Loftium Wants to Help You Make Your Down Payment—If You’re Willing to Be an Airbnb Host for the Next Three Years

Today, in “taking the sharing economy to its logical and terrible extremes,” we go to The New York Times:

When [Yifan Zhang] bought a townhouse in Seattle with her husband last summer, she knew that the spare bedroom could generate extra income on Airbnb. But when she learned just how much they could collect each month — enough to cover the mortgage, and sometimes more — her entrepreneurial instincts kicked in: Why not front would-be home buyers money for a down payment, and then collect a share of their Airbnb rental income in return?

That was how Loftium, a service in Seattle, came about: It will provide prospective home buyers with up to $50,000 for a down payment, as long as they are willing to continuously list an extra bedroom on Airbnb for one to three years and share most of the income with Loftium over that time.

So. Airbnb created a service through which you can earn money by renting space in your home (within varying degrees of legality) as long as you share a little of that money with Airbnb.

Now Loftium wants to use the reputation and user base Airbnb has created to start its own service and collect even more of your Airbnb earnings.

And yes, Loftium is loaning you up to $50K in the process, but they’re assuming they’ll earn that money back through your Airbnb rental. The NYT does the math, and if you rent your room at $150 per night for 268 days of every year, Loftium should earn back the $50K and make a profit.

If you hold up your end of the bargain and they don’t earn the loan back, the Loftium FAQ states that they’ll take the loss:

The down payment we offer is not a debt, it’s a part of a services agreement.

You enter into a contract with Loftium and and when that contract ends – typically after 36 months – you don’t “owe” us anything. There’s no payback if we don’t make enough money on the Airbnb income.

The risk is on us, not you.

You do owe Loftium money if you decide to stop Airbnbing before the contract is over:

[…] you are able to buy out of the contract by paying Loftium a fee based on 115% of the pro-rata share of the contract, which is determined by how much contract time has passed.

For example, if you received a down payment of $25,000 and want to cancel the contract halfway through, you would need to pay back 1/2 x 115% x $25,000 = $14,375.

Other fun facts: you can’t buy a condo or a home with a HOA, and you must get your mortgage through Loftium’s partner, Umpqua Bank.

The more I look at Loftium the more it seems… kinda reasonable, actually. Everything on their website looks fair and non-exploitative. It is a little weird to see this service essentially piggybacking on another service in order to make money, but there are startups that rent cars to Uber drivers, so it’s not unprecedented. (In the sharing economy, everyone gets a cut of what you can’t afford on your own!)

And why not spend three years running a bed and breakfast in addition to whatever else you’ve got going on in your life? You’ll also need to get a business license, according to Seattle law, as well as a city regulatory license and liability insurance. (Plus, of course, business taxes.)

Anyone interested in taking Loftium up on this offer?

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