CoQuity.com seeks to revolutionize the housing and real estate industry. One of the biggest problems in this industry is the Affordable Housing Crisis, which is a lack of millions of affordable housing units in the United States and all over the world. Our mission statement is to “Help Households Build Generational Wealth.” And we will solve the affordably housing crisis by providing a service for renters that allows them to earn equity with each housing payment and converting them into buyers. We will do this by providing communication, legal, and financing assistance, through technology, to ease the process of forming and running a co-operative housing. Furthermore, co-operative (co-op) housing is defined as a legal structure where a group of people come together to purchase a multi-family housing complex, and each household pays for and owns a share of the building complex, instead of an individual housing unit (like condominiums). Hence, the name CoQuity.com, deriving from two terms: co-operative housing and real estate equity.

The Department of Housing and Urban Development (HUD) defines affordably housing as housing costs, specifically rent, that does not exceed 30 percent of a household income. But when I started a construction company in the Summer of 2020 to tackle the Affordably Housing Crisis head on, this venture helped me gain first-hand experience of the construction and housing industry. Learning more about the system of housing, I realized (in a simplified scale) that landlords calculate rent by 1.) buying a piece of housing real-estate on a mortgage 2.) making the tenants pay rent 3.) use this rent to pay the principal and interest for the mortgage and 4.) earning equity on the housing real-estate as each month passes by. This system is a win-lose system where the landlords win, and the tenants lose.

Therefore, the solution for the Affordably Housing Crisis should not be aimed at decreasing the cost of rent because, every month, tenants will continue to throw away 30 percent (or more) of their income for rent and never see that money again. Rather, the solution should be aimed at helping families capture some value in equity through each payment that they make for housing. CoQuity.com will create a new system where 1.) the mortgage is used to buy a multi-family co-op housing complex 2.) the equity of the property goes to the members of the co-op 3.) the members pay for the co-op housing costs plus an extra service fee (which is what we will charge for our services) and 4.) we will use these housings costs to pay for the principal and interest on the mortgage and other costs (property taxes, insurance, utilities, etc.). In this new system, every stakeholder wins. The following image displays the new system.

We are currently living in the brink of not the third but fourth industrial revolution, which is the “digitization of every single industry in the planet” (Robert F. Smith, Vista Equity Partners). Examples of this revolution includes Amazon that digitized the retail industry, Uber that digitized the transportation industry, and Airbnb that digitized the hospitality and tourism industry. All these companies fall under the label “online marketplace companies.”

CoQuity.com will digitize the housing market by serving as an online marketplace company for co-operative housing. In this online marketplace, we will unite 1.) renters that want to become owners through co-op housing 2.) mortgage lenders that want to mitigate the risk on their mortgage loan investments and 3.) real estate vendors that build and/or sell multi-family housing complexes. On our website, renters will be able to fill out a survey to sign up and join a waitlist to join a co-op. If accepted, new members in the co-op can view, access, and sign legal documents/contracts. After all the legal paperwork if filled out, the co-op members can link their bank accounts to the website to allow us to automatically withdraw money for monthly housing payments. Finally, with each housing payments, the co-op members can track how much money is going to principle (or equity), interest, property taxes, utilities, service fees, etc. Mortgage lenders can access our website to view relevant and accurate information of co-ops and co-op members to aid them in their decision process to finance a co-op. Lastly, real estate vendor will be able to list their properties for sale.

Additionally, CoQuity.com will manage risk for the mortgage lenders and members of the co-operative housing by dealing with late housing payments by charging a fee or decreasing the equity stake of co-op members. And, by facilitating the sale of equity shares in the co-op when members decide to move out (similar to how the stock market facilitates the sale of shares).

During the Fall Semester of 2019, I conducted some primary market research by conducting a survey. The survey included 69 participants and the demographics of the participants are as follows; Gender: 58% females and 42% males, Race and Ethnicity: 49% Latinos, 24% White, 13% Asian/Pacific Islander, 10% Black, and 4% Native American, Age: Average age of 18 years old, Age ranges from 15-21 years old, Socioeconomic Class: 38% lower, 58% middle, and 4% upper. The main insights from the survey can be observed in the following two graphs. With the first graph, we can see that most households that are buying are living in single family homes such as houses and trailer homes, and most of the renters are in multi-family housing like apartments, townhomes, duplexes, trailer homes, and houses too. With the second graph, we can see that most participants want to buy instead of rent (93%) and they also prefer the housing form of houses (85%) above all other forms. However, I hypothesize that they are do not desire the form of a house, but its connotation of ownership.

Our biggest competitors are landlords, institutional investors, and public housing. Our target market are renters, specifically the people most marginalized in housing: single parents, elderly, veterans, and racial/ethnic minorities. In the United States, there were 43 million renters in the year 2019 and the average rent was $784 per month. If 93 percent of renters are looking to buy (according to the survey), we can multiply 43 million by 93% and then multiply by an average rent of $784 then multiply that by 12 (for twelve months in a year), and we get a total number of $376 billion in total rent each year. If our services charge a fee of 5 percent of rent (assuming this will be the average monthly co-op housing costs), the Total Addressable Market per year calculates to $18.8 Billion. Our competitive advantage is that we are early digitizers in the industry of housing and co-operatives, allowing us to catch the wave and get a head start from future competitors.

Since this business model is new and disruptive, CoQuity.com will have to do things that do not scale when we first launch. The three main goals for our sales strategy would be to 1.) clearly communicate the functions of our online marketplace to target market and have them sign up for the waitlist 2.) build personal relationships with mortgage lenders to finance the first co-ops and 3.) earn the trust of real estate vendors to acquire the first co-ops. The first goal can be accomplished by knocking door-to-door at apartment complexes where people rent, and verbally explain the function of our business and have them sign up if they are interested. The second goal can be achieved by meeting with a loan officers and getting approved (through me or another co-founder) for a mortgage on a single-family home. The third goal can be achieved by talking to a realtor and connecting with a vendor through them. The first co-op will be a “single-family” house where single or couple (with no kids) co-op member(s) living in each room and share the kitchen, bathrooms and living rooms. However, as the general public learns to understand our business, mortgage lenders realize the low risk of financing our co-ops, and real estate vendors feel confident to list their properties with us, we will be able to scale bigger into multi-family complexes and move the process entirely online through our website. We want to grow organically.

Our revenue model is based on three different cashflows: Service Fees, Closing Costs, and Interest. Service fees will be based on monthly housing costs and will be a flat monthly rate of 5 percent. Closing costs include the cost to process and close the sale of real estate from vendors to co-op members and mortgage lenders. Additionally, we will charge a closing cost for co-op members on the sale of their equity share if they decide to move out. For both real estate vendors and co-op members vendors, there is a one-time flat rate commission fee of 3 percent. Cashflows from interests will be specific to real estate vendors who decide to list and sell their property with ordinary annuity payments (instead of a cash buyout). This method will charge 5 percent of the interest rate. For example, if the real estate vendor sells their property on a 30 year, 3.5 percent annual percentage rate (APR), monthly ordinary annuity payments, we will receive monthly interest revenues on 0.175 percent APR (3.5*0.05=0.175) of the 3.5 percent APR over the course of 30 years (or the length of the annuity).