It sounded like a scam.
When Hannah Exner and Sam Joselyn spotted an ad for an artisan house in Seattle’s desirable Westlake neighborhood, the rent rate of $ 1,000 per month was shocking.
“I have lived in this area twice before,” Exner said. “I knew it was crazy.”
They hurried to book a visit. The hardwood floors, the view of Lake Union, a parking space and the central location – it was too good to be true.
But there was a catch. Cheap rent – more than $ 1,000 less than the monthly market rate – is made possible by Loftium, a Seattle startup that rents homes to tenants at a discount if they agree to become an Airbnb host.
“The first two weeks have been weird,” Exner said of Airbnb guests staying in units below and above their floors. “But it’s really no different from apartment living. It’s a lot less bizarre than I thought.
Loftium previously made headlines in 2017 for its unusual plan to provide down payment assistance to potential homebuyers who agreed to share their Airbnb profits with the company. The offer was popular, but the company ran into problems due to rising house prices, competition between buyers and the complexity of the mortgage process.
“It became very clear that we did not have products suitable for the market,” said Yifan Zhang, CEO and co-founder of Loftium.
About 18 months ago, Loftium made a crucial pivot in switching to the rental model. It still aims to make family housing affordable, albeit in a different way.
Home of Loftium inks lease with a landlord and guarantees them monthly rent payments, generally over a period of 3 years. He then signs a one-year sublet with the tenants at a reduced rate, provided they are hosting Airbnb guests at the property.
Loftium provides Airbnb units and helps tenants manage listings. The business makes money by collecting enough revenue from Airbnb customers. It’s similar to WeWork’s business model with offices, although Loftium is unique in that it uses a bedroom to offset the costs of the house for a tenant family.
The Seattle startup still uses much of its original technology, like prediction algorithms to calculate nightly Airbnb rates, or automation tools to help tenants communicate with guests.
The new model is easier to scale because Loftium doesn’t have to raise huge amounts of capital to help people make down payments, and it’s much faster and easier to lease units than to close. home sales.
“The economy is quite similar, except the business model is more capital efficient,” said Zhang, a finalist for the GeekWire Awards for Startup CEO of the Year.
Loftium is growing rapidly. It leased 100 properties to owners at the end of 2018 and added 500 more last year, with plans to reach 1,500 homes by the end of 2020. The company operates in ten cities and plans to expand. add four more markets this year. Loftium has also quadrupled the size of its team over the past 12 months and now employs 54 people.
Investors appreciated the pivot. Loftium last year raised a previously undeclared $ 15 million Series A investment round led by Norwest Venture Partners, with participation from existing backers Threshold Ventures and Founders’ Co-op. The startup also added Brad hargreaves, co-founder of the General Assembly and CEO of the housing startup Common, to its board of directors. Total funding to date is $ 17.5 million.
The idea for the Loftium first germinated when Zhang moved to Seattle. She and her husband bought a townhouse and rented a room on Airbnb.
Zhang, a Harvard graduate who previously co-founded a fitness goals startup called GymPact, started Loftium with its co-founder Adam stelle, a former leader of Galvanize and ex-COO of Startup Weekend.
“The founding mission was really important to me and Adam as we searched for the right fulcrum,” said Zhang. “We wanted to keep our North Star, the mission of ensuring that single family homes and family housing continue to be affordable. “
The average household income for a Loftium tenant is $ 80,000, and ages range from people in their 20s to people in their 50s. Primary occupations include teachers, retail workers, small business owners, and others.
“We are opening up the possibility of living in a single-family house at a below-market rent,” said Zhang. “This is an opportunity that does not exist outside of Loftium.”
The CEO added that more than 70,000 guests have stayed in a Loftium unit, with more than 60% of that traffic in the past six months.
“While we have spent the past 18 months resolving property supply and tenant demand first, we will also be focusing on first-time clients in 2020,” she said.
“We can actually live like adults,” Exner said, “which is difficult for a lot of people in Seattle to do.”