Rent-to-buy start-up Divvy Homes has entered into new debt facilities totaling $750 million to finance home purchases for its customers.
The debt — from lenders including Barclays, Goldman Sachs, Cross River Bank, LibreMax Capital and Brigade Capital Management — will refinance two existing debt facilities and give Divvy “substantial” added capacity to support its “10-year goal of helping more than 100,000 families become financially responsible homeowners,” according to the funding announcement.
The funding comes less than two months after Divvy announced a $200 million fundraise that brought the company’s valuation to $2 billion.
Divvy offers a path to home ownership to those who aren’t ready for a down payment and mortgage. For an upfront payment of 1% to 2% of a home’s value, Divvy will buy a home with cash, and then rent it back to the client for up to two years. Divvy holds about 25% of each monthly payment as savings toward eventual purchase by the client. If the client decides not to buy the home, they can move out and recoup the accumulated savings.
Divvy says about 47% of customers choose to buy, a conversion rate “well above” that of its competitors.
Like I-Buyers such as Opendoor, Zillow and Offerpad, Divvy has benefitted from the tight pandemic homes market because cash offers can provide a winning edge in bidding wars.