The inspectors look for potential structural and foundation issues, pest control problems, deteriorating roof conditions, outdated electrical systems, and other issues that could be financially burdensome for the eventual homeowners.Īlgorithms to Evaluate Ability to Purchase In order to prevent high unforeseen costs for customers down the road, Divvy works with inspectors to check that homes won’t have large repair costs. The company’s model is designed so that within three years or less, Divvy would be able to sell and transfer the property over to them. Divvy would then collect a monthly amount that is composed of both market-rate rent and an equity payment. The individual or family must contribute at least 2% of the total home value for a down payment. Divvy would then help these individuals or families attain their goal of owning their chosen home someday. They gave individuals or families in these cities the option to select a home they would eventually want to own. “For us, the mission is really important to be serving those who I think most benefit from access to home ownership and who most struggle with it,” stated co-founder and CEO Adena Hefets.ĭivvy Homes initially launched in three markets-Memphis, Atlanta, and Cleveland. Andreessen Horowitz made early investments in companies that have since soared to remarkable heights, such as Facebook, Coinbase, Airbnb, and Twitter. Alex Rampell, a partner at the VC firm, led the $10 million Series A round in Divvy Homes in 2018. The startup last raised a $43 million Series B round in 2019.Įarly on, Divvy Homes attracted the attention of the prominent Silicon Valley venture capital firm Andreessen Horowitz. Divvy Homes recently raised a $110 million Series C round led by Tiger Global Management. It’s usually a couple settling down, they have kids…they’re going through a life event like that.”ĭivvy’s model of providing customers with a pathway from renting to homeownership has drawn investor attention. “Our customers have, on average, about $4,000 saved up in the bank, about $60,000 to $80,000 in income, and generally have about a 635 FICO score. “The number of people who fall outside of the traditional mortgage box is growing, with more people struggling to be able to purchase a home,” states Divvy’s CEO Adena Hefets.Ĭo-founder and CEO Adena Hefets highlights that the typical customer is a middle-class American who has been locked out of the traditional mortgage system in the current market. Divvy’s business model takes advantage of a huge potential opportunity. The average price of the homes it buys is around $200,000. Over the course of 2020, Divvy expanded into 16 total markets. Millions of Americans are unable to meet the characteristic standards of traditional mortgage underwriting.ĭivvy generates revenue through collecting rental income. Securing a mortgage often requires having a strong credit history and a steady income. One hindrance is the homogeneity of the requirements for securing a 30-year fixed mortgage. There are a number of barrier of entries for Americans aspiring to purchase their own home. In the meantime, customers are able to build equity. The Divvy business model consists of allowing customers to select a house they aspire to eventually own, and then renting it back to them over the course of a couple years. The San Francisco-based startup seeks to make homeownership more attainable for millions of Americans. The homeownership rate is slowly climbing up again, but still hovers around 65%. Homeownership rates declined following the global financial crisis, reaching a low point of 63% in 2016. Faced with a soaring housing market, large student loans, and credit card debt, the homeownership rate has declined from its peak of 70% in 2004. For many millennials and middle-class Americans, homeownership has become a distant dream.
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