At Spruce, we love working with innovative companies offering something truly different. One of our favorite examples of that is Divvy Homes, a pioneering real estate company providing an easier path to home ownership. Adena Hefets is the COO and co-founder of Divvy Homes, and we sat down with her to learn more about the service Divvy offers and her vision for the future.
The original idea behind Divvy Homes was that you could start by investing in part of a house and build up your investment in more manageable pieces.
Today, the way we work is you pick out the house and put 2% down. You own 2% and Divvy owns 98%. You pay market rent on the 98%, and make a small contribution on top of that to start gaining equity in the house.
After the first month, you own 2.2% and 5% by the end of the first year. By the third year, we ensure that you have 10% equity in the house and you’re paying 90% of market rent. You have the option to buy the house at any time during a three year fixed term, but you also don’t have to.
We saw two categories of people that could benefit from Divvy: Either people who have all of their net worth and savings tied up in their home with limited liquid capital to invest, or those who can’t get a mortgage and want access to some homeownership exposure.
On a more personal note, my parents immigrated to the US with very little money and no knowledge of how to invest in the stock market. I grew up fairly low income and the only reason my family has any money today is because they invested in real estate. Providing everyone access to partake in this asset class that typically takes a lot of work to get into was the goal. Because of my own background, I’ve seen first hand how homeownership can create wealth for families.
Our ideal customer is anyone who wants access to homeownership, but hasn’t been able to for one reason or another. We help people from a variety of backgrounds, income brackets, and credit profiles.
They could be in a situation where they just need a few more years to get their financial situation in order, or need to move but aren’t sure they’ve found the perfect house for them yet.
Honestly, some people use us just because it’s an easier way to buy a house. Who is Uber’s core demographic? It’s not just rich people who want to take private cars, it’s anyone who wants to get from point A to point B. It is more a factor of convenience, which goes across all income spectrums.
We’re not a lender. On paper, Divvy actually owns the home, and legally we are more like a landlord than a lender. The reason why this is good for a customer is that they don’t have any mortgage debt on their credit report. Gaining equity in a home, without taking on debt, gives Divvy customers increased flexibility. If you have a mortgage on a house, you can’t walk away. If our customers want to walk away at any point, they can, and we’ll cash them out at their ownership percentage.
We reach our customers through real estate brokers, mortgage brokers, customer referrals, new home builders. We have a bunch of different organic channels. The beauty of our model is that we don’t “eat anyone’s lunch”, so it works really well with a lot of people.
Divvy is currently operating in Atlanta and Cleveland. Our growth prospect for the next year is to expand into 1-2 markets but really go deep within them—probably 10x’ing the homes we’re purchasing.
There are so many. Our first home was probably one of my favorites, bought for a woman named Jane. Jane is an ER nurse and single mother, working from 4 p.m. to 4 a.m. everyday. If you call the emergency line, Jane is the person answering the phone—she is just super tough. She had applied for a mortgage and was close to getting it, but wasn’t able to save up for the down payment. Divvy was a really great option for her to get into a house. She is also just so wonderful, sweet, and kind!
Buying a home is such an emotional and difficult purchase, and we make it really easy. Our goal with Divvy is to make this process as easy and delightful as possible. Customers send us pictures of themselves in their homes, we pass them around the office, and we just love it.
Life is really short, and you need to spend it doing something that you feel like has meaning for you. That’s what Divvy is. It’s definitely a challenge, but having our customer’s love their home and feel like they have an opportunity like they’ve never had before, that’s what makes it worth it.
“Principles” by Ray Dalio. I tend to use my past experiences to fuel my gut decisions on how to deal with things, and Dalio is all about making unbiased decisions. I think being balanced in how you think is super important in my position.
I also just finished “Evicted: Poverty and Profit in the American City” by Matthew Desmond. It chronicles people who are very low income and how it’s really hard to break the cycle of constantly renting and being evicted. Small bump and hiccups can completely throw your world into disarray. Your car breaks down, so you take out a payday loan, you can’t afford it due to the super high interest rates, and you find yourself losing your home. It was a very powerful book and also reminded me of what we don’t want. With Divvy, we want to create a really stable housing experience.
Oh man, I’m coffee all the way.
I grew up on Long Island and there’s no topography to it. On the weekends, you go to the movies. I love San Francisco because I’m rediscovering things that New Yorkers never did—like hiking and running on trail paths. Being able to experience the outdoors is why I love San Francisco.
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