Divvy Homes, a real estate startup that allows would-be homeowners to pay a portion of rent while investing equity, has raised $30 million in Series A funding for its rent-to-own platform.
The funding round, which will help expand Divvy Homes’ platform in Cleveland, Memphis and Atlanta, was led by venture capital firm Andreessen Horowitz. Alex Rampell, who lead’s the firm’s financial technology investment strategy, will also be joining Divvy Homes’ board. Other investors including Caffeinated Capital, Scifi Ventures and DFJ have already invested in the real estate startup previously.
“We’re thrilled to have [Andreessen Horowitz] on our mission to give access to homeownership to everyone,” Divvy Homes CEO Brian Ma told Inman in a prepared statement. “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.”
Founded in San Francisco nearly two years ago, Divvy Homes allows renters to put down 2 percent of the price of a desired property, which the company then buys and leases back. Twenty-five percent of that monthly price goes toward equity for the house while the remaining 70 percent goes toward rent. The company also charges a 5 percent maintenance fee.
Through the rent-to-own model Divvy allows renters a path to homeownership while they amass 10 percent of its worth in equity credit over three years. After that, renters can purchase the home by paying a down payment from the monthly credits and getting a mortgage.
While rent-to-own companies are often accused of trapping people who are unable to save enough to buy a home, equity credit helps make customers mortgage-ready in just a few years. To ensure that timetable, Divvy works with customers to secure affordable homes expected to grow in value.
The company receives more than 2,000 applications a month while buying one home a day for its tenants.
“We are very excited to partner with Divvy by leading their Series A,” Rampell said. “In the future, you will buy your house from, or sell your house to, a company due to the laws of comparative advantage. Divvy is powerful for several reasons: it blurs the lines between renting and owning, prevents renters from using up all their income on rent, and provides better alignment – owners take better care of their property than renters do.”