In many cities, teachers are being priced out of the housing market. This is horrible for the profession, and for schools. Our schools benefit when teachers live in the community and are connected with the families they serve.
Unfortunately, housing costs make owning impossible for too many teachers. Ever-increasing rents drive living expenses higher and lead to more frequent turnover. In some places, housing is one of the greatest challenges of recruiting or retaining good teachers. Teacher home buying programs, often with some level of financial assistance, are one attempt to meet this challenge.
I was recently asked by a colleague, “should I use Landed?” I wasn’t familiar with the program, so I looked into it. As always, I want to help you make solid decisions for your specific circumstances, not mine.
Landed is a program that can help teachers buy a house in these expensive areas. Let’s explore whether Landed is a gift, a scam, or an option for you to consider. I’ll spoil my conclusion up front: It’s not a slam dunk, but Landed is worth looking into for some home buyers.
Table of contents
- What is Landed?
- Some Number Examples
- Should I Use Landed?
- Clear Benefits of Landed
- Avoid Using Landed If
- Do Your Research
What is Landed?
Landed proclaims, “We Help Educators Buy Homes in Expensive Areas” right up front on their website.
(Update: Landed has expanded the program to serve health care works in some regions. This is great news and I’m glad to see greater support! However, since this site is focused on educators, I’ll continue to refer to that audience throughout.)
The primary (but not only) feature of Landed is a shared equity down payment program. In short, they help you with upfront costs in exchange for a share of your home equity.
This can make housing accessible for educators who may not be able to buy otherwise, or who are eager to skip the long work of saving up a full 20% down payment. In some areas, prices increase faster than savings, continually pushing the purchase farther back.
Who Is Eligible?
Landed is only in specific markets. You have to work for school districts participating in the program and buy a house within the defined market area. While teachers are the focus, school principals and paraeducators can also benefit! In some Landed regions, the program is also available to college and university employees.
Landed seems to be aggressively expanding their areas of eligibility. At the time of this writing, you need to be an educator working (and buying) in one of the following cities / metro areas.
- San Francisco Bay Area (California)
- Los Angeles Metro Area (California)
- San Diego Metro Area (California)
- Denver Metro Area (Colorado)
- Boulder Metro Area (Colorado)
- State of Hawaii (Yes, the entire state)
- Boston Metro Area (Massachusetts)
- Portland Metro Area (Oregon)
- King County Metro Area (Washington)
- DMV Metro Area (Washington D.C.)
You can check for updated (and more detailed) eligibility here. Landed also accepts information requests from educators who do not currently live in a covered area – you may help bring the program to your area.
Important to note: Unlike many educator home-buying programs, Landed does not require you to be a first-time home buyer. Apparently, you can use Landed even if you currently own a home.
The home you are buying has to be your primary residence and must remain so while in partnership with Landed. (Updated 11.2020)
How Does it Work?
Shared Equity Down Payment Assistance
The core feature of Landed is a down payment assistance program for teachers (and other educators.) Landed works in areas where housing prices have outpaced income growth – particularly for public educators. Saving up 20% for a down payment is a challenge.
Landed will match your down payment, up to 10% of the house value. So, an educator who can bring 10% of the house value to the table can have that matched, providing the full 20% down payment.
Let’s look at the example of a $350,000 house. A 20% down payment would be $70,000. If a teacher can save $35,000, then Landed matches the $35,000 for a total of $70k.
It is not a grant or gift, however. This is where the “shared equity” part comes in. In exchange for that 10% match, Landed receives a stake in 25% of the equity growth (or loss) of the house when it is sold or refinanced.
In browsing online, it appears there is some confusion about this. The stake is 25% of equity gain/loss NOT 25% of the total house. That is, if the house were to sell for exactly the same price it was purchased at, Landed would receive only the 10% contributed back and 0 equity stake.
We’ll go through some examples of what this looks like later.
To help the educator navigate the process, Landed connects them with…
A Teacher Home Buying Team
If you decide to work with Landed, they connect you with a licensed real estate agent and a “Landed home buying expert.”
The team provides property reviews, home buying education, and guidance. Landed also claims to provide you with an analysis of multiple home buying options, not just the use of their down payment assistance program.
Assuming that is true, and the team is skilled experts, this is a huge benefit for first time home buyers. The home buying process is often too complicated and confusing for many first-time buyers. This team, and the agent network make Landed a full teacher home buying program, rather than simply a shared appreciation loan program.
Landed requires that you use a licensed real estate agent. Skipping it isn’t an option.
