Divvy, which helps renters become owners, raises $110M

Mortgage alternative startup saw business grow fivefold in 2020

National /
Feb.February 02, 2021 09:00 AM
Divvy Homes CEO Adena Hefets. (Twitter, Divvy)

Divvy Homes CEO Adena Hefets. (Twitter, Divvy)

 

UPDATED: Feb. 2, 8 p.m.: Rent-to-own startup Divvy Homes has raised $110 million to meet a wave of demand from customers who cannot secure a traditional mortgage.

The Series C was led by Tiger Global Management with participation from GGV Capital, Moore Specialty Credit, JAWS Ventures and others.

According to Divvy, the infusion of cash will accelerate its geographic expansion and support the launch of new products, including brokerage and title insurance. “We’re starting to build out services [for] an end-to-end customer experience,” said co-founder and CEO Adena Hefets.

Divvy’s valuation was not disclosed, but the round brings its total funding to $500 million in debt and equity.

Founded in 2017, Divvy bills itself as a way to bridge the gap that aspiring home buyers struggle to cross. Many of its customers are health-care workers, teachers and independent contractors. “There are people who can get a mortgage and folks who can’t,” Hefets said. “There aren’t many options for those who can’t.”

Divvy buys homes on behalf of customers, who sign a three-year lease on the property. Customers chip an initial 1 percent to 2 percent of the home’s value, and can then build their equity up to 10 percent. Those who fall behind can get their equity back, Hefets said in an interview with Inc. magazine.

“If someone falls behind on payments, we try to find a flexible solution. We will apply on their behalf for rental assistance,” she said. “They get their equity back if they just tell us this isn’t working for them. If they don’t communicate, we have an obligation to evict them.”

Hefets said Divvy’s business quintupled over the past year as unemployment spiked and mortgage lenders tightened their underwriting requirements. “In addition, you have mass migration from multi-family to single-family” homes during the pandemic, she said.

Divvy does not disclose the number of homes it owns, but has purchased “thousands” of properties since 2018, spending $100,000 to $500,000.

Last year it expanded to Miami and Fort Lauderdale, and it’s now in 16 markets around the U.S. It aims to be in 20 by the end of the year.

The company’s revenue comes from rental income. At the end of a lease, the customer can cash out or purchase the home from Divvy. “Ultimately, it’s similar to a mortgage,” she said. “It’s just that Divvy is in there instead of the bank.”






    Related Articles

    arrow_forward_ios
    Andrew Florance, CEO of CoStar Group (CoStar, Homes.com)
    CoStar to buy Homes.com for $156M
    CoStar to buy Homes.com for $156M
    (iStock)
    Mortgage requests, refinancings continue to drop
    Mortgage requests, refinancings continue to drop
    Howard Hanna CEO Helen Hanna Casey and Compass CEO Robert Reffkin (Howard Hanna Casey, Getty)
    Howard Hanna accuses Compass of poaching agents, stealing trade secrets
    Howard Hanna accuses Compass of poaching agents, stealing trade secrets
    The effective rate was 1.1 percent, on average, in 2020, down from 1.14 percent in 2019. (iStock)
    Homeowners’ property taxes grew twice as fast last year
    Homeowners’ property taxes grew twice as fast last year
    HomeX founders Michael Lerner and Vincent Payen (HomeX)
    HomeX nabs $90M to connect homeowners and repair techs
    HomeX nabs $90M to connect homeowners and repair techs
    The state has opened 52 more investigations into potential fair-housing law violations tied to the Newsday report (iStock)
    Agents named in discrimination exposé face discipline from NY state
    Agents named in discrimination exposé face discipline from NY state
    Celebrity broker Ryan Serhant is renting his Hudson Square penthouse. (Serhant)
    Ryan Serhant rents Lower Manhattan penthouse for $15K
    Ryan Serhant rents Lower Manhattan penthouse for $15K
    Birmingham and Bournemouth both saw a giant increase in demand. (Getty)
    Demand for rentals rises in UK’s largest cities in Q1
    Demand for rentals rises in UK’s largest cities in Q1
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...