Down payment with a catch
It’s getting harder and harder for many to enter the housing market, but a new start-up in America is making it a little easier for those wanting to purchase a home…but it comes with a catch.
A 29-year-old entrepreneur from Seattle, Yifan Zhang has come up with a service, called Loftium, which fronts up the cash for a down payment on a home with a proviso they continuously list their extra bedroom on Airbnb for one to three years and share the income with the company.
Zhang told New York Times the concept came about when she and her husband
purchased a home in Seattle and looked into renting the spare bedroom to generate extra income. But when she learned the amount could cover her mortgage or sometimes more each month, she decided to start up Loftium.
The company provides prospective home-buyers in Seattle with up to $50,000 for a down payment as long as the extra bedroom is listed continuously on Airbnb for one to three years and the majority of income is shared with Loftium during this time.
The start-up determines the size of the down payment its willing to put up through an algorithm that predicts how much income a room can generate.
The company then collects around two-thirds of the income, leaving the home-owner to take home part of the profit as well.
And if the room doesn’t generate the expected income (provided it’s not directly the result of the homeowner through bad reviews/lack of availability etc), the homeowner is not out of pocket and there is no expectation to pay the money back.
The concept is fine if you are willing to open your home to travellers in order to get in the housing market.
While Loftium currently only operates in Seattle, the company has plans to branch out to more cities within a year and it’s only a matter of time before a similar operation starts up in Australia.