New Alt. Equity Company Compares Sale Leasebacks to Reverse Mortgages

A New York, N.Y.-based alternative equity-tapping company has highlighted its new sale leaseback offering by comparing it to the way a reverse mortgage works, saying that it offers seniors an additional option for those who are looking to tap into their home’s equity while also remaining in the home without taking on additional debt.

The company, Truehold, announced the launch of its sale leaseback program earlier in 2021 and offered that its product can expand the ability for more seniors to age in place, according to Nick Machesney, its vice president of product and experience in an interview with McKnight’s Senior Living.

“Where a reverse mortgage is essentially a loan, using the home as collateral, the leaseback is not a loan, it’s not a debt,” Machesney told the outlet. “The benefit compared to a reverse mortgage is, one, you get 100% of your home equity out, where a reverse mortgage is generally in the 40-to-60% range, because the rest of the equity escaped and [is] held as debt. You’ve got more financial freedom.”

Once the home is no longer needed, it is leased to other older adults or sold by the company, he explained. While McKnights and Truehold seem to see this as a new comparison to reverse mortgage offerings, other firms with sale leasebacks have generally taken slightly different approaches when interacting directly or indirectly with reverse mortgage companies.

Late last year at RMD’s inaugural event HEQ: The Future of Home Equity in Retirement, Jeffrey Glass, CEO of alternative equity company Hometap — which specializes in shared equity investments — described the relationship his organization has with the reverse mortgage industry as potentially complementary as opposed to directly competitive.

“[Ours] is quite an adjacent product. The way I think about it is while they share a very similar, high-level goal of helping a homeowner see cash without having to make monthly payments, home equity investments are really quite different,” Glass says. “I think it’s important to understand that typically, it’s a lump sum payment that happens upfront. There’s no interest rate. And in fact, the ultimate settlement with the company is based on the future value of the home.”

Like reverse mortgages, many alternative equity tapping companies come with many of the same educational concerns since borrowers are not nearly as aware of options like sale leasebacks or equity investments compared with traditional financing, and even reverse mortgages. This was expounded upon by Jarred Kessler, CEO of EasyKnock, which offers sale leasebacks.

“I think [a sale leaseback] is a much easier product to understand [than a reverse mortgage],” Kessler told RMD in 2020. “We’re buying your home, you pay us this rent, and this is what you get at the end. So it’s not as complicated, it’s pretty straightforward to understand. But, the brand awareness and the trust factor is more challenging because people may have not heard about it before.”

Other alternative equity tapping companies have more directly taken aim at reverse mortgages in advertising materials with the intention of pointing out the difference between debt-based solutions and these other options.

Read the article at McKnight’s Senior Living.

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