Airbnb is often cast as the villain in discussions around affordable housing. Aspiring home owners struggle to afford the 5% down payment required for a conventional mortgage, and as increasing numbers of real estate investors use platforms like Airbnb to accommodate tourists, prices get further out of reach for would-be residents.
Yifan Zhang is re-casting Airbnb as a force for good in affordable housing with the launch of her new startup. Yifan is the co-founder and CEO of Loftium, a service that provides prospective home buyers with up to $50K for a down payment with the caveat that they list an extra bedroom on Airbnb for 12-36 months, and share the profits with Loftium for the length of the contract.
A 29-year-old Harvard grad with experience in the startup world, Yifan became an Airbnb host when she and her husband bought a townhouse in Seattle. The revenue stream from their spare bedroom covered the couple’s mortgage payments, and Yifan got the idea to help prospective home buyers come up with a down payment based on the potential profit of listing a spare room on Airbnb. Today she discusses rising home prices in the US, the strict mortgage regulations in place, and the media attention Loftium has received since its launch. Listen in to learn how the application process works, what happens if a customer breaks their contract, and how Loftium shares Airbnb profits with its hosts.
Topics Covered
How Yifan got the idea for Loftium
•Tried hosting herself in apartments, always got caught
•Bought townhouse with husband in Seattle
•Listing spare bedroom on Airbnb covered mortgage
•Seeing revenue stream gave her idea to solve down payment problem
How much a typical down payment costs in the US
•Conventional mortgage requires minimum 5%
•First-time home buyers who meet qualifications can get 3%
•Average price of home in Seattle is $700K (5%=$35K)
•Difficult to save for down payment
The strict mortgage regulations in the US
•Can’t use just any funds
•Must save up for years
•Only other option is gift from parents
•Loftium is first regulator-approved source of down payment funding
Where Loftium operates
•Product launch in Seattle
•Plans to scale to other cities
•Vote for expansion cities on website
Loftium’s current partners
•Mortgage provider Umpqua Bank
•Apply down payment to conventional Fannie Mae loan
How the Loftium process works
•Go to loftium.com
•Look up home for sale
•Platform gives estimate of down payment
•Use funding to make offer
What happens if Loftium customer breaks contract
•Pay back pro-rata amount of time remaining + termination fee
•No consequence if hosting traffic declines
How hosts and Loftium share Airbnb profits
•Split varies, adjusted based on how much customer needs for down payment
•Typical split is 70/30
How Loftium handles changes in regulations
•Only open in markets with regulatory approval
•Restricted to spare bedroom in primary residence
•If rules change, Loftium has second lien on property
•Company gets paid back when customer sells house
•No cash burden on customer
Loftium’s competitors
•ClearBank (Canadian lender)
•Works exclusively with existing hosts
•Loans for furniture, renovations
•Recently added property
•Most Loftium customers are first-time hosts
How Loftium supports its customer-hosts
•Provides automation, software
•Partnering with existing companies
•Plan to supply suite of services
•Automated keypad, smart messaging, pricing tool
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