Twenty-five years into their mortgages, many senior citizens are cash-poor but equity-rich. A new startup is trying to help homeowners unlock that equity to stay in their homes as they get older.
Irene, which launched in New Jersey three months ago, will buy homes from seniors with the caveat that the sellers retain the right to stay in their home for the rest of their lives. Irene takes over all responsibility for mortgage payments, property taxes and home maintenance costs, letting senior homeowners stay at home, reduce costs and avoid the more time-consuming aspects of homeownership as they age.
The company raised $1.3 million in a funding round led by IA Ventures at the end of last year. Irene had participated in the MetaProp startup accelerator for real estate tech startups in New York last year, and its funding round also included participation from MetaProp and Notation Capital.
“What was interesting to me was that over 80 percent of older adults own their homes,” Irene co-founder Fabrizio Tiso said. “While they sometimes don’t have cash on hand, they have a lot of savings in their home. It doesn’t matter if the home is $1 million or $200,000. How do we help seniors leverage their largest asset to plan for retirement in the place they want to retire, which is their home, in an affordable way?”
The strategy employed by Irene is one that’s common on a peer-to-peer level throughout Europe and especially in Italy and France, said Tiso, who is from Italy. Familiarity with the model inspired him to bring the idea in an institutionalized form to the United States. Taking the strategy from a peer-to-peer transaction — where an individual investor would buy the right to inherit the home of an older adult — to an institutional company will get homesellers better prices for their homes, Tiso said.
“It’s a big innovation for the U.S. market, but it’s definitely not a new, untested product. We see our solution saving tens of thousands of seniors every year across many different European markets,” Tiso said.
Tiso comes from a background in the finance industry. He and co-founder Wilson Keenan developed Irene’s home-purchasing option in contrast to reverse mortgages and debt products that have been available to people facing similar choices in the past.
“Seniors deserve to live out their retirement in the homes they own. Irene guarantees that staying at home is affordable for any homeowner. Their simple, transparent offer process, superior data and flexible contract structure are disrupting reverse mortgages,” IA Ventures partner Jesse Beyroutey said in a statement.
Generally, homeowners who sell to Irene receive cash up front to pay off their mortgage, Tiso said. While they could receive money from their sale to Irene as an annuity to support their living expenses — which is how the arrangement has generally worked in Europe — the main way Irene plans to cut living costs for seniors is by taking over those property tax and home maintenance costs after the sale.
If the sellers end up choosing to leave their home — whether to move into assisted living or for any other reason — they still retain the right to rent out the property and earn rental income for the rest of the lives, just as they were guaranteed the right to stay in the home themselves.
And if anything were to happen to Irene while homeowners who sold their homes to the company are still alive and living in their homes, there are protections in the contract to ensure those homeowners are able to stay there. Irene’s investors would stay involved and protections if those investors also failed would enable seniors to get the title to their home back, Tiso said.
Tiso declined to share how many transactions Irene has in progress or whether any have closed over the past three months the company has operated. The company chose to start in New Jersey in part because of the state’s high property taxes, which often force many seniors who would otherwise choose to stay in their homes to move elsewhere. Next up are Florida, for its senior-heavy housing markets, and California and Washington, though Tiso did not provide a specific timeline for expansion.
Irene has its own real estate agent working in-house, so the company won’t be hiring outside agents to facilitate its home transactions. But the company is hoping it can work closely with agents through referrals; if Irene meets a client who would be better off moving than staying in their home, they’ll refer the client to an agent, and if an agent encounters an older client who doesn’t really want to move but is considering it for financial reasons, they can introduce the client to Irene.
Along with this entire model’s frequent use in Europe, the right to stay is a common estate planning tool and feature of U.S. contracts, Tiso said. His idea is figuring out how to apply it to a new model here.
“We are literally leveraging something that exists that people are familiar with and attorneys are familiar with to use it in a very smart way,” Tiso said.