Posted October 9, 2018

“You better cut the pizza in four pieces because I’m not hungry enough to eat six.” –Yogi Berra

In the future, you will buy your house from, or sell your house to, a company due to the laws of comparative advantage. We have made many investments (e.g., FlyHomes and OpenDoor) around this thesis.

But how do you fundamentally unbundle housing and what it means to “have a house”? Owning a house confers (bundles) three rights:

Houses that are for sale are…for sale. Houses that are for rent are…for rent. Why not take a house that’s currently for sale, and turn it into a rental — to you? And why not take rent and turn part of it into an ownership interest?

Enter Divvy. Started by Brian Ma, Adena Hefets, and Nick Clark — the perfect combination of real estate guru, capital markets guru, and engineering guru — Divvy lets you pick out any house on the MLS, buys it for you, and rents it to you, conferring an ownership position over time. It’s a new path to home ownership and a redefinition of residential housing verbs. Do you own, do you rent, or do you Divvy?

There’s also a clear network at play. There are 2 million licensed real estate agents in the U.S., a plurality of whom go without a single transaction in a year. If agents could just expand the “pool” of buyers by changing the definition of buying (not by encouraging people to buy more house than they can afford!), they have a ton of opportunity in many, many otherwise unavailable clients — the entire rental population.

And that’s precisely how Divvy works. You either hear about it from Divvy (word of mouth/advertising) or from an agent. You find the house you want on the MLS. Divvy buys the house (using an agent to close the transaction), owns the house, and rents it to you. And during the rental term, part of your rent goes to establish an ownership stake.

This is powerful for several reasons. One, it blurs the lines (in a good way!) between renting and owning, and makes often nicer “for sale” housing stock — closer to good schools and amenities — available to those who can’t afford to buy. Two, it prevents renters — especially those who want to live in a nice area — from simply burning up their income on rent and not being able to make a down payment in the future. Third, it provides better alignment — think the antithesis to the Warren Buffet saying of “nobody washes a rental car”. Owners take better care of their property than renters do.

On the “investor” side (Divvy uses debt to buy homes), it’s very compelling to only buy a property when you have a captive tenant (those familiar with real estate might view this as a twist on the “sale leaseback”). Normally, if you are a landlord, you first build or acquire a property, and then have to find a tenant. In Divvy, the order of operations are reversed, and the returns have been very compelling.

We are very excited to partner with Divvy by leading their Series A.




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