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Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

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Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#81

Post by DoreenMichele »

SOMA_BOFH wrote: post #80
DoreenMichele wrote: post #77

Earlier quoted context omitted.

And then it goes on to say: to make sure we can pay you back we buy financial instruments on the open market, kind of like buying a stock of apple for example. These instruments work in a very interesting way. Their prices go up, if the real estate market goes down. Their prices go down, if the real estate market goes up. So, with these instruments. We can ensure that in the event of a recession, we can still afford…

> Their prices go up, if the real estate market goes down. Hopefully they provide more detail here. I'm old enough to remember 2008 and recall many financial instruments with a traditionally inverse correlation to each other behaving unexpectedly. Similar unexpected behavior led to the LTCM crisis in 1998.

My father -- born in 1922, grew up in The Great Depression -- always said "The best way to double your money is fold it in half and stick it in your pocket."

There are no guarantees in life (except maybe death and taxes). They seem to be taking reasonable precautions. They don't deserve to be lambasted for being a bit green and failing to phrase their comment like smarmy con artists pretending there is zero risk -- just trust me (wide, toothy grin).

Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#82

Post by jedberg »

Pretty cool concept! You're basically letting people buy into your real estate hedge fund. :)

Something I didn't see addressed in the FAQ: Do I get to include closing costs and agent fees in my cost basis before determining your 20% cut?

If not I can see a case where appreciation was minimal and I actually lose money one you get your cut because those fees eat up all the appreciation.

Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#83

Post by jedberg »

loftyai wrote: post #74
SimianLogic2 wrote: post #52

Earlier quoted context omitted.

I did. We were out-of-towners at the time, so I would use that to build a strike list of 10-20 properties. We would fly in and do as many visits as we could schedule in a weekend. Currently at 8 doors (that SFH, a tri, a quad), but now that we live in the area I typically just run one or two at a time in a spreadsheet instead of cranking through 100 in one go. I find the list much more interesting than the insurance…

Totally understandable that $100/month may be steep for a nationwide list when you would only want Atlanta. We do plan to add a cheaper tier where you can select just one or a few cities. As far as having a Zestimate like tool - most of our models have focused on predicting future appreciation. That being said, our instantaneous pricing tool often gives similar estimates to Zestimate but differs from Zestimates a dec…

You should track your internal estimates against Redfin instead/also. They tend to be more accurate, at least in the Bay Area.

Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#84

Post by loftyai »

ttcbj wrote: post #71

This is the first time I have ever seen an early stage company include Saint Louis in anything, so, thanks for that ;-). That said, you say your market is: "Lofty AI is best for people who are: 1. Thinking of buying their first home, but are nervous about losing money. 2. Looking for higher returns than normal by buying properties in an appreciating neighborhood early." 1. I wonder if people who know they have to sel…

Thanks for the feedback, you bring up some really interesting points.

1. I think what you're saying (and please correct me if i'm wrong) is that we could go after people who aren't about to buy a home but who already own a home and may want to sell it in 2-3 years. That is actually something we already have done and are open to doing more! We could certainly make it more explicit on our website that this is an option.

2. This is a really cool concept. As you have noted we aren't so much in the business of encouraging people to optimize the cash flow on a home and partnering with them on that, but this is a common way to make money of real estate and is certainly something we could branch out into.

This would complement our goal of not having to just become a fund and help solve real pain points people have in purchasing homes really well.

Again, really appreciate this feedback - the phrasing sparked some really cool insight and will definitely think about this more going forward.

Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#85

Post by syntaxing »

This is a super interesting idea, and I have been wondering if there was a service like this. Is there something similar to this that recommends the house based on your stage of life? For instance, if you have a kid and your income is X amount, this is probably your best area or even if I wanted to retire with a set standard of living and maybe environment. This paired with home value appreciation that you provide would be awesome!

Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#86

Post by loftyai »

syntaxing wrote: post #85

This is a super interesting idea, and I have been wondering if there was a service like this. Is there something similar to this that recommends the house based on your stage of life? For instance, if you have a kid and your income is X amount, this is probably your best area or even if I wanted to retire with a set standard of living and maybe environment. This paired with home value appreciation that you provide wo…

Love this suggestion! We have been toying with the best way to personalize the properties shown to each individual user. Right now it's just by city, max price and property type.

We also have added things like "near nightlife", "near trendy coffee spots", "near schools" in an attempt to capture what you have suggested here - albeit in a less efficient manner.

A "stage of life" questionnaire would be a great way to encapsulate all those above and more in an easy to interface with UI for the user. Thank you!!

Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#87

Post by loftyai »

simonebrunozzi wrote: post #76
loftyai wrote: post #46

Earlier quoted context omitted.

Thanks for your question! I believe my main post or the responses might have been unclear. If so, my apologies. But your understanding isn't correct. Other companies are not insuring your downside. We are the only counter party you have. The problem is if a recession happens, then a lot of our properties actually decline in value. As a result, we might not be able to pay you back. So to make sure we can pay you back…

> As a result, we might not be able to pay you back This is an absolute non-starter. Sorry to be blunt, guys, but if you can't cover your promises, they aren't promises. Your customers should be nuts to agree with this. Or misinformed. Again, sorry, I don't want to bash you, but what you are offering is simply too bad for your customers.

Sorry that the post wasn't as clear. My intention with that line was to walk people through the process step by step.

Of course, we engineer the product so that we can pay people back. But I wanted to show people our thought process, which is what happens if there was a recession and most of our portfolio declines by more than 20%. If we didn't have hedging instruments, we wouldn't be able to pay people back.

Therefore, our next step was to purchase hedging instruments for every contract we take part in. Hope this clarifies things. If not, let me know, and I'll be happy to elaborate more.

Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#88

Post by loftyai »

SOMA_BOFH wrote: post #80
DoreenMichele wrote: post #77

Earlier quoted context omitted.

And then it goes on to say: to make sure we can pay you back we buy financial instruments on the open market, kind of like buying a stock of apple for example. These instruments work in a very interesting way. Their prices go up, if the real estate market goes down. Their prices go down, if the real estate market goes up. So, with these instruments. We can ensure that in the event of a recession, we can still afford…

> Their prices go up, if the real estate market goes down. Hopefully they provide more detail here. I'm old enough to remember 2008 and recall many financial instruments with a traditionally inverse correlation to each other behaving unexpectedly. Similar unexpected behavior led to the LTCM crisis in 1998.

You're correct in that many financial instruments with traditionally inverse correlation started moving differently. However, this is mainly from the natural correlation between two instruments that may develop over time.

For example, assuming the cell phone market only had 2 players, apple and samsung. And let's assume investors think it's a winner takes all market. So, historically, if apple shares went up, it means investors think they will dominate, which means investors think samsung will lose. This may lead samsung stock to decline when apple stocks increase and vice-versa.

Now imagine a recession. Investors don't care about that relationship anymore, because they just want to pull their money out of the market. Now everyone is dumping both apple and sumsung, so now, the correlation has changed.

I assume this is what you are talking about for the instruments you were mentioning. But, we use options, which are artificially created, so when we buy put options, they will always be 100% inversely correlated to the underlying REIT/ETF. Therefore, if the REIT/ETF goes down during a recession, our options will increase in price.

Hope this clarifies things!

Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#89

Post by loftyai »

DoreenMichele wrote: post #81
SOMA_BOFH wrote: post #80

Earlier quoted context omitted.

> Their prices go up, if the real estate market goes down. Hopefully they provide more detail here. I'm old enough to remember 2008 and recall many financial instruments with a traditionally inverse correlation to each other behaving unexpectedly. Similar unexpected behavior led to the LTCM crisis in 1998.

My father -- born in 1922, grew up in The Great Depression -- always said "The best way to double your money is fold it in half and stick it in your pocket." There are no guarantees in life (except maybe death and taxes). They seem to be taking reasonable precautions. They don't deserve to be lambasted for being a bit green and failing to phrase their comment like smarmy con artists pretending there is zero risk -- j…

Thanks for the kind words Doreen, your father sounds like a wise man :)

We have tried to engineer the agreement to the point where only during times of nuclear war or some crazy natural disaster, would we not be able to cover the losses.

And per our contract, we are not liable for these act of god events. So, we recommend all of our customers to purchase insurance on property, especially if they live in risky areas related to weather phenomenons.

Down the line, our priority is to incorporate climate modeling , so that we just no longer recommend properties prone to natural disaster damages.

Re: Launch HN: Lofty AI (YC S19) – Real estate investment with alternative data

#90

Post by loftyai »

edouard-harris wrote: post #56
Hydraulix989 wrote: post #14

Earlier quoted context omitted.

My first reaction was: If this company goes under (like 90% of YC startups) and you took this sort of arrangement, then you are @#$!'d (all caps).

Well over 50% of YC startups across all batches have either exited or are still alive.

Wow! I knew it wasn't as high as 90% death rate, but 50% survival rate is actually quite high!
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