Downpayments, a fintech real estate startup, is emerging from secrecy today with a mission to help investors buy new properties with interest-free down payments.
It’s a tall claim.
The Miami-based startup, which was spun off from Australian company Futurerent last October, says it is able to give investors a way to leverage their existing equity to make a new purchase without having to refinance the property their.
ESPECIALLY, Advance payments says it is able to provide an interest-free down payment of 10% of the purchase price of a property (which amounts to $200,000). Financing for more than 10% of the purchase price can be approached depending on the customer’s circumstances, at “competitively” low rates, it further claims. A full 20% down payment is available at 7% per annum, according to the company’s website. Investors have up to four years to repay their debts, with no early repayment penalties.
“Until now, most real estate investors have turned to ‘cash-out refinances’ to access their next down payment. Cash-out refinances are an inefficient way to access capital, and mortgage rates soaring to nearly 8% have created a difficult environment for investors to cash out a refinance without losing their existing low fixed rate.” Godfrey Dinh, CEO and founder of Australia-based Futurerent and Downpayments, in an email interview. “And, Home equity lines of credit (HELOCs) are not available on investment properties.”
Downpayments currently assists buyers with the purchase of any Florida based residential property purchased for investment purposes.
So how does the company make money? Dean told TechCrunch that Downpayments is able to offer interest-free down payment financing by packaging the in-house buyer’s agency brokerage services that sellers pay for. He also earns a commission from the affiliate buyer’s agency.
“It is no different to the BNPL industry where the dealer pays to help cover the cost of financing for the buyer, albeit with upfront fees,
Downpayments secured $31.8 million in seed funding from Partners for Growth and $1 million in equity funding from Second Century Ventures, which is backed by the National Association of Realtors (NAR). It plans to use its new capital to fuel real estate investment deals.
Dave Garland, managing director of Second Century Ventures, said he was drawn to back the advances in part because of Futurerent’s track record in Australia.
“In Australia, they have enabled countless buyers to overcome down payment barriers. Now, they face a US market where rising housing costs outpace incomes and savings,” he said. “Their unique model allows buyers to spread down payments over time, interest-free or at low interest rates, opening the doors to home ownership to a whole new segment.”
Futurerent, according to Dinh, has 11 full-time employees and has grown revenue 3x year over year. Founded in March 2019, it has raised just $7.7 million and grosses over $3.34 million annually in Australia alone.
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