Downpayments wants to offer real estate investors interest-free financing
Downpayments, a real estate fintech startup, is emerging from stealth today with the mission of helping investors purchase new properties with interest-free down payments.
It’s a lofty claim.
The Miami-based startup, which spun out of Australian company Futurerent last October, says it’s able to give investors a way to leverage their existing equity toward making a new purchase without having to refinance their properties.
Specifically, Downpayments says it is able to provide an interest-free down payment of 10% of the purchase price of a property (capped at $200,000). Funding for greater than 10% of the purchase price can be accessed depending on the client’s circumstances, at “competitive” 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 pay off their debts, with no penalty for paying early.
“Until now, most property 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 skyrocketing to nearly 8% has created a difficult environment for investors to cash-out refinance without losing their existing low fixed rate,” said Godfrey Dinh, the 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.”
For now, Downpayments helps buyers with the purchase of any residential property based in Florida that is purchased for investment purposes.
So how does the company make money? Dinh told TechCrunch that Downpayments is able to offer interest-free down payment funding by packaging the in-house buyer’s agency brokerage services paid for by sellers. It also earns commission from the associated buyer’s agency.
“It is not dissimilar to the BNPL industry where the merchant pays to help cover the cost of finance for the buyer, albeit with Downpayments, additional services are provided to the buyer to create more value for our clients,” he said.
Downpayments has secured $31.8 million in initial debt funding from Partners for Growth and $1 million in equity financing from Second Century Ventures, which is backed by the National Association of Realtors (NAR). It plans to use its new capital to power investment property transactions.
Dave Garland, managing director of Second Century Ventures, said he was drawn to back Downpayments in part because of Futurerent’s track record in Australia.
“In Australia, they’ve empowered countless buyers to overcome down payment hurdles. Now, they’re tackling the U.S. market where skyrocketing housing costs outpace incomes and savings,” he said. “Their unique model lets buyers spread down payments over time, interest-free or at low rates, opening homeownership doors 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 US$7.7 million and originated over US$3.34 million per year in revenue in Australia alone.
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