Saving up for a down payment becomes next to impossible when the majority of your paycheck is eaten up by rent. Without a loan from the Bank of Mom and Dad or a winning scratch-off ticket, the American Dream can start to seem more like a pipe dream.
Divvy Homes, a startup that allows its customers to choose their dream home and rent it while saving for a down payment, announced today that it raised $110 million in Series C funding led by Tiger Global Management. The round included existing investors like a16z and newcomers GGV Capital, JAWS Ventures and Moore Specialty Credit.
In just four years, Divvy Homes has acquired over $500 million in equity and debt funding. Among the investors from previous rounds were prolific US homebuilder Lennar and Affirm CEO Max Levchin. Divvy Homes’ CEO Adena Hefets previously worked as a product manager at Square and co-founded the company with Brian Ma, Nick Clark and Alex Klarfeld.
Unlike other rent-to-own ventures, Divvy Homes allows its customers to select the home they aspire to own (albeit within an approved budget) and put just one to two percent down. The company purchases the home on its customers’ behalf and they rent it back to them at an above-market-rate price to accumulate savings.
Customers can opt to buy back the home at any time with the money they’ve saved, or they can move out after their three-year lease is up and pocket the cash. Those who move out early will still have access to their savings but will have to pay a relisting fee. Divvy Homes’ earnings come from monthly rent payments and home appreciation.
The company operates in 16 markets across the country including Phoenix, Atlanta, Houston, Miami, Denver and Cleveland. Hefets told TechCrunch that the average price of a Divvy-purchased property is $200,000 and about half of customers choose to buy back their home.
Divvy plans to use its latest round of funding to break into more markets and develop a “complete end-to-end experience” that will assist users along every step of the real estate process.