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Loftium help with your down payment—if you Airbnb a room

The startup could put home buying in reach for some

Tim Franklin Photography

With home values on the rise in Seattle, one of the major barriers to homeownership for many is the downpayment. With median values in the $700,000 range, it can cost upwards of $100,000 just to get in the door of a starter home.

A new startup that launched in Seattle today could put homeownership in reach for those who can’t afford a downpayment. Loftium provides a downpayment of up to $50,000 to qualified buyers. In exchange, the buyer agrees to rent out one room on Airbnb for anywhere from 12 to 36 months, depending on the loan amount and rental price.

Seattle is their first city—their first recipient just closed on her first house—and they’re eyeing other cities where legislation is either on the books or in the works to support people renting out rooms in their homes. (Seattle proposed a new set of rules in September.)

We spoke with co-founder Yifan Zhang about the process, getting approved, and scope of the company.

Seattle resident Laura Coe in her Capitol Hill home, which she purchased with downpayment help from Loftium.
Courtesy of Loftium

This interview has been edited for clarity.

What's the approval process like? Are there restrictions to the kind of property you can buy or the location?

Homebuyers can get instant estimates on any for-sale property via the Loftium website. They have to get pre-approved with our mortgage lender Umpqua Bank to get final committed quotes from Loftium.

Right now, Loftium is servicing Seattle city limits, and only move-in-ready homes without an [homeowner’s association], because most HOAs do not allow Airbnb.

How many applicants will you be accepting?

We're offering 50 down payments initially in Seattle this fall. When we hit this goal, we'll be expanding our offering.

Does the Airbnb rental have to be a certain kind of rental—for example, if someone took advantage of this and then built an ADU, could the Airbnb become that? Or is it a little more controlled?

We usually provide down payment estimates based on a spare bedroom in a house. But one of our first customers is using Loftium's down payment to afford a remodel of her new home's mother-in-law unit to Airbnb.

We adjust the down payment provided based on the room's characteristics (renovations, private bathroom, private entrance, etc), so ADUs get more down payment even with a shorter contract.

Is the homebuyer on the hook until the downpayment is completely paid off, or is it just that they have to make their place available for a set amount of time?

Loftium is not a loan, and homebuyers do not need to pay us back anything. They just have to list their room on Airbnb for the length of the contract.

Do you control cost of the place?

Yes, Loftium provides the pricing software as well as auto messages and a keypad for your door to make hosting seamless. With our software package, homebuyers typically spend less than 15 minutes per week hosting.

How much of the profit from the rental goes to the homeowner?

[The default split is] 70/30, but we adjust it if you need more down payment or monthly help.

What was your startup funding like? How do the down payments get funded?

Loftium just closed a $2.5M venture round, led by DFJ with participation from Seattle's Founders Co-op and Curious Capital, a new local fund. Our down payments are separately funded by debt investors.

Are there any other rules as far as when the home needs to be made available—e.g. can they use discretion about who they rent to? Can they take it down for a weekend when their mom comes to visit?

We give homebuyers eight freebie days per year to block their room for guests or just to take a break. Also, Airbnb lets them cancel three guests per year if the homebuyer feels uncomfortable. I personally find this generous—I've hosted over 200 guests in my spare bedroom in our first year and I've only had to reject one guest for trying to squeeze more people into the room than was allowed.

The types of guests you get Airbnb-ing a room in your primary residence are different. They know you're right next door so no one is going to book your home for a party.

What if circumstances change and someone needs to stop doing Airbnb—I imagine these circumstances will be rare, but that they'll probably happen—what kind of risk is involved there?

If someone wants to stop Airbnb-ing, they just have to pay us back a portion of the down payment we gave them, depending on how much contract is left.