When he was running a software outsourcing service in Ho Chi Minh City, Singaporean JunYuan Tan realized most of his engineers faced a common challenge: their path to home ownership was hardly smooth. Most of them were earning a couple thousand US dollars a month, a sum that was significantly higher than the local average salary, and yet they were struggling to purchase their own residences.
Home prices are extremely unaffordable in Vietnam, especially in major cities such as Ho Chi Minh City, which has a population of about 9 million. Research conducted by JLL Vietnam in the fourth quarter of 2019 shows that the average apartment price in Ho Chi Minh City reached a record high of nearly USD 2,900 per square meter, an increase of 78.2% year-on-year.
Without financial support from parents and relatives, most millennials rely on loans from banks, and the accompanying high mortgage rates, in their quests to own a home.
Tan saw an opportunity to build a company that could disrupt Vietnam’s nascent mortgage market.
Co-investing in your home
The idea crystallized when he joined the six-month startup generator Antler in Singapore in July 2019. At the program, Tan met his co-founder Phillip An, who had originally joined Antler to develop his idea of building a platform for fractional ownership of wines and other collectibles.
“We started working together from the first week, and Homebase was built from our desire to support millennials like ourselves to own a house. Essentially, it’s still about fractional ownership, but we believe that tackling the housing problem is so much more exciting,” Tan said.
Homebase applies technology and financing tools to provide customers with customized co-investment plans. In simple terms, Homebase buys a house together with the customer, who then pays rent to Homebase for the portion that the company owns. Meanwhile, the customer can take his time to save up money and purchase the rest of the property from Homebase, and transition fully to become a homeowner. The selling point here is that, after the transaction, the customer would have spent less money than if he took out a mortgage from a bank.
Tan said he was inspired to start Homebase by referencing rent-to-own startups in the US, such as Divvy Homes and ZeroDown, which have raised USD 180 million and USD 136 million in funding, respectively, according to data from Crunchbase.
Tackling Homebase’s first market: Vietnam
The mortgage rate in Vietnam runs at 7–11%. Homebase’s team, which now includes two additional co-founders from Vietnam, decided the country was a good place for them to start operating because of its rapid economic growth, thriving property market, and a growing demand for home ownership, especially among urban millennials.
According to Tan, Homebase has already raised an angel investment of USD 310,000, which included funds from one of Divvy Homes’ founders. This gave the team enough cash to commit to two property transactions in Vietnam so far. The startup claims that it can potentially generate USD 36,000 in revenue per property over a three-year period, yielding a 53% profit margin.
“Customers love Homebase because we are cheaper than the traditional mortgages,” said An. “Homebase gives you the option, but not the obligation to buy out the rest of the equity in your home.”
Tan said that the startup’s competitive advantage lies in the flexible financing options for its customers: Clients can rent the space on a three-year basis, then purchase additional equity during their residency or sell the property together and split the proceeds with Homebase. Technology enables the company to automate asset valuation, property management processes, and credit scoring.
“Real estate agents don’t co-invest in your house. Unlike them, we have the data and we put money where our mouth is. It’s our incentive to tell you to buy a property that is good for capital appreciation,” Tan said.
Future plans amid a pandemic
Homebase was one of the 14 startups to receive an investment from Antler this spring. Tan said the startup is looking to raise an additional USD 2 million, and is confident that they will hit the mark even as COVID-19 rips through Southeast Asia. Homebase is in discussions with banks in Vietnam to formulate partnerships and market the company’s service as an innovative financing scheme for home buyers in the country.
“Asset prices are starting to come down just as we’re entering the market. This means that we have the potential to come in at the perfect time to scoop up assets for cheap. When the market rebounds, we could reap very healthy returns,” he said.
This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.