If you use an agent in the Landed network there is no charge to you. However, if you want to use an agent outside the network, then Landed will charge a .75% fee. This may be paid by the agent, but that negotiation will be up to you. Just be aware that if you choose to use your own agent, this cost exists and must be paid somewhere.
How is Landed funded?
Landed appears to be funded initially through a combination of private investors and foundation funding. These investors are provided a return.
Ongoing funding looks like it will come from three primary sources:
- Agents that work with Landed pay a percentage of their sales commission
- Investors are charged a fee
- The funds from the equity take are returned to the pool to support future down payment assistance
How Landed is funded may matter to you, but the most important analysis is how the numbers will (or won’t) work out for you as an individual buyer. Let’s get into that now.
When Do You Pay Off Landed?
If you use the down payment assistance, you pay Landed back when you sell the home, refinance, or after the loan is complete.
Some Number Examples
Let’s start with the example Landed publishes on their homepage. They assume you’re buying a $500,000 home. To qualify, you’d need to bring $50,000 for a downpayment (10% of cost) and Landed would supply the other 10% ($50,000.)
You now have a $400,000 mortgage. They assume you live in the home and make payments faithfully for 10 years. After ten years, they provide two scenarios. In one, you sell for a reasonable gain. In the other, the housing market has declined during your period of ownership. According to Landed, these are the results:
That does a fair job of capturing the beginning and ending numbers. Note that it assumes you’re in the house for 10 years and make all payments. So, $85k of your equity is from your payments.
Let’s look at a few other numbers. To keep it consistent, we’ll assume you’re buying the same $500,000 home. (That’s a big price tag for most teachers….)
We’ll assume you buy the same home without Landed’s assistance. In most cases, that will introduce private mortgage insurance into the equation. For simplicity, I’ll just use this Nerdwallet mortgage calculator and their recommendation to assume a 4.125% rate. Don’t assume perfect accuracy, but it provides a reasonable idea.
|WITH LANDED||W/OUT LANDED|
|Down Payment||$100,000 |
(10% you, 10% Landed))
|Monthly Payment (Principal and Interest)||$1939||$2181|
|Private Mortgage Insurance||$0||$188|
In this example, you end up paying $430 more a month in order to retain your full equity. $188 of that goes to PMI (private mortgage insurance) which doesn’t pay down your principal. Ouch.
In Landed’s example, at the end of 10 years you end up paying Landed $75,000. How does that compare to the difference in payments saved?
If you just count the savings alone, 10 years of payments equate to $51,600 more without using Landed. $22,560 of that would be PMI, although you’d likely have options to get out of that earlier once you hit 20% equity.
Out of curiosity, I ran two sets of numbers assuming you used Landed and invested the payment difference. I assumed a 7% rate of return (compounded annually), and the same ten-year time horizon in their example. Here’s what that looks like:
|Full Payment |
|Monthly Amount Invested||$430||$188|
|Amount After 10 years:||$71,293||$31,170|
Interestingly, if you used Landed and invested the payment difference, the amount you’d accumulate comes out pretty close to what you have to pay Landed after 10 years. If you earned 8% it’s almost identical ($74,500 investments vs. $75,000 Landed buyout).
Should I Use Landed?
One of my core tenants is that personal finance is personal. I can’t give you a yes or no answer without knowing your exact circumstances AND how you think and feel. That’s impossible.
I’m also a big fan of making solid decisions (rather than chasing perfect ones.) Combining those two pillars, I’ll tell you how I’d think about this decision. Ask yourself these questions, answer them honestly, and you’ll probably have a good idea if Landed will work for you.
Is Owning Important To You?
So much of the debate around housing is framed in numbers. Even when looking at just numbers, you can make a case for either renting or buying by tweaking your assumptions. But, let’s agree that in most cases renting comes out ahead from a simple numbers perspective.
That ignores the fact that for many people, owning a home is important for other reasons. For us, for example, mortgage freedom gives us a sense of control and helps me resist my struggles with feelings of financial insecurity.
For others, owning a home provides “roots.” This can be especially important to educators who really value being invested in their community.
If owning a home is important to you, then the ability Landed provides to buy a home in an expensive area is probably worth more than just simple numbers.
This one is hard to quantify. If you’re fine renting, then you’re probably better off renting in most of the areas Landed works. If owning is important to you, factor that intangible into your decision.
Do You Live in An Eligible Area?
If you don’t live in an area where Landed works, the decision is made for you. For now. You can reach out and see if they’re coming soon.
If not, and you want to buy with a teacher home buying assistance program, research other options.
What Do You Believe About the Future of Housing Prices?
