Divvy Homes’ Adena Hefets on Rent-To-Own Innovations

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In this episode of the Top of Mind podcast, Mike Simonsen sits down with Adena Hefets, co-founder and CEO of Divvy Homes, to talk about why the rent-to-own model is gaining momentum in today’s housing market. She discusses the challenges many people are facing in getting a mortgage, looks at the dynamics behind the affordability crisis, and shares her thoughts on which segments of the housing market are best poised to hold value and appreciate. She also gives her perspective on which types of proptech startups are poised for success, and which ones will have trouble making it.
About Adena Hefets
Adena is the co-founder & CEO of Divvy Homes, a proptech company on a mission to make homeownership accessible to everyone. In 2017, Adena set out to solve a problem she saw in the market: fewer people can afford to purchase a home today than two decades ago. To solve this, she came up with a new way to finance a home purchase through a rent-to-own model that allows renters to gradually build up ownership in their future homes - all while living in it.
Prior to founding Divvy, Adena joined Square in 2013 and was responsible for building out Square Capital, a merchant cash advance platform with billions in loans outstanding. Prior to Square, she was part of the large-cap buyout team at TPG, a private equity firm, where she helped purchase companies in the real estate sector. She started her career as an investment banker at Merrill Lynch.
Here's a glimpse of what you'll learn:
- How the rent-to-own model works, why it’s attractive, and which demographic groups are embracing this approach
- Which type of proptech startups are poised for success, and which ones will have trouble making it
-Why the biggest crisis we’re facing in real estate is affordability, and what we can do about it
- Why big investor money is still on the sidelines, and what that means for the housing market
- Which segments of the housing market are best poised to hold value and appreciate
- Where we should see the impact of AI innovations on the real estate industry (and where we won’t).
Altos Research is the premier resource for real-time real estate data. We provide weekly market statistics, analysis and reporting for 99% of the zip codes in the U.S., helping real estate professionals, investors, financial institutions, and their clients make better-informed decisions.
Featuring Mike Simonsen, President of Altos Research
A true data geek, Mike founded Altos Research in 2006 to bring data and insight on the U.S. housing market to those who need it most. Altos provides national and local real estate data to financial institutions, real estate professionals, and investors across the country, and the company is now part of HW Media, publisher of HousingWire and RealTrends. Mike uses Altos data to identify trends in the real estate market well before the headlines, and his work has been featured in the New York Times, The Atlantic, Fortune, Forbes and other publications.
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Altos Research is now part of HW Media! Check out their channel at @HousingWire for more housing market insights.

[@MrWaterbugdesign]

Can rent to own run into Dodd-Frank problems? Interest only can be an issue maybe?

[@MrWaterbugdesign]

18:00 OK, Adena explains that her structure is a gift to renters. That's all it is. That's fine for people who want to give away money. For 1% a renter can lock in today's value with an option to buy sometime in the future. So for a $500k house that's $5k to buy the option. They have to pay prop tax, ins, maintenance. But maintenance can be deferred. In a year f the value jumps up 20% they get $100k appreciation for the $5k option. If the value declines 20% they walk away leaving the owner with a net $95k loss. Plus the owner keeps a lot of risk for the duration. Terrible deal for the owner...unless they're just donating to the renter.

[@MrWaterbugdesign]

11:00 It's silly to do a rent vs own analysis with a duration variable. If I know I only want to live in SF for 1 year renting is cheaper unless values really jumped up. But if I plan to live there for 10 years it seems much more likely that rents values and home value will increase making ownership much better. I see this "cheaper to rent" idea all over the web. But always short sighted in the extreme. Owning is an investment. Investments include risk. You can gain by taking on that risk. Super, Divvy is giving away options. I don't see how that would ever scale. Most people are wanting to make money, not give it away.

[@MrWaterbugdesign]

29:00 "no transition fee" for Divvy when the renter walks. Really? So apparently no landlord experience because she doesn't seem to know some renters trash the property. Divvy would have to repair and sell the property to a traditional buyer. So a $500k house Divvy keeps the $5k down payment and has to pay how much for repairs, carrying cost for repairs and while selling, plus selling expenses. So Divvy loses maybe $20k? I don't see that as "no transition fee".

[@MrWaterbugdesign]

26:11 "...health care workers (nurses)...education workers....1099 plus child support..." Bingo. A female giving equity to single moms. Got it. Much lower standards to qualify than a mortgage...gift, gift, gift.

[@lookup9078]

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