Seattle startup uses Airbnb to cover down payments on homes

Seattle home buyers may have a new tool to fight skyrocketing prices in the region thanks to the new tech startup Loftium.

“We definitely hit a nerve,” Loftium co-founder Yifan Zhang told Seattle’s Morning News. “Down payments are a major barrier, the largest barrier to homeownership for young people.”

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The solution that the Seattle startup promotes came to Zhang as she was buying her own house in Seattle.

“My husband and I bought a townhouse in Beacon Hill and we started renting out one of the bedrooms on Airbnb,” she said. “We were amazed that one bedroom was enough to cover the mortgage on an entire three-bedroom townhouse. And Beacon Hill is not central Seattle. So when we started looking at the numbers, we realized a lot of homes in a lot of neighborhoods in Seattle and other cities generate enough income from this extra bedroom to pay that down payment in just one to three years.”

That’s how Loftium works. The company will help out with a down payment on a home. In return, the new homeowner agrees to rent out a room on Airbnb and split the revenue 70-30 with Loftium. This arrangement lasts 12-36 months.

“We can predict with relative accuracy how much any given bedroom in any given home in the Seattle-metro area can bring in on Airbnb over a fixed period of time,” said co-founder Adam Stelle. “Our goal, of course, is over that time, to make our money back as well as a little bit of a buffer.”

Loftium at work

Stelle says this is not a loan, rather a straight revenue share program. It is aimed at closing a gap that has grown wider and wider in Seattle as home prices shoot through the roof, while millennials are weighed down by high costs of living.

“All of our friends who were buying homes in their mid-20s were people who have access to family, and family wealth and are essentially getting gifts from their family,” Stelle said. “And our friends who didn’t have that, they have to wait another five to ten years. And in a market like Seattle, with houses appreciating like they are, you might not be saving enough to even keep up.”

“If you look at data, people are working hard and part of the reason people want to live in cities is there is more opportunity, there are more jobs,” he said. “So really, we are just trying to fill a gap here that is caused by the student loans and high rental prices.”

There’s definitely a desire for a program like this, Zhang said. Within a day of opening the startup to buyers, they had more than 1,000 contacts in the Seattle region.

One of those people was Laura Coe, a financial manager for Microsoft. Loftium helped her with a down payment between $20,000-25,000 for her Capitol Hill house. She’s renting out a room for about 12 months to pay it off.

She admits, she was skeptical of the entirely new form of financing.

“I’m like, ‘OK, what’s the catch,’” she said. “Turns out, they just want to help young, new home buyers in Seattle get into the real estate market.”

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