Divvy Homes, a rent-to-own startup based in San Francisco, has had a busy year.
In September, the company closed a $43 million Series B funding round and expanded into three new markets in Texas, Missouri and Florida. The key to the startup’s success lies in staying grounded to the needs of everyday Americans — the millions of people who dream of owning a home but feel priced out or lack the credit to qualify for a conventional mortgage, according to co-founder and chief executive officer Adena Hefets.
Adena Hefets
“The old American dream of having a large house with a white fence and a yard for the kids and a place that is one’s very own is still very much there,” Hefets told Inman, adding that there is a growing market for people who are exploring alternate options to finance their home. “That’s never going to change.”
Hefets, who will be speaking at Inman Connect New York later this month at New York’s Marriott Marquis, sat down to talk with us about everything from millennial financing needs and data trends to the modern-day manifestations of the American Dream.
Inman: This fall, you closed a major funding round. What has the year been like for you and where do you plan to take Divvy Homes in the future?
We have raised $30 million in Series A in 2018 and closed our Series B funding round in September. That is in equity. We also raised over $100 million in debt, which brings our total funding to over $200 million. In terms of this year, we have purchased more homes, continued to develop products that work for those who have been pushed out of the traditional mortgage system, closed a funding round and expanded Divvy to new markets. The plan is to make it easier for more people to make the jump into homeownership — expand our team of real estate experts, increase technology investment and keep buying homes.
Inman: What advice would you give to a real estate tech company that wants to secure the sort of funding you were able to get?
I’d say it all comes down to having a really good product. I think that consumers understand the value proposition of a product that they really feel is helping them. The key is building something that people really love and want to watch grow. I guess my only advice to a company in real estate tech or real estate in general is to work on a product and provide a solution that gets people really excited.
Inman: But what if you already feel confident in your product? What steps do you take then?
Well, it is structured around your initial time chart. You have to make sure that all your hypotheses and the assumptions you have are panning out. You get invited to speak to mentors, you decide to bring in capital that is right for you. If so, you’re on a really tight decision-making process. Raising capital is a completely different process so I would say to build a good product and the capital will follow.
Inman: Affordability has been a major concern across all sectors of the industry. Even with high employment and low mortgage rates, home values are too high for many first-time buyers to save for a down payment. Do you see this economic situation changing any time soon?
There are definitely pockets of this country which saw enormous jumps in home values and became oversaturated as a result. High home prices are, depending on where in this country one lives, a major reason why some people struggle to make the leap from renting to owning and why companies like ours provide a necessary service. That said, the job market remains strong and a lot of millennials are increasingly starting to look for their first home through alternative methods of financing. I do not believe that we will have a recession or at least certainly not anything like the one we had in 2008. But some pockets of this country are still grappling with prices that are disproportionate to people’s incomes and I do not see any drastic changes in that regard happening any time in the future.
Inman: What technology trends have you observed over the last year? Is the real estate industry still primed for disruption, as people used to say a few years ago?
We are seeing more and more people look for alternate ways to finance a home. For many, this means looking away from a traditional mortgage and exploring options such as nontraditional lenders, shared mortgages and, of course, rent-to-own. When it comes to technology, I expect the digitization of the homebuying and rental processes to continue and only become more automatic with time. Data, and how we gather and apply it, also continues to play a major role in the market going forward. Information on everything from pricing and inventory to apartment and home sales can be used to predict housing trends and develop new and more relevant products. On the consumer side, having access to data allows you to make more informed investment decisions.
Inman: Looking at the industry in general, what else are you keeping an eye on for 2020?
The technology is an enormous part of it but we are also seeing changes in how people look for homes. While some millennials are exploring alternative housing methods (multi-family housing, condos), a large number is also growing older and ready to look for single-family houses of their own. Many who had delayed homeownership before are now looking to buy that first real home. That means that many are also starting to explore the financing options that are available to them.
Inman: So the American dream of a house with a yard is one thing that has not changed despite the abundance of technology?
Yes! Some [millennials] are exploring options such as multi-family housing and condos but the old American dream of having a large house with a white fence and a yard for the kids and a place that is one’s very own in the world is still very much there. That’s never going to change.
An earlier version of this story identified Adena Hefets as the COO of Divvy Homes. She is, in fact, the CEO. Inman regrets the error.
Are you ready for what the industry holds in 2020? Inman Connect New York is your key to unlocking opportunity in a changing market. At Connect you will gain insight into the future, discover new strategies and network with real estate’s best and brightest to accelerate your business. Create your 2020 success story at Inman Connect New York, January 28-31, 2019.
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