Buying a home? Loftium gives thousands for a downpayment -- with a catch
In this hot housing market, homebuyers are looking for anything to give them a competitive edge to close a sale.
A Seattle startup is offering to give up to $50,000 in a down payment. And as you probably guessed, there's a catch.
Buzzing since Monday's launch, the Seattle startup Loftium has had more than a thousand prospective homebuyers sign up.
The idea is simple: Partnered with Umpqua bank as a lender, Loftium gives you money that is "approved down payment assistance" to buy a home. In turn, you promise to rent out a room in that home and give the company a majority cut of the revenue.
"You can look up any house on Loftium.com to see how much down payment we can give you," said company co-founder Yifan Zhang. "And in exchange, you agree to Airbnb an extra bedroom to 12-36 months and split the income with Loftium."
Customers answer a series questions on their website, and Loftium determines the size of the down payment it can offer based on how much revenue a room rental can generate.
"If you're interested, and you want to move forward, then you can convert that estimate into a quote," said co-founder Adam Stelle. "And that's a committed quote that at that point you can take and use as your down payment."
Twenty-nine-year-old Laura Coe closes on a Capitol Hill craftsman this Friday. The purchase of the two-bedroom home was made possible after the company gave Coe $9,000 for a down payment to buy the home.
Coe agreed to rent out her downstairs mother-in-law on Airbnb and give Loftium 70 percent of the cut for one year.
"What it did is it allowed me to get in now," said Coe. "I thought I could have waited a couple of years and pinched some of pennies, ultimately buy a home I love. But I would have had to wait."
Matt Miner, a realtor with Coldwell Banker Bain, said with Seattle's steep home prices, he's been advising his clients to rent rooms in their newly purchased homes to help generate revenue for mortgage payments.
The Loftium idea plays off the same idea.
But he advises customers keep a close eye on the changing regulations for short term rentals in Seattle. For example, the city is considering a $10/night tax.
Zhang explains they're only offering deals for home purchases in Seattle and condos and HOAs do not qualify.