Zero down payment, a new way of renting a house and paying a down payment, is it a new revolution in buying a house?
Editor’s note: This article is from WeChat public account “Silicon Valley Insight” (ID: guigudiyixian ), author of Silicon Valley Insight.
San Francisco rent has risen again!
According to the rental website Zumper, the median market rent for a one-bedroom apartment in San Francisco reached the highest level of $3,700 per month in May this year!
(Zumper rent report for San Francisco in the summer of 2019)
However, in San Francisco, where the technology giants are headquartered, there is a homeless population with high rents:
From 2017 to 2019, the homeless population in San Francisco increased by 17%, local residents kept complaining about the use of drugs, needles, and dirty streets and crimes The increase in fear. (Yes, every time I went back to the city for an interview, I felt scared…)
(Picture From NBC Bayarea, the copyright belongs to the original author)
In the end, can you solve the problem of buying a house in San Francisco and Silicon Valley? A startup in Silicon Valley called ZeroDown recently proposed a solution: zero down payment to buy a house. Silicon Valley Insights will bring you a look at it today. Can this solve the problem of difficult housing purchases in Silicon Valley? Can this model be promoted?
Zero down payment, building a house “equity” like a company equity
US time last Monday (August 25th), ZeroDown, a home loan startup in Silicon Valley, announced that it has closed $100 million in debt financing backed by Credit Suisse. ThisWhat the company hopes is that let customers get the first place to buy a house in San Francisco and Silicon Valley, so as to solve the first step of buying a house:The down payment problem.
From the name of this startup company “ZeroDown”, it can be seen that: Zero down payment, yes, it wants to let the customers buy the house with zero down payment, thus solving the difficult problem of buying a house in the Bay Area.
In March of this year, ZeroDown made its debut on the roadshow of the top incubator Y Combinator, which has become a super “hot item”. In the past June, ZeroDown announced a $30 million Series A round of financing led by Goodwater Capital and then YC CEO Sam Altman.
According to Pitchbook data, the 6-month-old startup was valued at more than $80 million. More specifically, before the company decided to be incubated by YC, ZeroDown contacted Sam Altman and discussed that such an idea is not reliable (I feel that such a star company has not emerged for a long time?…).
Company founder and CEO Abhijeet Dwivedi said in an interview with Business Insider that even as a startup executive, he could not find a reasonably priced house for his family within the commute distance of San Francisco, “This is much harder than I thought.” (Hey, otherwise…)
And Dwivedi admits that he was inspired by the same experience of startups. “This model is inspired by how people get equity in the company,” Dwivedi said. This home buying model is much like stocks and options, so it’s not a loan. Customers are building equity, not debt. “
4 criteria for assessing income, renting a room and paying a down payment point
What exactly does ZeroDown do?
First step: It will first assess the applicant’s financial situation. In other words, even if you want a zero down payment, see if your income status does not meet ZeroDown’s assessment criteria, and then see what kind of house you can buy.
(screenshot from ZeroDown official website)
According to Techcrunch, applicants are mainly evaluated using four criteria: income status (including total pre-tax income, stocks), savings (deducting monthly Repayments such as student loans, car loans, etc., employment status and “soft” credit checks.
ZeroDown official said that users need to register first, and by linking to a bank account, provide assets and proof of income to qualify for purchase, to confirm your income and understand the financial situation. If the application is eligible, the company will contact the customer within 48 hours.
Step 2:ZeroDown evaluates your financial situation and then combines your needs to buy a full house. At present, the official website shows that the price of the house is between 550,000 and 1.5 million US dollars (it sounds like a reasonable house price, but 550,000 can buy it in Silicon Valley? Xiaoyan said it is a bit skeptical…).
(Looking for Belongs to your house – buy your house – move in – pay monthly, screenshot from ZeroDown official website)
Step 3:Check in the house and start paying monthly!
If you follow the steps in the official website of the above picture, it sounds really “quick and convenient”, but in fact, the small detective found that starting from the monthly fee, it becomes complicated. Because the whole process is “You first rent a house with ZeroDown, then discuss whether you want to eventually buy a house.”
How to rent and buy a house? ZeroDown proposes that customers need to sign two agreements: one is a lease agreement and one is a potential purchase agreement to ensure that you can be the first priority buyer of the house.
In other words, if you really want to buy a house from ZeroDown, the fee you pay is rent, includingGive the house a down payment “攒 points”, except that allows the customer to pay the ZeroDown for five years while the house is down payment.
Who then ultimately owns this house? ZeroDown officially stated that it bought your house in full, that is, it is a real home buyer. After two years, you can start thinking about buying a house with your “points”, but in the fifth year, you must make a decision or not.
If five years have passed, what do you want? ZeroDown did not disclose this in an interview with Business Insider and said it was a “trade secret.”
So, every month in the five years, you can get a certain amount of purchase points – imagine it is a stock option, the price paid will be converted into a percentage of the total price of the house, if at least two years You can use these points to actually buy a house.
Want to buy 1 million rooms? 6700 per month
The following is a simple total price, in the end, zero down payment to buy a house, means how much you have to pay ZeroDown!
If you want to buy a home in the Silicon Valley for a total price of $1 million, you first need to pay a one-time fee of $10,000 (this is not a down payment, it is a one-time fee), then you need to commit Pay $6,700 per month for at least two years. Then you can stay in the house.
So, in the monthly payment of 6,700 yuan, the monthly corresponding points are 0.25%.
