Funding that Pesky Down Payment
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Without further ado…
BY DREW MEYERS
Originally Published: August 28th, 2019
We all know down payments are a barrier to homeownership. Renters are constantly annoyed that they are throwing cash away every month without building equity. They have few options, short of having $10,000—or even $100,000 depending on the market—stashed away for the down payment. Not everyone has “the bank of mom and dad” to rely upon.
“After a 30-year global property boom, millennials have become ‘generation rent’ as they struggle to buy a place of their own,” says Vuyo Radebe, a contributor for Quartz. However, it’s not all bad: the “feudal landlord-tenant relationship [that] has endured” for centuries is going by the wayside. Instead, “more and more landlords are starting to embrace a new model in which the “customer” (i.e. the renter)—not the landlord—is king.” The consumer is increasingly in the driver’s seat, not unlike the sales side of the industry.
What do they want? Ownership. Long term value. A better life.
There are a plethora of startups working on bridging this gap. Among them are Landis, Divvy, ZeroDown (fresh off $100 million in debt capital from Credit Suisse), VerbHouse, and Haus. Landed helps educators in expensive markets. Cher pools pre-approved co-borrowers based on personal and financial needs. There is another swath of startups co-investing in homes already owned.
Although Loftium has pivoted into property management, offering rent savings in exchange for managing an on-site Airbnb, partnering with Digs to easily stash away savings into a down payment fund would be a boon for future home buyers.
All of them will work with you to put a plan in place to buy your dream home over the course of several years.
But what if you don’t know what your dream home looks like? What if it looks different in five years? What if you simply want to stop sending rent checks with nothing to show for in return?
Now there’s another rent-to-equity game in town.
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