Airbnb is a hot topic in Seattle right now, and it’s a growing trend to buy homes with an Airbnb option. In fact, it’s such a popular option that a startup called Loftium is offering to help you finance your Airbnb.
What’s the catch? Loftium will help you buy a home with Airbnb potential by contributing to your down payment. In return, you have to rent out one room in your new home via Airbnb and split the income with Loftium for the first 1-3 years (depending on your agreement).
Curious? Here are a few things to consider:
Short term rentals in Seattle can make a TON of money.
At minimum, it’s typically double what you’d get leasing for a year. As an investment, short term rentals are really hot, and the returns are far higher than most things you can get with other investments. A good return would be 7%, but in some cases we’re seeing a 20% return.
You have to live in the home.
For a home to qualify for Loftium’s assistance, it must be your primary residence. This means that the home has to be large enough to have at least an extra bedroom to use as the Airbnb.
Loftium does not support purchases in condo buildings.
Not only does Loftium not work in condos, it doesn’t work in any home with an HOA (including single-family homes and townhomes). There are only a handful of condo buildings in Seattle that allow you to rent out as an Airbnb, anyway.
In many cases, this is a great way to take advantage of unused space.
In our experience, many younger people in their 20s or early 30s are planning ahead and buying homes that they plan to grow into once they start having families. In the meantime, they have have a few extra rooms. This is a great way to utilize the space for a few years, and then take back the space when you need it down the road.
There is a startup cost to take into account.
Loftium requires that your Airbnb have certain amenities, like wifi, a queen-sized bed, a small desk/table with a chair, a bedside table with a lamp, space for luggage, and other items. It’s important to factor these expenses into your budgeting.
If you’re *close* to having a down payment but you’re not quite there, this could be perfect.
Loftium’s offer could help you get a home sooner and start building that equity. And in a market like Seattle’s where the prices are going up, up, up, this could be a huge advantage.
Sound too good to be true?
There are still a lot of questions, and before us real estate agents can thoroughly recommend something like this, we need to know more about the liabilities involved. Here are a few additional things to consider:
What happens if laws regarding short-term rentals in Seattle change? What will happen to people who depend on the agreement with Loftium to finance their home?
What if your circumstances change, and you have to sell your home and move during the time of the agreement?
While there are many scenarios that may arise, it looks like Loftium takes a look at each unique situation, and each agreement might look a bit different. You’ll have to run your credit, and any home loan you receive must be financed by Umpqua at this time. It’s certainly an interesting concept that can help a lot of people, but we need to go into it slowly and make sure it’s a good fit for people.
We’ve been talking to Umpqua, and we’re sure much more information will come to light over the coming weeks. Have questions or want to talk more about this? We’d love to hear your thoughts! Get in touch below.