
high rent to income
ratios

14. Moving on to the second side of our market, we
considered several possible types of lenders
Peer-to-Peer Institutional Investors Traditional Lenders

15. Working with traditional lenders made it difficult to maintain our
customer value proposition
1. No lender will deal with a
fractional default
1. Separate mortgages for each co-
owner
2. Individuals are each guarantors for
themselves
3. New mortgage product
3. Banks like things they
recognize
2. They want guarantors on
the mortgage
1. One mortgage for the home, under an
LLC
2. HomeSlice as guarantor, backed by
Private Equity firm or Institutional Investor
3. Mortgage under LLCs have existed for a
long time
Our initial MVP: what we thought.
What we learned.
How we pivoted: our new MVP.

16. With our new MVP, institutional investors want in!
Investors are excited about the opportunity to
invest in real estate in new ways and see
multiple ways to partner
• Acting as the guarantor to HomeSlice
mortgages so that individual buyers don’t
have to
• Buying out slices when owners choose to
sell them off (or default)

17. Value proposition iterations flow through the BMC

18. What the final product looks like TODAY

19. HomeSlice removes barriers for borrowers…
Effortless process to
align with co-owners on
purchase and
management terms
1.
Legal structure to allow
sales of home slices
2.
Roadmap to manage
potential default of
co-owners
3.

20. One
home
One single
mortgage
for the
entire
property
…while keeping things the same for lenders (while
opening up a new market!)
Lender
underwrites
loan
Institutional
investor holds
the paper

21. HomeSlice makes money during origination and upon monthly
mortgage repayment
Buyers
Lender
2.5% fee to borrowers over 6 years
$3.5K total
Downpayment & Monthly Repayments
Loan
0.5% origination fee to both lender &
borrowers = $4K total
$7,500 LTV for borrowers over 6 years
(>50% realized immediately)
Potential for many other value-added services to generate extra revenue
$1000 CAC

22. The potential is huge…
* Based on median home price by city and 80% loan-to-value ratio
Top 10 US metro areas
25-34 yrs old
53-77% below income
threshold to afford to
own
50% would want
to own if they
could
3M People
$518B
Lending Opportunity
People Who Want
To Buy But Can’t*

23. …but we need to act fast
$8M Series A investment by
a16z in Sept 2016!
New player coming in (Seattle):

24. Immediate Next Steps
• Continue to build out a front-end website
• Model out return profile for institutional investors /
initial financing partners
• Complete our first beta transactions for a batch of
customers

25. HomeSlice is democratizing home ownership.
We invite you to join us!
Thanks to: Mentors, Classmates, Teaching Team

26. Appendix

27. Our third MVP was centered around the details of default
mitigation, a sticking point for VCs, PEs, and lenders

28. Big Idea #2 – Co-Owners Need Babysitting
Our second MVP was centered around
the user interface with our platform to
understand how we can best deliver
value to them
We Learned:
Aligning with co-buyers on purchase and maintenance terms is a HUGE pain point currently standing in the way
of shared ownership.
If borrowers can’t figure this piece out, they won’t want to co-purchase homes (even with no cross-party liability)
We Did:
Made this a key value-add of our platform and brought it to the forefront of the interface

29. Big Idea #4 – It Needs To Be Personal
We learned that lenders always
require a personal guarantor on a
residential mortgage who can
demonstrate that he/she is capable of
paying it back (even for LLCs)
BUT…talked to PE lenders and figured out a
way to make HomeSlice the guarantor
PE firms are looking for new investment
opportunities in real estate and may be
interested in providing bridge financing for
HS backed mortgages or contributing
capital for HomeSlice buy-outs of defaulting
slices

30. Big Idea #5
Investment property use case is easier for people to swallow – even
Millennials (69% of people surveyed were interested vs. 34% for primary
residence)

31. Customer Segments
• Millennials aged 25-34 who haven’t
owned a home before and are
looking to build their assets
• Family members of first-time home
buyers
• Couples who aren’t married but
want to live together and build
their assets
• CMO investors looking for new
opportunities
• Low-income individuals who
qualify for an FHA loan
• House-rich, cash-poor baby
boomers
KEY LEARNINGS
• Many Millennials have family members who could
help with the purchase, but the lack of system to
make it a “real investment” stops them from
asking
• Low-income segments bring a flurry of additional
challenges and are a hard place to focus initially
• There are already lots of solutions available for
people who want to cash out home equity