(screenshot from the calculation page of ZeroDown’s official website)
Besides this $6,700, do you have to pay other fees? After all, if you buy a house in the United States, it is not only a monthly mortgage, but also a property management fee (HOA), housing insurance, property tax and other expenses. The official answer for ZeroDown is:No, the company will be responsible for the cost of property and home insurance,$6,700It means that you have to pay a fixed monthly fee,there are no other hidden costs and expenses.
(screenshot From ZeroDown official website)
From the ZeroDown website, you can see that the price has ranged from $650,000 to $1.25 million, but I’m really in San Francisco, and the peninsula is also One family , the rest are in East Bay. If it is a $1.15 million house, the monthly fee is around $7,700.
What if I don’t want to live when I live? You can move out after two years and use these points to redeem the corresponding cash, “returning rent, withdrawing cash, leaving.” Or, if you still want to stay, you can live for five years. Between the second year and the fifth year, if you want to buy any ideas, you can decide how much you want to pay based on the purchase points you have earned.
According to its official display, the purchase credit for 2-5 years is equivalent to 3.6%-9% of the total house price, and if it is not refunded, it will receive 5% bonus points, which means 9%. Will become 14% of the total equity (this is 6% off the normal 20% down payment of the house).
(annual Corresponding to the purchase credit of 攒, screenshot from ZeroDown official website)
But the ZeroDown official website does not prompt, the customer pays the remaining down payment according to the total price of the first book, and how to continue to repay the loan after owning your house. Is it with ZeroDown itself, or is it looking for a bank to make a loan?
However, ZeroDown officially said that it will provide a luxury concierge service to help customers with everything from cleaning to moving to ordering new furniture.
Realtor: Five Questions to Be Solved
So, in the end, the mode of zero down payment isIs it not feasible in Silicon Valley or even high-priced areas? Will it attract many people to buy a house? Let’s first take a look at the answers in the Silicon Valley region.
Xiaoyan interviewed Dan Robinson, the agent of Sotheby’s International Real Estate in the Silicon Valley Peninsula area. Dan Robinson has been focusing on the real estate business in San Mateo County for 10 years and has lived in Silicon Valley since 1979. The trend of real estate growth in Silicon Valley in the past 40 years can be said to have a certain understanding.
From the perspective of a real estate agent, Dan Robinson said that the ZeroDown model has the following main questions to be resolved:
First, lack of transparency. Customers can’t see before signing a contract, if they decide not to buy a house after 5 years, can they still “take money to leave”;
Second, there is inflexibility. From the official website, at least the monthly payment must be paid for 2 years, but what if the customer has to change jobs and leave the Bay Area within two years? Or, when you pay for medical expenses, you need cash urgently, you can’t pay enough money, what should you do at this time;
Third, potential additional costs. Even the first two years were based on the method of “paying rent and crediting the credit line”, but the official website mentioned a little “home maintenance costs”. The official website said: As a resident and home ownership partner, the customer is responsible for maintenance. For failures such as roof replacement and air conditioning, ZeroDown will cover such maintenance costs. Dan believes that ZeroDown is not dominant compared to traditional rentals, where the landlord is responsible for “maintenance costs”;
Fourth, is it possible to pay the down payment if you don’t pay the down payment?
Dan Robinson For example, if a house with a total price of $1.5 million is based on ZeroDown, it will pay $10,350 per month for ZeroDown.
(screenshot from ZeroDown official website)
However, if you are renting a house, the 3 bedroom and 2 bath houses are in the corresponding peninsula area, and the median is about 5,000 yuan, which is equal to the monthly rent of the user.You can save about $5,000.
The rental results of the Zumper website show that rents for 3 bedrooms and 2 baths range from 3800-8000 in the peninsula area.
And regardless of whether or not you can get a payment of 10,000 yuan per month, Dan Robinson takes the common retirement savings account in the United States as an example. If you look at the annual growth rate of 3%-6%, you will save 5,000 yuan per month. After three years, I can get down $19-200,000. But according to ZeroDown’s official statement, after three years, if the down payment is fixed at 9% ($158072), one is 150,000, one is 19-20 million, which is uneconomical. of.
If you don’t follow a fixed ratio and look at the Fair Market Value, who is going to define this ratio? (Small exploration, The Mercury News reported that The company’s market-to-market value-added ratio is set at 5.4% per year).
What if it is a recession? Can the customer leave in advance and not pay the mortgage? Dan Robinson told Silicon Valley that the average increase in house prices in the Silicon Valley peninsula over the past 30 years can be as high as 6%. So, is this 5.4% reasonable?
Five, can you really solve the housing problem in the Bay Area? Dan Robinson believes that solving the housing problem is a public institution such as the government considering how to add more housing to existing land. For example, today, every commercial residential developer is required to build a low-income group according to a certain proportion. House. Failure to pay the down payment does not mean that the problem of renting a house and housing is difficult. What’s more, the object that ZeroDown considers has a certain income limit.
Maybe, the original intention of ZeroDown is good, and I hope to solve the problem of renting a house and buying a house. However, does zero down payment really solve the problem of buying a house? I am afraid not necessarily. Such a business model seems to be realized only in areas with high housing prices and high growth rates, but it must be closely related to the economic environment.
Everyone thinks that buying a house with zero down payment will be a big motivation for you to buy a house? Are you still honestly paying the first few years and then buying a house? Welcome everyone to discuss!