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Loftium co-founders Yifan Zhang and Adam Stelle take a novel approach to down payment assistance. (GeekWire Photo / Monica Nickelsburg)

Laura Coe never expected to buy a house before she was 30. The 29-year-old Microsoft finance manager has been renting in Seattle since she moved here in 2010, and remaining near the city’s urban core is important to her. With Seattle’s skyrocketing home prices, she thought it would take years of penny-pinching before she could afford a home in a neighborhood where she wanted live.

Then she heard about Loftium, a new startup that helps homebuyers with their down payments on the condition that they rent out a portion of their home on Airbnb and share some of the profits with the company.

Loftium officially launches in Seattle today. The startup has been flying below the radar while awaiting regulatory approval but Coe got the inside scoop from a friend who works there. With Loftium’s down payment assistance, today she is closing on a two-bedroom, two-bathroom craftsman home in Capitol Hill.

Laura Coe at the Capitol Hill house Loftium helped her buy. (Loftium Photo)

“I never imagined I would ever land in Capitol Hill but I didn’t want to be pushed out too far north or too far south, where my lifestyle would drastically change,” Coe said. “I really value being able to walk to grocery stores and coffee shops and being close to arts and sporting events so keeping things how they are today was super important. Because of that, I thought it would take me years to save up.”

The amount of down payment assistance Loftium offers depends on the location where a customer wants to buy and the terms of the arrangement. For example, a customer looking to buy in a popular neighborhood could receive $20,000 toward her down payment, agree to rent a bedroom for somewhere between 12 and 36 months, and give Loftium 70 percent of the monthly revenue generated from Airbnb, retaining the other 30 percent for herself.

The idea struck Loftium co-founder Yifan Zhang when she first moved to Seattle. She and her husband bought a townhome and rented out one bedroom on Airbnb.

“I was just amazed by the income stream from that,” she said. “Just one bedroom in our three-bedroom condo could cover the vast majority of our mortgage, taxes, and insurance, which was a little crazy.”

Shortly after arriving in Seattle, Zhang met Loftium co-founder Adam Stelle, the former COO of Startup Weekend and entrepreneur in residence at Pioneer Square Labs. They began working on Loftium in October 2016 but weren’t able to speak publicly about it because they were jumping through regulatory hurdles. Because the product is a novel approach to financing for homebuyers, it required special federal approval.

“Everything is from scratch in terms of the product that we’re building,” Stelle said. It’s a new type of relationship that we’re building with customers. Legally, it’s a totally new thing.”

Loftium is partnering with Umpqua Bank initially and planning to offer down payment assistance to 50 customers in Seattle. From there, Stelle and Zhang expect to scale the business to new cities and partner with additional lenders.

Homeowners still manage the Airbnb rentals as hosts but Loftium provides some tools like smart pricing, auto-communications, and a keypad for the door to make it easy for guests to check in and check out. There are also a few guidelines that customers must comply with, like upkeep and maintenance. Loftium is only available to people buying houses, as condos often prohibit Airbnb.

Loftium’s product predicts how much revenue an Airbnb is expected to bring in but there’s no penalty for customers if it underperforms.

“This is not structured as a loan,” Zhang said. “I think it’s one of the most innovative parts of Loftium. It’s structured as a revenue share. If the room itself doesn’t rent out on Airbnb and doesn’t perform as we predicted, Loftium is the one that takes on that risk rather than the homeowners.”

Loftium’s launch comes as the Seattle City Council considers a new set of regulations that would, among other things, levy a $10 per night tax on hosts of short-term rentals. Zhang doesn’t expect the regulations to significantly impact Loftium’s business but does hope the city will reconsider the nature of the tax.

“Personally, I feel like the flat tax is regressive,” she said. “It unfairly places a higher tax burden on Airbnb hosts farther from the city center and those renting out a spare bedroom, versus an entire home — both types who earn less from Airbnb income. A small percentage fee would be much more fair.”

Fairness, Zhang says, is at the core of Loftium’s mission. At a time when Seattle is grappling with a housing affordability crisis, she hopes the service her startup is offering can help level the playing field.

“The goal is to ensure that cities don’t become places where only the very, very wealthy can afford to own, that there’s still this ability for middle-class people to be able to own a home,” she said.

As far as Loftium’s first customer is concerned, it’s a mission accomplished. “It’s something that I didn’t think I’d be able to afford, especially this early,” Coe said. “It’s been incredibly exciting and very, very rewarding.”

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