San Francisco, California, is one of the world’s most expensive cities. With a median price of almost one million dollars for a single-family residence—which is sometimes paid completely in cash—buying a home in the Bay Area is out of reach for many people.
“Ask anyone in the Bay Area and they aren’t sure they can afford to buy a home,” said Abhijeet Dwivedi, CEO and co-founder of ZeroDown and former COO and CSO of Zenefits, as reported by Housing Wire. “Now we’re giving buyers the power and flexibility they need to purchase the home of their dreams.”
The San Francisco-based startup combines technology with a debt-fueled real estate fund to partner with clients—allowing them to purchase a home without a traditional down payment/deposit. ZeroDown will purchase a home with an all-cash offer and lease the property to the buyers.
“We are the first real estate company to directly address the San Francisco housing market and are excited to see the impact we can make,” Abhijeet said.
The monthly payment is based on the value of the home and will not change as long as they live there, according to the startup’s FAQ page. ZeroDown will pay for property taxes and home insurance, simplifying the homeownership process even further.
Clients get five years to pay the company the cost of the down payment. During this time, the users earn “purchase-credits” that represent a percentage of the ZeroDown home’s value. After living in the house for at least two years, they can put those credits towards buying the home or move out and redeem the purchase-credits for cashback.
If the buyers want to purchase the house after five years, they must buy the property at that time; the users will have accumulated 15 percent purchase-credits that can be used towards buying the property.
“It gives people time to build up more savings or get a higher salary,” Abhijeet explained to TechCrunch. “Their buying power five years out is hopefully higher than it is today.”
To apply to the platform, aspiring homeowners need to provide proof of assets and income and link ZeroDown to their bank accounts. This requires a soft credit check, so a denial will not negatively affect their credit score.
Once accepted, the company will work with the buyers to get a better picture of their finances and potential buying power. According to TechCrunch, ZeroDown appears to primarily serve those with a household income of over $200,000.
Clients then pick a qualifying home, typically priced between $550,000 and $1,750,000, using a home search engine with the ZeroDown Google Chrome plugin, which shows the ZeroDown offer listed per home, or a ZeroDown partner agent.
Users need to pay a one-time programme fee of $10,000. ZeroDown then makes an offer on behalf of the aspiring homeowners. If the offer is accepted, ZeroDown will take care of closing costs and other related fees. If the offer is not accepted, buyers will get their money back.
According to TechCrunch, Zero consists of two separate businesses working together: a tech startup supported by equity financing and a real estate fund supported by debt capital.
“The fund has to do its job to hold the assets and provide a return and the tech company has to do its job of executing very well,” the CEO explained.
The San Francisco company has recently raised $100 million of debt capital from Credit Suisse to support the next stage of the company’s growth.
“ZeroDown has received an overwhelmingly positive response during the past few months and has provided San Francisco residents with the means to buy their dream homes,” said Scott Lustig, Director of Capital Markets at ZeroDown in a statement. “This additional funding from Credit Suisse enables us to accelerate our mission of giving homebuyers greater power and flexibility in the home buying process.”