Flyhomes is broadening its suite of home-buying tools by acquiring the host-to-own platform Loftium in a Seattle startup real estate deal.
Terms of the acquisition, first reported by Startup, were not disclosed.
Loftium’s 11 employees, including its two co-founders, will join Flyhomes. The 6-year-old startup will maintain its operations and branding, with no interruptions to daily customer services, according to Loftium CEO and co-founder Yifan Zhang.
The acquisition comes at a time when the broader real estate market has been in flux due in part to rising interest rates. Flyhomes, which helps home-buyers secure purchases with all-cash offers, laid off 20% of its employees in July, then reduced headcount again in November.
Loftium and other Seattle real estate tech companies including Redfin, Zillow, and Inspectify also laid off workers.
Loftium made headlines in 2017 for its unusual plan to provide down payment assistance to potential homebuyers who agreed to split Airbnb profits with the company through renting out a room in the house.
The startup pivoted in 2019, instead renting homes to tenants at a discount if they agreed to become an Airbnb host.
Loftium launched its host-to-own program a year ago. It’s similar to the original model but has a few differences. Here’s how it works:
- Loftium first buys the house the customer desires, places a tenant in one of the rooms, then takes 40% of the rental income each month.
- After 1-to-3 years, the buyer can purchase the home from Loftium with a down payment of 3-to-5%, then pay a pre-fixed mortgage rate.
- The buyer then has the option to continue renting the room for income.
- Loftium takes care of all the rental duties: It remodels a room in the house as the guest room, gets regulatory approval from the local government, and locates a tenant online.
Zhang said the goal of the acquisition is to eventually integrate this service alongside Flyhomes’ search and home-buying tools.
“Our mutual aim is really to bring more affordability products to the home-buying space,” said Zhang, a finalist for Startup CEO of the Year at the Startup Awards in 2020.
A recent study found 41% of respondents slowed or stopped their home search due to reduced purchase power, according to Flyhomes EVP of Strategy and Growth Adam Hopson.
He said Loftium’s typical customer profile includes middle-income workers who are not on a trajectory to earn high salaries, including nurses, teachers and nonprofit workers. He added that these workers want to live close to where they work but their wages are not keeping up with the rise of housing costs.
“[This acquisition] gives us a way to expand the group of people that we can serve as customers,” he said.
Loftium has rental properties across 10 markets while its host-to-own program currently operates in Denver and Portland. Zhang said the company has “seen more demand for hosts-to-own than ever” but declined to give a specific number.
“I think the overall housing market has a lot of uncertainty,” she said. “There are still a lot of fears and questions from home buyers. But overall, I think our value proposition has very much resonated in this type of environment.”
Loftium previously raised $15 million in Series A funding led by Norwest Venture Partners, with participation from existing backers Threshold Ventures and Founders’ Co-op.
Flyhomes also offers mortgage services and has a Buy Before You Sell program that helps sellers buy and move into their next home before selling their current property.
The startup has helped customers buy more than $5.7 billion worth of homes at prices ranging from $150,000 to $7 million.
The company is led by CEO and co-founder Tushar Garg. It has raised more than $200 million to date, including a $150 million Series C round raised in June 2021.
Investors include Norwest Venture Partners, Battery Ventures, Fifth Wall, Camber Creek, Balyasny Asset Management, Andreessen Horowitz, Canvas Partners, and former Zillow Group CEO Spencer Rascoff.