Startup Fronts Down Payment If You Rent Room On Airbnb
Want to buy a house but can't afford the down payment? This startup offers assistance... with a catch.
Image: Ennis Davis, Modern Cities
Would-be millennial homebuyers are encountering a significant barrier of entry when looking to buy their first home, and it has nothing to do with rising home prices or affordability. According to Zillow, more than two-thirds of renters indicate that saving for a down payment was the most significant hurdle towards achieving homeownership. A new Seattle-based startup called Loftium is looking to help first-time homebuyers by providing down payment funds in exchange for a share of future Airbnb income.
Homebuyers who need Loftium’s down payment help simply agree to rent out a spare bedroom and split the income with us for 12-36 months after buying their new home. According to the company, “We know not everyone has access to parental down payment gifts, and we feel strongly that this shouldn’t determine who rents and who buys. More than anything, we believe that with an entrepreneurial attitude and Loftium’s help, anyone can tap into the income potential of spare rooms to become a homeowner.”
The pilot program is first being rolled out in Seattle to 50 homeowners and Loftium is working with local lender Umpqua Bank for an end-to-end financing transaction. On a primary home transaction, Loftium can offer up to $50,000 (not to exceed 10% down) on a conventional Fannie Mae mortgage offered by Umpqua Bank. In a departure from many municipal-based down payment assistance programs, Loftium does not have income limits or home price restrictions.
The transaction is relatively simple: Buyers choose a home, qualify for the loan amount with Umpqua Bank, and put at least 1% toward the down payment. Loftium will then estimate the income potential of renting the home’s spare bedroom on Airbnb and will then offer a lump-sum prepayment to use toward the remaining down payment. In exchange, the homebuyer be required to list a bedroom(s) on Airbnb and manage the rental process for a fixed period of time, ranging 12-36 months. Along with providing down payment assistance, Loftium also provides homeowners with training and online resources that enable them to become successful Airbnb hosts.
Company founders Yifan Zhang and Adam Stelle have been long-time Airbnb hosts. “We started Loftium in 2016 after experiencing how hard it is to buy a home in the city where you live and work. We were seeing a pattern: our friends who were able to buy all received help from their family, while those without help were out of luck,” notes Yifan. “It turns out this is true across the country - with skyrocketing student debt and rent prices at historic levels, even people with steady income are increasingly unable to save enough for a down payment. Being long-time Airbnb hosts, we saw a solution. As a homeowner, you can host short-term travelers and access a significant, reliable income stream (and meet great people in the process!) But until now, there’s been no way to access that income if you don’t already own. That’s where Loftium comes in. We’re leveling the playing field with a new type of down payment help that’s available to anyone who wants to take their future into their own hands.”
But wait, aren’t millennials shunning home ownership? According to Zillow, roughly two-thirds of millennials believe that owning a home is necessary to live The American Dream and that owning a home increases their standing in the local community. If you believe the narrative that millennials have a significant change of attitudes towards the white-picket-fence ideal of The American Dream, then think again - millennials believe the two preceding statements more so than any other generation.
Cover Image: Dan Herbin, Modern Cities