San Francisco-based Divvy, which only launched earlier this year with $7 million in funding, calls itself a “fractional homeownership company.”
In many ways the company seems similar to traditional rent-to-own operators, some of which have earned a reputation for cheating by snapping up run down homes and convincing tenants to rent them with the chance to own the property later, even though they never make any repairs to those properties.
But Divvy says it gives people the chance to live in the kind of home they want, even if they can’t afford to buy it.
Divvy’s model works like this: the buyer chooses any home for sale they can find and Divvy will purchase it. The buyer puts down 2 percent on the home, and then pays a monthly amount to Divvy that combines both the rent and the equity payments.
Should the tenant keep up with the payments, the equity portion of their monthly fees slowly builds credit in that home. The idea is to build up 10 percent equity credit in the home over three years, so the tenant can demonstrate they have a reliable payment history and required income to be “mortgage-ready” when that period ends.
At that stage, residents are then given the option to buy the remainder of the home with a mortgage, with the credit they’ve built up used as the down payment.
Residents can also buy the home earlier if they’re ready to do so, Divvy says.
Divvy reckons its model has seen some success in Atlanta, Cleveland and Memphis, the three cities where it currently operates. To date, it’s buying up one home per day in those markets, and receives around 2,000 applications each month.
With the new funding, Divvy says it’s going to grow its business
Divvy CEO Brian Ma said the company is “thrilled” to bring Andreessen Horowitz on board as an investor: “We envision a world where everyone has a stake in the prosperity of their neighborhood and are excited to make Divvy the preferred partner for renters looking to purchase their first home,” he said.