You’ve probably heard that “real estate always goes up.” Certainly in most markets where Landed is operating, housing prices have (on average) appreciated rapidly in the last few decades. I’d also suggest that Landed is willing to operate in these markets because they assume housing prices will continue to rise and their equity share will pay off.
I’m not as convinced. But, it doesn’t matter what I think – it matters more what assumptions you make.
If you believe housing prices are going to increase astronomically, and you can avoid sharing that equity – you’d almost certainly want to avoid using Landed.
On the flip side, if you believe prices will be flat or even decrease, then Landed makes obvious sense. They’re assuming the downside risk on a portion of your down payment, and you can use the money elsewhere. If the housing value is flat, you get a 10% interest free loan!
How Quickly Do You Want to Buy?
Let’s say you’re slowly saving up a down payment. You’ve got 10% now, but it will take you years to save the next 10%. You can’t afford the higher monthly payment, and hate the idea of private mortgage insurance.
If buying sooner is important, then Landed is the choice. If you can wait a few years, it’s not as clear.
Does a Buying Team Have Value For You?
This one is hard to quantify, but for many new buyers navigating the process of buying a home is challenging. It’s opaque, confusing, and constantly seems to be taking advantage of you. Deals fall apart for apparently no reason, numbers change unexpectedly, there are mountains of paperwork.
A team of professionals that are willing to work with you is potentially valuable if running the home buying gauntlet for the very first time.
Do You Want to Mitigate Risk or Maximize Upside?
In addition to all the other financial pieces (monthly payments, share equity) this is also a choice about sharing risk.
If you want to share the risk of housing price changes, then Landed is your choice.
If you want to maximize upside, then you might give them a pass.
Do You Feel Landed Terms Are Fair?
This is another “feeling” factor. Based on a review of some online sources and comments, a 10% downpayment for a 25% stake in equity growth clearly feels unfair to many. If it were 10% for a 25% stake in total value, I’d definitely agree. As it is, my personal assessment is that it’s fair enough.
Do You Have An Exit Plan?
Assuming you are still considering moving ahead with Landed, you need to develop an exit plan. Is your plan to refinance as early as possible to exit the agreement?
Do you plan to live in the house forever? If so – make sure you have a plan to pay the amount you owe without selling the house. You’ve got time, but you’ll want to start planning now.
If you don’t understand how, and when, you might sever the partnership, I wouldn’t consider Landed.
Clear Benefits of Landed
There are two aspects of using Landed that I believe are clear wins if you’re considering it.
If you can’t bring a 20% downpayment to the table but really want to buy a house, you’re likely going to have to pay private mortgage insurance (PMI.) PMI is nothing but lost money. It provides no benefit to you other than being able to buy a house with a small down payment.
If you’re buying no matter what, using Landed will keep you from paying PMI. That’s an unequivocal benefit.
Having a dedicated buying team to advise you, free of charge, is a clear plus. I know I’d have valued it when I bought my first home.
Avoid Using Landed If
On the flip side, there are two circumstances where you should not use Landed even if everything else lines up.
Buying More House Than You Can Afford
Don’t use Landed just to let you buy more house than you need, or can afford otherwise. If you’re using it to stretch into a bigger house – that’s a financial mistake.
Housing will always be one of your largest expenses. Don’t make it larger than it needs to be. Otherwise, you may end up (like us) needing to downsize.
You Feel Like It’s A Scam
If you don’t believe it’s fair – don’t use Landed. The bitterness you hold onto will certainly make any financial equation not worth it.
Do Your Research
As I walked through learning about Landed, the important considerations, and ran some numbers I came to believe that Landed was a viable option. I’m not sure I’d use it, but I certainly didn’t reject it out of hand.
That’s me. No matter what, do your own research. Compare your actual numbers and decide what’s important to you. If you do start going down the path with Landed, make sure you read the contract to understand the details, ask questions, and only move forward if you’re confident it’s right for you.
Landed is a teacher home buying program that includes shared equity down payment assistance and a home buying team. It has potential benefits for some, but may not be the right choice for all buyers.
Ask yourself the following questions to help you decide if you should use Landed:
- Is owning important to me?
- Do I live in an eligible area?
- What do I believe about future housing prices?
- How quickly do I want to buy?
- Could I use home buying advice from a team?
- Do I want to mitigate risk or maximize upside?
- Do I think Landed is fair?
- What is my exit plan if I use Landed’s down payment assistance?
Answering each of those questions for yourself will get you a lot closer to a decision. Make sure you do your research so you can proceed (in either direction) with confidence.
If you want to look at some other sources related to teacher home buying: