From left: Will Smith, Landis’ Cyril Berdugo and Tom Petit, Jay-Z (Getty, Landis)
Will Smith and a company backed by Jay-Z are betting on a startup that seeks to make homeownership easier to obtain.
Will Smith’s Dreamers VC and a company backed by Jay-Z’s Roc Nation participated in a $165 million capital raise for Landis, which seeks to help renters become owners. The funding round was led by venture capital firm Sequoia Capital and included debt and Series A equity financing.
Landis has now raised $182 million since its founding in 2018. Led by Cyril Berdugo and Tom Petit, the startup seeks to help aspirational homeowners purchase a home through its technology platform.
The company will often work with someone who cannot secure a mortgage because of bad credit or the inability to come up with a down payment, according to Petit. Landis will use its technology to determine whether the aspiring homebuyer can afford to qualify for a mortgage in the next 12 to 24 months. If they can, Landis will rent the customer the property and provide a coach to help the client secure the mortgage.
The goal is for the resident to start paying a mortgage instead of rent.
“People get really attached to the house, so they redouble the efforts to get that mortgage,” said Petit, explaining the premise of the business plan.
Berdugo said the platform has no upfront costs for participants and aims to not collect rent for long.
“We are not a landlord, we are a homeownership program,” said Berdugo. “We do not want to be perceived as a single-family rental fund.”
Landis’s capital raise comes at a time when institutional investors are betting that renting is an increasingly preferred option. Billions of dollars are being poured into the single-family rental space with institutional investors such as Blackstone and KKR are acquiring and building new homes to rent out.
The sector, however, has come under criticism over concerns that single-family rental operators have higher eviction rates than mom-and-pop landlords.
Renting makes sense for Americans who might not be in a home for enough years to justify the closing costs on a sale, or who are at risk of losing the home to foreclosure.
Petit, for one, is a believer that homeownership is superior for the majority.
“For most of America, homeownership is a better option and we want to make sure no one is left out of that,” said Petit.
Research on this topic is mixed. One recent study by LendingTree found that median housing costs were lower for renters than homeowners with a mortgage in all 50 of the largest U.S. metro areas.
But studies have also found that homeowners build more net worth over time.
Landis has been able to attract some big-name investors, including the actor Will Smith, whose venture capital fund, Dreamers VC, looks to invest in startups that address social problems.
“Landis is an innovative company that also has a social mission we are aligned with,” Smith said in a statement. “We are excited to be part of a journey that helps Americans achieve homeownership through financial education.”
Landis also said investors include some fintech founders, such as those of Plaid, Cash App and Ethos. The founders of Instacart, Front, Flatiron Health and Tango joined the funding round as well.
Investment has poured into proptech, where companies are seeking to modernize tech-averse real estate sectors such as construction, mortgages, title insurance and home buying. While some proptech companies have launched IPOs, others have failed spectacularly, most recently Katerra, a SoftBank-backed company that sought to streamline the building process but ultimately filed for Chapter 11 bankruptcy in June.