In exchange for a $10,000 fee, ZeroDown will buy a home on behalf of a renter.
The renter then moves in and pays a monthly bill to ZeroDown that essentially includes funds for a future down payment. Rather than accumulate in a savings account owned by the renter, those funds earn the renter “purchase credits” from ZeroDown.
The renter can then put those purchase credits towards a down payment to buy the home from ZeroDown in the future — but only if the renter remains in the home for two years. Alternatively, the renter can move out and redeem their accumulated purchase credits for cash — but again, only if they stay in the home for at least two years.
ZeroDown currently only operates in the Bay Area, which has some of the highest housing prices in the country, meaning that even homebuyers that would be considered wealthy in other cities can’t necessarily afford homes here. And that’s who ZeroDown aims to serve.
Customers or households must earn more than $200,000 a year and have some savings to qualify for ZeroDown, and eligible homes have to be priced between $550,000 and $1.75 million.
People who rent homes from ZeroDown, whom ZeroDown calls “homeownership partners,” are responsible for paying for maintenance of the home. Property taxes, home insurance, and where applicable, HOA fees, are included in the monthly bill that renters pay to ZeroDown.
ZeroDown didn’t immediately respond when asked if the renter loses some or all of the money they paid to ZeroDown for purchase credits if they move out before two years have elapsed.
But while renters may not enjoy benefits offered by a traditional landlord, like included maintenance, if they rent from ZeroDown, they get to lock down a home they really would like to buy, but don’t feel they can yet afford.
The company has raised $30 million in equity financing and more than $110 million in debt, $100 million of which comes from Credit Suisse, the company announced in August.
ZeroDown pairs qualified applicants with partner real estate agents to find the home they want, and then splits the buy-side commission with those agents. As of June, the company had a partnership with Berkshire Hathaway HomeServices Drysdale Properties.
“We prefer that you work with one of our partner agents, whom we’ve selected for their deep knowledge of the Bay Area housing market,” ZeroDown says on its website. “That said, we’re happy to partner with your agent if you’ve already been working with one and trust them.”