While many millennials struggle to find the money to buy their first home, many more people are looking to buy their second. Summer directly aimed at the last group.
Even for those wealthy enough to consider a second home, there are still a huge amount of both the costs and risks associated with this kind of purchase — enough to discourage them from moving at all. First world problems, but problems nonetheless.
Summer tries to break down many of these barriers by offering to try on a model before buying.
Here’s how it works:
People interested in a second home can either browse the homes at Summer or shop with the Home Startup (in markets where Summer operates). The company buys the house for cash, but the Summer member pays a refundable 20 percent fee and pays a monthly subscription based on the amount of time they want to spend in the house.
So let’s say a Summer member wants to spend 90 days at home. Summer calculates the cost of a house per night, as you would on a home-sharing platform like Airbnb, and breaks it down into monthly payments for a year. However, the startup also accounts for peak travel times, so three weeks in July in the Hamptons can take up more of that “subscription loan” than 3 months in the winter.
Summer gives this contestant three years to decide if they want to buy a house. If they do, Summer puts up 100 percent of the down payment and 50 percent of the monthly payments to buy the house. If not, Summer will fully refund the 20 percent down payment.
When a member is not at home, Summer covers all operating and maintenance costs, from furniture to cleaning and refurbishment, and lists it on Airbnb. During the rental period, 100 percent of the rental income goes to the Summer. If the member decides to make a purchase, Summer described the option of entering into a revenue-sharing agreement.
However, it is too early to talk about the transition from members to owners. Summer has just exited beta with seven homes across four markets, four homes are already available for booking on the platform right now.
The company primarily makes money through rentals, but can also generate income through housing appraisals and subscription income from members.
Summer was founded by Paul Kromidas and Woods Buckley, who worked together at Airbnb (Kromidas led the creation of Airbnb Luxe) prior to the launch of Summer.
The company is partnering with lenders to purchase homes and has raised $13.4 million led by QED with participation from Lightspeed Ventures, 1Sharpe Capital, First Minute Capital and others.
Kromidas and Buckley believe that the biggest challenge for the summer is market learning.
“When you talk to people about their attitude towards real estate transactions, there is a lot of distrust,” Kromidas said. “They always have a story about a bad broker or a bad trade and there’s always that moment where I’m pulling my hair. When people first hear about us, it sounds too good to be true, which doesn’t necessarily reduce trust. But then when you peel the bulb, you begin to realize that it has all the best, without any flaws. And as people learn more and more, this light bulb moment starts happening and they realize, “Hey, this is a really good deal for me.”
Credit: techcrunch.com /