Dealflow | September 19, 2019

Patch Homes raises $5 million for debt-free home refinancing

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, September 19 – Ten years in finance exposed Sahil Gupta to average Americans’ financial woes. “Everyone wants to invest for retirement and have a nest egg, but the average person is struggling to make their mortgage payments and pay down debt,” Gupta told ImpactAlpha.

Gupta launched Patch Homes to help people access cash when they need it by tapping into their home equity. But instead of offering home equity lines of credit or second mortgages, Patch offers a debt-free option: it takes an equity stake in customers’ homes.

The company has raised a $5 million equity round from Union Square Ventures, Tribe Capital Techstars Ventures, Breega Capital, and Greg Schroy.

Gupta built Patch’s model around the structure his father used to buy their family home in India in 1982. “My father believes in taking on no debt. He has never taken out a loan in his life. So when he was building our family home in Delhi, he asked my uncle to co-invest in our house,” he explained. Thirty years later, that home is still in the family.

Patch also sees itself as a long-term partner that supports homeowners as they weather cashflow needs and life changes. Its equity model is limited to 10 years, however, with a maximum deal size of $250,000.

Patch recoups its investment (plus its cut of the home value appreciation) either through a payout or when the home is sold. If a home depreciates, Patch takes a loss.

Since launching in 2016, the company has expanded into 11 metro areas and underwritten homes worth $3.5 billion in total. It is capitalized by real estate private equity firm Patch Capital Partners (no relation).