Divvy Homes wants to make it easier for South Floridians to become homeowners.
The San Francisco property tech firm has seen demand skyrocket since entering the Miami and Fort Lauderdale markets last year as aspiring buyers compete for properties in a seller's market. The company buys eligible single-family homes on behalf of its users and then leases them back to renters for a period of three years, offering a path to ownership for people who may not qualify for a mortgage.
"You can think of it like home ownership with training wheels," said Divvy Homes CFO Tom Egan. "Right now it's harder than ever for people to reach the first rung of the property ladder. We feel like we're enabling that in a way that traditional products are not."
Divvy Homes clients must contribute 1% to 2% of the home's down payment to participate in the program, compared to at least 20% with a traditional mortgage. After that, 25% of their monthly rent payment goes into a savings account to put toward the rest of the down payment. The goal is to help buyers transition to a traditional mortgage after three years.
If the client decides they don't want to go through with the purchase, they can walk away from the rented Divvy Home and receive their down payment savings balance minus a 2% fee.
The company aims to make home ownership an accessible goal in competitive markets like South Florida, where average residents struggle to compete with wealthier transplants and institutional buyers who can place all-cash offers on homes. The region's tight inventory of single-family homes is also driving up costs: Median home prices in the Miami-Fort Lauderdale area reached $356,000 in July, up 40% from 2016.
"What makes our product compelling is we make all-cash offers for our customers, giving them the ability to operate on the same playing field as institutional buyers," Egan said.
Launched by co-founder and CEO Adena Hefts in 2017, Divvy Homes is among a handful of tech "unicorns" – private companies valued at $1 billion or more – led by women. The venture has raised $1.2 billion debt funding and has a $2 billion valuation.
Divvy Homes is now available in 16 U.S. metros, including five in Florida. The company is selective about where it operates, focusing on metros with large population centers where it can earn profits on rent yields. And there's plenty of demand: Divvy Homes reports it closed more homes in 2021 than it did in the four years since its founding.
"Almost 50% of our leases have ended up with a customer acquiring a home – we’re proud of that, but we want to do even better," Egan said. "This is only the start."
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