32. Value Proposition
• Catalyzing first-time home purchases
• Increasing access to income-generating
investment properties
• Taking the counter-party risk out of
shared ownership
• Facilitating the drafting of legal
documents for shared ownership (co-
owner agreement, LLC docs)
• Understanding the financial benefits of
renting vs. buying
• Increasing liquidity of RE investments
• Cashing out of real estate investments
without refinancing
• Enabling the shared purchase of vacation
homes
• Using peer to peer lending to facilitate
home ownership
KEY LEARNINGS
• HomeSlice can make home ownership seem cool again to
Millennials (“won’t have to move to Orinda to buy”)
• Investment property use case is easier for people to
swallow – even Millennials (69% of people surveyed were
interested vs. 34% for primary residence)
• HomeSlice can deliver maximum value if it reduces
counter-party risk for borrowers while keeping things
status quo for lenders (single property = single mortgage)
• Agreeing on terms of property ownership and
management is a HUGE pain point for co-owners

33. Status Quo Process for the Lenders
One home
Lender underwrites loan
Institutional investor holds the
paper
One single
mortgage for the
entire property
BENEFITS:
• Access to a new market of buyers
• No additional complexity of tracking and managing payments

34. Less Complexity and Risk for the Borrowers
BENEFITS:
• Reduced financial hurdle of a first home purchase to start building assets
• Reduced counter-party default risk
• Reduced legal and tax complexity of shared ownership (e.g. co-owner agreement)
Legal structure to allow
sales of home slices:
Measures to manage counter-
party default risk:
• Mortgage insurance provides a 6-month
window to avoid foreclosure
1. Other slice owners have first rights
to buying the default slice
2. New owner buys default slice
3. Entire property is sold

35. Channels
• Direct to Customer
• Real Estate Agents
• Banks (mortgage lenders)
• Large companies via financial
wellness programs
• Mortgage Brokers
KEY LEARNINGS
• Real estate agents really function as gate keepers
to the industry (via their relationships with
sellers), it will be important to work with them
from the beginning
• Banks can’t be incentivized to use HomeSlice, and
they’re very traditional – selling through them isn’t
really feasible, but they may provide a way to
target individuals who didn’t qualify for a full
mortgage
• Similarly mortgage brokers can’t be incentivized,
and we’re in a slightly competitive position to
them

36. Customer Relationships
• Educator – when & how to buy
• Simple, easy to understand, one
stop shop for fractional mortgages
• Social impact – enabling home
ownership
• Real estate broker replacement
• Underwriter
• Legal advisor
• Fully vertically integrated bank
KEY LEARNINGS
• There’s a lot of discrepancy in what individuals
know about the financial trade-offs of buying
homes and a lot of opportunity to help them
through the process
• Whether we focus on investment properties or
primary homes, our basic motivation is to enable
home ownership (& this resonates with investors
too!)
• Underwriting and legal advising imply significant
costs & difficulties, with ambiguous benefits – we
need to explore these more

37. Key Partners
• Lenders (mortgage providers)
• Private Equity / Institutional
Investors
• Real estate brokers
• Loan servicers
• Property developers
• Insurance companies
• Mortgage brokers
KEY LEARNINGS
• Need debt financing to do this at any sort of scale,
which means playing within the existing
ecosystem
• TICs have been top-performing loans for lenders
(~0% default rates, even during housing crisis)
• PE firms are looking for new investment
opportunities in real estate and may be
interested in providing bridge financing for HS
backed mortgages or contributing capital for
HomeSlice buy-outs of defaulting slices

38. Petal Diagram
We Are Not Alone But We Have a New Angle
In addition to the diagram,
HomeSlice also competes with
other investment alternatives,
ranging from REITs to Wealth
Management companies

39. Key Activities & Resources
• Customer service
• Legal & tax support
• Mortgage brokerage
• Payment collection & processing
• Software dev
• Marketing & growth
• Biz dev
• Realtor
KEY LEARNINGS
• We projected that launching the ‘whole enchilada’
would cost us about $1M a year in expenses in
our first year of full operation..
• However, we think that hacking the process really
requires very little besides up-front capital to
qualify HomeSlice for guarantor-ship and
strategic partnerships with a willing law firm & a
bank

40. Monthly
Mortgage payment
+ 2.5% processing
+1.0% insurance premium
Previous Owner Real Estate
Agents (buyer &
seller side)
Or other institutional
investors, accessed
through a loan servicer
Or other lender
Cash Flow Diagram:
Up-Front:
20% of down payment
+ 6% Realtor Fees
+1.5% Closing Fee for bank
+ .5% Closing Fee for HS
Up-Front:
.5% origination fee for HS
Up-Front
100% of home
+6% Closing Fee
Monthly
Mortgage payment
Up-Front
1.5% Closing Fee

41. Revenue Structure
• Upfront borrower fees
• Upfront origination fee (paid by
banks)
• Ongoing mortgage payment fees
• Refinancing origination fee
• Mortgage insurance premiums
• Value added service sales
• Real estate brokerage commission
KEY LEARNINGS
• Large fees are assessed upon closing of a property – there
is opportunity to add fees at this point in the transaction
• HomeSlice can function as a mortgage broker and collect
fees in the same fashion
• There are many regulations surrounding loan servicers. It
is still TBD if HomeSlice would serve this role or partner
with an established loan servicing provider.
• While it may be necessary for HomeSlice to play the role
of real estate agent, we will limit our ability to scale if we
play that role indefinitely. Playing this role will also limit
our ability to partner with agents locally.

42. Cost Structure
• Customer Service
• Mortgage Brokerage
• Software Development
• Marketing & Growth / Biz Dez
• Payment Collection & Processing
• Legal and Tax Support
• Real Estate Brokerage
KEY LEARNINGS
• Once we have developed a LLC and co-owner
template, we likely do not need to have many legal
resources on staff, as any disagreements on the
legal documents are resolved between co-owners,
not owners and HomeSlice
• We likely do not need to build real estate brokerage
resources, as much of that will be outsourced to
realtor partners
• Many of these costs can be “hacked” in Years 0 and
1 as we manually close real estate deals

43. Buyer Economics
Buying with HomeSlice is 15% CHEAPER than Renting
• Shorter duration
• Higher
mortgage rate
• Higher closing
costs

44. TAM - Latent Demand
People Who Want To Buy But Can’t Top 10 US metro areas
25-34 yrs old
53-77% below
income threshold to
afford to own
50% would want to
own if they could
3M people
$518B
lending
opportunity
* Based on median home price by city and 80% loan-to-value ratio

45. We Iterated A Lot On Our Business Model

46. Final Canvas
Millennials aged
25-34 who haven’t
owned a home
before and are
looking to build
their assets
Catalyzing first-time
home purchases
Increasing access to
income-generating
investment properties
Removing counter-party
risk from shared
ownership
Facilitating the drafting
of legal documents for
shared ownership (co-
owner agreement, LLC
docs)
Educator – when & how
to buy
Simple, easy to
understand, one stop
shop for fractional
mortgages
Direct to
Customer
Real Estate
Agents
Customer service
Legal & tax support
Mortgage brokerage
Payment collection &
processing
Software dev
Marketing & growth
Business development
Lenders (mortgage
providers)
Private Equity /
Institutional
Investors
Real estate brokers
Loan servicers
Platform
PE funding to allow
HomeSlice to “back” the
mortgages
Marketing (direct & PR) & growth
Customer service
Software development
SG&A
Closing cost fee (buyer)
Origination fee (lender)

47. Immediate Next Steps
• Model out return profile for institutional investors /
initial financing partners
• Understand legal implications of HomeSlice being on
mortgage and LLC being on title
• Continue to pitch to lenders, need a lender partner
• Build a functioning front-end website

48. Expansion Roadmap
Highest population density
+
Highest real estate prices
=
Biggest concentration of users who can’t
currently afford to buy