Tech startup Divvy aims to revolutionize the rent-to-own model for houses


A new tech startup that allows renters to build up credit for a potential home purchase down the line may be just what the doctor ordered for those who can’t afford to buy right away.

Divvy Homes soft-launched near the beginning of the year and is already making waves in the real estate world. The San Francisco-based service, which bills itself as “a tech enabled rent-to-own business,” claims to have 200 people a week already applying for its program.

Divvy allows renters to build equity credit toward buying home

Here’s how it works: The renter finds a home for sale and Divvy buys it and leases it back. The renter typically puts down 2% for the down payment (no less than $1,250). The above-market monthly rent includes equity payments, which builds the renter’s equity credit in the home.

What a resident pays monthly is comprised of three parts, the company says in an FAQ:

  • Rent (about 70% of your monthly payment)
  • Equity credits (about 25% of your monthly payment)
  • Maintenance funds (about 5% of your monthly payment)

The business model aims to facilitate the eventual purchase of the home by building up 10% of equity credit over three years. Of course, the renter also has the option to buy the home outright at any point before that.

Each home has a pre-determined buyback price based on Divvy’s projection of its market value in three years. The company promises that the buyback price won’t change during that time period.

The company, which just received a round of funding from several venture capitalists, including Max Levchin, a PayPal co-founder, is currently available in the Cleveland and Atlanta markets, according to a press release.

“Our highest priority is to educate, support, and partner with our home buyers to make sure they transition smoothly into homeownership,” Brian Ma cofounder and CEO of Divvy said.”Our program is specifically designed to be fair and transparent — we want every home purchase to be a win for our customers.”

On the tech side, Divvy is looking to do no less than revolutionize the homebuying process. On its website, renters can get pre-qualified online. According to the company, anyone who has a credit score of at least 500 and no bills in collections is eligible.


Once the process is complete, potential tenants can search homes on the site and choose one that they want to live in.

While residents will be on their own when applying for a mortgage, they can save money through Divvy because there won’t be any closing costs.

What Clark has to say about Divvy

Money expert Clark Howard says that rent-to-own programs rarely work out for renters. But while it’s too early to tell if this venture will pan out, it definitely is a new and tech-savvy approach to homeownership.
“Is it going to blow up on you as a consumer, a would-be homebuyer? Don’t know, “ Clark says. “But I really like the simplicity of what they designed and we’re going to have to see if it works out well.”

See more of Clark’s pointers in his Tips for first-time homebuyers. Also, check out these nine costly mortage mistakes to avoid.

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