Startup offers down payments for first-time home buyers who rent a room on Airbnb
Loftium takes a share of the profits for up to 36 months.
First-time buyers in Seattle can take advantage of a new startup that assists them in making down payments to buy a new home. Loans are provided on the basis you rent out a room in your new pad to pay back the debt.
Loftium, founded by local American entrepreneurs Yifan Zhang and Adam Stelle, recently received federal regulatory approval to make its first 50 down payments to customers located in Seattle, Washington.
How does it work? Loftium partnered with regional lender Umpqua Bank to provide down payments for approved home buyers. Loftium determines the size of the payment it’s willing to make using an algorithm which estimates the potential income generated by renting a room on Airbnb for between one to three years.
Down payment recipients must list one bedroom as an available “private room” on Airbnb, communicate with guests before and during their stay, ensure the room and bathroom are clean and remain hospitable to guests.
Approved loan recipients are expected to list their bedroom on Airbnb year-round, except for eight own-use days. Additionally, hosts can only cancel up to three guests per year if they feel uncomfortable with bookings.
While Loftium does not have a business relationship with Airbnb, the company assumes an average occupancy rate of 65% for the entire year, which varies house to house depending on the popularity, location and season.
Loftium doesn’t receive any interest on the loans it provides. The company takes a share, approximately two thirds of the total monthly revenue, of the income generated from the agreed duration of the Airbnb listing.
If their income prediction is incorrect and the Airbnb doesn’t do as well as imagined, the loss is on them.
Loftium will provide approved customers with smart locking automated keypads for easy guest access, sheets, duvet covers, towels, pillows, a comforter, hangers, a blow dryer and some basic toiletries for the room.
There’s also automated guest messaging software and smart pricing software provided with each listing.
For now, Loftium is only available in Seattle but plans to expand to other cities with Airbnb-friendly regulations.
The startup may provide a possible solution for the staggering proportion of young non-homeowners who suggest their hefty student loan debts are the primary reason they have delayed purchasing their first home.
A recent finder.com study found Americans are borrowing a whopping $288 billion from friends and family each year. Just over one quarter (26%) of the total loaned funds were put toward a down payment on a home.
Taking out a mortgage isn’t something you should rush into. Take the time to find out about how they work, the various types of loans that are on offer, the current rates available to you and then compare your options.