Divvy Homes – a startup that is out to help more people realize that dream by buying a house and renting it back to them while they build equity – has just closed on $110 million in Series C funding.
Divvy claims to be different from other real estate tech companies in that it aims to digitize “the archaic, data-heavy processes buyers encounter along the way.” It works with renters who want to become homeowners by buying the home they want and renting it back to them for three years “while [they build] the savings needed to own it themselves.”
Rather than buy homes and look for renters, the company does the opposite. Customers pick out a home and Divvy purchases it on their behalf with the renter contributing an initial 1-2% of the home value. They move in at closing, and pay one monthly amount. Part of that money is a “market-rate” rent and about 25% goes toward building up their savings in the house so they can put a down payment (estimated at 10% value of the home) on to purchase from Divvy later. The renters can choose to cash out their equity or purchase the home before the three years are up, if they choose. They also have the option to re-up their contract if needed, to take a bit longer to save up for a larger down payment.
While Divvy’s mission involves wanting to make homeownership more accessible… it’s a lucrative business model as well.
Looking ahead, Divvy plans to use its fresh capital in part to expand to more markets… But ultimately, Divvy wants to “create a complete end-to-end experience,” from providing realtors to serving as a lender… “That’s our bigger vision… We’re not there yet.”