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Comment by DesiLurker | Hacker News Reader

Don't the IPOs have a six month holding for employees? if so they wont be able to cash out well into holiday season.

edit:spelling

From what I've heard from everyone everywhere on HN, banks are willing to give you a loan knowing you have a lot of stock in a big tech IPO. (Even if you can't liquidate for 6 months) I don't know how much you need but presumably more than the home is worth.

I'd love to hear some real world examples of people doing this. I'm curious if you need 20% down because that alone will put most of these folks who have been living off their salary alone out. (You can't easily save 20% down in less than 10 years for a $2-4m home on a single startup salary)

> From what I've heard from everyone everywhere on HN, banks are willing to give you a loan knowing you have a lot of stock in a big tech IPO

That could have gotten me in trouble when I was younger. I had startup stock that traded at $50+ on the day of the IPO. When the lockup ended, the stock was trading at $12. At the time, I more likely to think the stock was going to $1200, not $12. I'd likely have ended up owing a bunch of money I couldn't pay off AND a big tax liability.

If I were in that situation today, I'd see if I could find someone who would give me money at today's price and get N shares of stock in 6 months (the duration of the lockup period).

It would've been bad for you, but the bank would've been OK. Mortgages are collateralized loans, so they'd just get the house, plus whatever money you had left, and it wouldn't be a big loss for them.

I don't think you'd be able to get a non-collateralized loan based on putative IPO stock value.

> I don't think you'd be able to get a non-collateralized loan based on putative IPO stock value.

I've heard that people with a ton of stock can find people willing to work with them. If you have $100 million USD in HawtStartup, I'm sure someone who believes that stock is going WAY up would be happy to buy at today's price w/ some discount in 6 months. Kind of like how farmers sell futures. I'm not an expert on the subject, and I've never had the kind of equity locked up, so who knows.

> If I were in that situation today, I'd see if I could find someone who would give me money at today's price and get N shares of stock in 6 months (the duration of the lockup period).

Employees are typically prohibited from shorting the stock.

We tried getting an asset backed mortgage recently. There are definitely some options which don't require 20% down, although they tend to have higher APRs.

Even with 20% or more down though, we found it difficult to get a good APR. There was one lender who offered an APR which was comparable to income based mortgages (~4% for 30 year fixed), but their program had very stringent requirements.

IIUC, they took 80% of our taxable assets and 60% of our retirement assets, and assumed that amount would be uniformly depleted over the mortgage term. That model seems extremely pessimistic, but I guess it accounts for the fact that some borrowers won't invest responsibly.

This lender calculated a debt-to-income ratio by dividing the mortgage payments (plus HOA etc.) by the asset depletion income, and required that the ratio be at least 66. I think different programs have different debt-to-income requirements.

So let's say a borrower wanted a $1m mortgage from this program. If it's 30 years fixed at 4%, the total mortgage cost would be ~$1.7m. To reach the 66% debt-to-income with their formula, the borrower would need ~$3.2m of taxable assets, or ~4.3m of retirement assets! That's assuming no other income, no HOA fees, etc.

There are other programs with less stringent requirements, but they seem to have APRs of at least 5%.

I'm not in the bay area....However I did recently buy a house. Banks are taking locked out stock, or even pre-ipo shares, as people's "gross value" in order to get people qualified.

What banks? The banks I worked with to get qualified didn't value any of this above zero, they also didn't value tenant income.

They did value whatever the max was you could borrow against your 401k.

That's unusual: whenever we got a new mortgage or refinanced (US Bank, Wells Fargo, Chase, ...), our rental income and the rental cost was included in the calculation.

To clarify - tenant income from renting out one of the rooms of the place I'm trying to buy (not existing tenant income).

Basically the peninsula is unaffordable to own alone, but if I could get a two bedroom and rent out a room I could do it (alternative is having to buy in SF a one bedroom for 780-875k). Banks don't let you do this though and without this I'm priced out of two bedroom units.

I suspect you could create some new mortgage instrument that allows groups of friends to buy a house together since now we typically just do this via renting and splitting the cost for individual rooms (though I hesitate to suggest this since it would ultimately drive up prices even higher). It's also hard to find people willing to risk this, but I think a standard contract structure could go a long way to reducing the social risk.

though I hesitate to suggest this since it would ultimately drive up prices even higher

I went to one open house in SF and the top floor was a nicely updated if small house. The basement/garage? The owner had put up walls to create 6 rooms and 2 bathrooms. The rooms were maybe 10'x10'? Apparently they rented them out to help with the mortgage. You could probably get $500-700/month for each or $3000-3600 for all six?

And that's one reason why parking is an absolute mess in SF even if you get away from the city center. A lot of houses have one or more in-laws (many illegal). And no place to park the car in the garage!

You can absolutely get a joint mortgage with a friend: I did. The real challenge is finding someone you want to go in on a long-term coliving arrangement with, agree with on how to handle home maintenance and the like, and trust not to try to screw you over.

Bank of America will indeed value tenant income, however, you'll need to provide proof of multiple years of steady tenant income before they'll value it above zero.

Wells Fargo will do this for publicly-traded stocks.

Is the market for condos as insane as for houses?

I think I'd be happy with a 1BR in someplace like SOMA where you can walk to everything you need. Conversely I'm not sure I'd want a long commute (across bay bridge, down South Bay, or in Marin) even if I could have a sweet house.

It's a little better, I was looking in SOMA and 1BR is around 875k, but you might be able to find older stuff around 700k.

It’s typically 90 to 180 days[0]

[0] https://www.investopedia.com/ask/answer/12/ipo-lockup-period...

edit: removed ‘usually much shorter’ which was wrong. Parent stated the right timeframe and I mathed bad.

It's usually 180 days, equal to 6 months and consistent with what the parent claimed.

You can get lock-up loans from ibanks to secure down payments.

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