Blockchain’s HiP Looks To Unlock Home Equity In The UK and Beyond

Blockchain, FinTech | July 6, 2018 By:

What is HiP? With apologies to Tower of Power, this HiP is an upcoming blockchain platform derived from the belief that wealth currently locked in real estate can be active, even providing solutions for those looking to buy their first home. HiP aims to be the first UK company to make real estate wealth more accessible at scale by turning equity and debt underlying a property into tradable, interactive assets. HiP aims to develop a system whereby equity becomes a currency and debt levels become a choice.

The system is currently in place in the UK, but has ambitions to move internationally. Co-founder Sam Collett talked with Block Tribune about its outlook.

BLOCK TRIBUNE: I’m a homeowner, and I would like to take advantage of this. Can you walk me through how it works?

SAM COLLETT: Sure. Start with the big question. Let’s start with an easy one. Let’s say you’re a homeowner and you own your house outright, so you don’t have any mortgage. You have 100% equity. You own it. That’s all grand. How it works is, let’s say you’ve got a two million pound house, and for whatever reason, you need a million pounds. The way that it would work right now is that you’ve got two routes open to you.

The first route is you downsize. You buy a million pound house, smaller house, smaller property. Then you get your million pound back cash. Or, you can go to an equity release product, and there’s lots on the market. I’m not sure what it’s like in the States, but in the UK at least, they are a total rip-off. You basically have to put your property back in to a set mortgage and they fleece you for lots of money just to get what is legally your money out of your property.

With HiP, you go onto the HiP platform. You sign up. You go through the due diligence, and we talk for you on behalf of lawyers and other kind of people like that. You, basically, end up on-boarding onto the HiP platform. What that allows you is you can … You have the access to your property wealth. Your property sits there on platform. If you want to release some equity, you can do two things. You can either decided that you’re going to take out a monthly paid back loan for your money. You can increase and decrease the amount that you have as your loan, and therefore, the amount that you take out of the equity. Or, and this is where it gets really exciting … You can do that at any time, by the way. You can change and decrease or increase your loan, change the amount of equity you pay in, take out equity whenever you want, to a certain point. Which most mortgages, most loan companies won’t allow you to do.

The most exciting thing is you can say, “Okay. I need, let’s say, 20,000 pounds equity. What I’m going to do is, I’m going to release my equity to third-party. I’m going to allow that equity to basically be traded on the platform.” Which means investors can come onto the platform, and they can actually take a piece of the wealth of my property, so they pay me money as part of a conglomerate thing. They get the benefits of my equity. If my house slightly goes up, they get a slice of the profit. If there’s rental on my property, they get a slice of that rental income, as well. They get a dividend, as well.

That is, basically, a very long-winded way of saying HiP is about fractional ownership of property where everyone can get access to the wealth that’s otherwise locked away in their property. Did that answer your question a bit?

BLOCK TRIBUNE: Are these investors permanently attached to the property? Or, can you buy them out at some point?

SAM COLLETT: You can buy them out. The important thing for residential is to know that it’s not that I would invest in your property. I would never know it’s your property. I’ve got a portfolio of properties in, let’s say, London, and I know I’ve got a piece of the pie of 10 properties in London, but it’s anonymized. Otherwise, you get kind of funny things where you go and knock on someone’s house and say, “I want access to my door, please. That’s my door,” things like that. It’s fractional ownership, but it’s also anonymized. And, yes, you can buy back your equity at any point.

BLOCK TRIBUNE: Yeah. What if you do have a mortgage and even a first and a second mortgage? How does that affect this deal?

SAM COLLETT: If you have the mortgage and you move your house, then sometimes you can take your mortgage with you. I’m not talking about HiP. I’m talking about banking today. You sometimes can take your mortgage with you, but sometimes you get a fresh new mortgage and buy off the old ones. That’s the same with HiP. Effectively, HiP would take over your existing mortgage, and you would swap like for like a HiP loan for your old HiP mortgage. To take my house, I’ve got roughly 50/50 equity and debt. I could get a HiP loan, which is an interest only loan, and basically HiP would buy off the mortgage, so that was owned by HiP. HiP would take that debt on. Okay?

There’s finance products on the platform. One of which might be … We’re opening out the platform to investors. We’re also opening it out to institutional investors. We’re talking to banks at the moment. There’s no reason why they would not have a … I don’t know … a Halifax product that lives on the HiP platform. It would work exactly the same way. It’s got the added bonus of that flexibility for homeowners.

BLOCK TRIBUNE: All right. What markets are you in now? What do you plan to be in?

SAM COLLETT: We’re starting in the UK, because we’ve got a SCA license that’s valid in the UK and Europe. We are starting with equity release and first-time buyers. I should talk about first-time buyers in a bit. Then we will move on to [inaudible 00:07:02] and then eventually we’ll move on to commercial.

At the same time as that, we’ll open it out into different territories. It’s designed to be … The model starts from the UK, because that’s where our license is. That’s what we know. Then we take that model and we take it to other countries that we’re already talking to. At countries that actually have the same property … crisis is a word … the same property problems as we do. America, actually, is a good example. France, for example, is a terrible example, because everyone rents in France, and everyone’s quite happy. Whereas in the UK, there’s a lot of equity in properties that no one can get to. Everyone’s quite poor, because all the money is in properties. Really, the only wealth is left is in property. And, first-time buyers can’t afford to live where they need to in the UK, because the house prices are ridiculous.

The good thing about HiP, when it comes to first-time buyers is it means that a first-time buyer doesn’t need to save up or doesn’t need to be able to afford the whole property. They could own half the property, for example, and other investors own the other half. Which we think is a really, really amazing thing, and we think it’s going to fix the UK property market when it comes off.

We’re kind of in funding round at the moment. The product is being built, and we are going to onboard properties in about October of this year. We’re going great guns.

BLOCK TRIBUNE: How will your company make money?

SAM COLLETT: Every time you trade on the platform, every time you use the platform, and every time you release equity or someone buys and sells equity, then we take a very small fraction of that trade. We also have to charge for onboarding of properties, because it requires lawyers and solicitors and valuators. All the people that you normally need to buy a property, we need those people, as well. We take a very small fraction of profit from the onboarding, and we take a very small fraction of the trade. It’s a small fraction, but it’s a really massive market, so it’s about a volume. It’s a volume based business.

BLOCK TRIBUNE: Okay. Do you have any plans for an initial coin offering?

SAM COLLETT: That’s what we’re doing at the moment. We have a utility token, and the trade that I was talking about on the platform, is powered by utility token. We are in a private round at the moment, talking to lots of people, which is very exciting. Then we’re looking to do a pre-ICO towards the end of … Well, I think probably beginning of August, now, I would imagine is when we’re going to kick off the pre round.

BLOCK TRIBUNE: Will the trades only be done with the tokens? If so, then obviously, you’re going to have to convert it to fiat, correct?

SAM COLLETT: Yes. All property transactions happen with fiat. To pay off mortgage and that kind of stuff, that’s all with fiats. The only thing that is the token is the fee for the trade, so not the actual trade. So, if I want to release 10,000 British pounds. I want 10,000 pounds in my bank. I don’t want tokens, but there’ll be a small fraction of that, the fee, will be paid in tokens and has to be exclusively paid in HiP tokens.

One of the things that I think is quite exciting is we’re talking to homeowners, and we’re talking to possibly older homeowners who if we said there was cryptocurrencies involved, they would run a mile. Some people are really into their cryptocurrencies and want to be upfront about it. Lots of people who are … especially older homeowners … if said there’s cryptocurrency, we’d spend days explaining what a cryptocurrency is, rather than them focus on what they’re actually doing with their property. For some people, it will be in the background. They will be using cryptocurrency, but they’ll be actually paying in pounds or dollars or wherever you are. We will make the exchange and the trade in the background. For me, that means Great-aunt Edna will be using cryptocurrencies invisibly. I think that’s quite exciting.

BLOCK TRIBUNE: Who will be covering the transfer of fees between the tokens and the fiat?

SAM COLLETT: That would be the user.

BLOCK TRIBUNE: Okay. Which could be fairly substantial, I would assume, since we’re talking properties.

SAM COLLETT: Well …If I’m taking 10,000 pounds out, it’s only a few tokens that we’re talking about. It’s a fraction of the cost. It’s not the full thing. Most users would expect to pay a fee on any transaction. They wouldn’t expect that fee to be massive, and our fee is not that massive. It’s just happens to be in HiP tokens.

BLOCK TRIBUNE: Sure. What’s the background of most of the principals of the company? Are they in real estate or finance or a combination of both?

SAM COLLETT: We have advisors in real estate. Most of us are in … It’s Kai’s idea, Kai Peeters. He’s CEO. His background is in cryptocurrency and in all sorts of entrepreneurial thing. Loyalty programs. He ran an online casino at one point. He ran the first crypto casino, as well, which is where all this kind of ideas came from.

You have Tobias, who’s the other co-founder along with me. He built the first trading exchange for a bank for Credit Suites, I think it is. This is like way back in the ’70s or ’60s, or whatever it is. He’s a lot older than us. His background is trading and banking and technical stuff, really, really hardcore backend stuff.

My background is I am a designer, and I am a coder. I am an all sorts of strategy market kind of a guy. Bit of all sorts. Really handy to have around for a startup, because I do lots of different things. We are the co-founders.

We’ve built a team of 20-plus really awesome people who are specialists in their fields. We’ve got a team of techies who are specialists in trading engines. We’ve got a market research kind of guy who specializes in real estate markets. Yeah, lots of different people who know much more about us than in specific parts of the business. It’s a business that covers lots of different bases. You’ve got crypto people. You’ve got real estate. You’ve got commercial property. You’ve got, obviously, the technical side of things. You’ve also got the users, as well. We’ve done lots of research on who our users are, and what they want, and how they’re going to interact with this thing. Lots of different areas that we’re trying to cover.

BLOCK TRIBUNE: I presume when you’re approaching your elderly clients about that property, you’re not starting with, “An online casino owner wants you to play with your money”?

SAM COLLETT: No. Exactly. It’s all about trust. It’s a trust business. The older you get, the more it’s about … To them, we need to be a bank. We are, effectively, a bank to them, because people quite rightly worry about their money. They worry about their property.

BLOCK TRIBUNE: All right. Those are my questions. Do you have anything you wanted to tell me about that I didn’t ask you about?  

SAM COLLETT:  Yeah. It’s an interesting business, and there’s one question that we continually ask ourselves that we generally get asked by people. Actually, it’s strangely a question that I can’t answer. Which is, why has this not been done before? The closest we can come to an answer to that is that, actually, it’s against the status quo for banks and other investors to shake it up. They quite like us where we are, paying our mortgages like little sheep every month. Why has no one done this before? Well, I think no one’s been asking the right questions, and we are.

BLOCK TRIBUNE: Didn’t they do this before? The derivatives market that caused this huge worldwide recession with the real estate industry?

SAM COLLETT: Well, no, they didn’t do this, actually. We’re kind of trying to lend one-on-one, as in if someone comes aboard with an equity release … They’ve got 100% equity, then in the very early days before we’ve got big investors on board, we can then lend that money out to a first-time buyer. We’re not doing what the prime guys were doing, which is just lending, on top of lending, on top of lending, on top of lending, until the house of cards fell down. What we’re actually doing is saying, “There is money in property. There is wealth. Why not access it, and share it, and make use of it, rather than let it sit there?” It’s not about … Yeah. We’re not lending stupidly, basically.