House hunters who feel like the combination of high prices and surging interest rates will freeze them out of the market may have a crack of daylight on the horizon thanks to a new startup.
ROAM is a real estate startup that offers for-sale homes that are financed with assumable loans. This could increase buying power for potential buyers and help homeowners sell their properties even more quickly.
ROAM is not currently open for crowdfunding investments but there are startups open for investment on various platforms.
Jurny is an AI-powered property management platform for streamlining every aspect of hotel, short-term rental and Airbnb operations. Airbnb was worth $47 billion at IPO and this startup is automating the trillion-dollar hospitality market in hopes of putting Airbnb hosting on autopilot.
What Is An Assumable Loan?
In certain financing or mortgage contracts, the loan securing the property is assumable, meaning a new borrower can come in and "assume" responsibility for the loan and then be the full owner of the secured property once the loan is paid off. In essence, it allows the original borrower/property owner to transfer their mortgage to another party while keeping the original terms, most importantly the interest rate, in place.
That means, for example, a seller who financed a property with an assumable loan 10 years ago with a 3% fixed interest rate has an especially hot commodity in a market where a new loan would likely be over 7%. On the buy side, being able to purchase a property with an interest rate less than half of the current rate is also an ideal scenario.
Making it easier for these two parties to connect could prove to be a lucrative business model for Roam. Although it sounds like an ideal scenario for buyers and sellers, obstacles remain.
Potential Obstacles
With interest rates hovering between 7% and 7.5%, it's not hard to see the appeal of assuming a loan for half of that is a tantalizing proposition. You may not have heard of assumable loans for a reason: They are not common in the single-family residential sector. A majority of conventional mortgages are not assumable, while assumable loans will require lender approval.
The borrower looking to assume the loan must be at least as creditworthy as the original borrower. Otherwise, the bank won't approve the deal and the purchase is off — at least on the original loan terms. Now that lending standards have tightened, lender approval for a loan assumption may prove to be more difficult than it would have been five or 10 years ago. So, buyers must keep all this in mind.
ROAM Could Be A Winner For Buyers, Sellers And Early Investors
Even though a majority of home loans are not assumable, that still leaves millions of potentially assumable loans available for would-be buyers. It also leaves millions of potential home sellers holding a potentially desirable value-add to their home sale. If ROAM is successful in connecting these groups, it could quickly be facilitating hundreds of millions of dollars in transactions annually.
That would be a winning situation not just for the buyers and sellers who connect through ROAM but for the original investors as well. Even if you're not looking to buy or sell a home, this is a startup to keep an eye on if you're an investor looking for new opportunities. It's startups like this that make this investment sector so exciting.
Roam Is Just One Of The Numerous Startup Opportunities
For the early part of its history, startup investing was a closed loop that offered its benefits to a small network of venture capitalists, fund managers and people in their social circles. By the time Alphabet Inc. and Meta Platforms Inc. made their initial public offerings (IPOs), connected investors had already made tens of millions of dollars while retail investors were stuck waiting in line. The Jumpstart Our Businesses and Startups Act was passed to level that playing field to some degree.
It allows companies to raise funds through equity crowdfunding, which is when startups offer future equity in exchange for investor capital. Unlike traditional venture capital investing, many equity crowdfunding offerings are open to nonaccredited investors for buy-ins as low as a few hundred dollars. You can find equity crowdfunding opportunities on platforms like StartEngine and Wefunder. Investment opportunities abound on those platforms in every sector, including:
- Real estate
- Pharmaceuticals
- Email, social media, and marketing
- Biotech
- Robotics
- Artificial intelligence (AI)
If startup investing sounds like something you would like to get into, you have many options to choose from. You can start building your own portfolio today. Bear in mind that the high potential upside of startup investing goes hand in hand with the elevated risk of loss of principle. These are new companies, and many may not be successful.
With that in mind, equity crowdfunding offerings may not be the best bet to build your entire portfolio around. However, the low buy-ins and high upside make them great potential add-ons for investors with robust portfolios who are looking to diversify into more lucrative markets or alternative investments.
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