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Divvy Homes review: revitalizing the rent-to-own model?

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DivvyHomes' rent-to-own model offers a real shot of homeownership to people who might not otherwise be able to buy a home on their own.

Homeownership is a challenge now more than ever before. Having a poor credit score or not having enough cash saved up for a down payment can deter many aspiring homeowners from even trying to buy a home in the first place.

Using a rent-to-own model, Divvy works with homebuyers who may not qualify for a mortgage but want to own a home of their own. In addition to helping ease the transition to homeownership, Divvy also covers other major home costs during the lease terms and prepares their customers for mortgage eligibility.

This article will review Divvy Homes, how their home buying process works, and whether or not it’s a good way to buy real estate.

Pros and cons



  • Helps homebuyers who otherwise might be disqualified buy a home

  • Low initial payment of 2%

  • Divvy provides maintenance during the rental period

  • Buyers can cash out at the end of their lease without purchasing a home



  • Homebuyers enter a 3-year lease with Divvy that can’t be broken

  • Divvy is only available in certain housing markets

  • Missing a payment can significantly impact a buyer’s credit score

  • Monthly payments will likely be higher than with traditional renting

What is Divvy Homes?

Divvy Homes is a new way to help homebuyers purchase a home through a rent-to-own model. The company purchases a home on a buyer’s behalf. The buyer then makes rent payments while also setting aside money for a future down payment through Divvy. After the rental term is up, buyers can buy their home.

During the three-year lease period, Divvy covers maintenance and repair costs — just like a landlord would. But unlike landlords, Divvy defers to the renter to coordinate and make decisions on repairs, giving prospective buyers the opportunity to test out home ownership and learn about what it takes to own a home.

Divvy offers a path to homeownership by allowing buyers to build equity in a home while still renting it. That means that individuals who may not have enough for a down payment, or are self-employed, or have a low credit score — or simply aren’t sure if they’re ready to own a home in the first place — will still have an opportunity to buy a home through Divvy.

Related: Rent to own – A home buying option with no down payment required

How does it work?

A buyer can select a home from one of the markets Divvy operates in.

Once the home is selected, Divvy pays for the house in cash on half of the buyer. In exchange, the buyer compensates Divvy with a 2% payment of the home’s selling price.

Homes can range in price from $60,000 – $300,000. This allows a buyer to get into their home for less than $6,000 in upfront costs. The remaining purchase price, closing costs, taxes, and insurance are all covered by Divvy.

After Divvy closes on the home, a buyer enters into a 3-year rental agreement with them. The rental term is designed to help make buyers “mortgage-eligible.” To do that, rent payments include an extra “home savings” fee that helps buyers set aside money to cover a future down payment while still paying rent on the home.

During the lease term Divvy acts as a landlord, covering maintenance and repairs. This allows a renter to essentially test out whether or not they actually want to take on all the responsibilities of owning a home.

When the lease term expires, buyers should have enough set aside to cover the down payment needed to qualify for a traditional mortgage. Buyers can buy back their home from Divvy and take ownership of it. If they decide homeownership isn’t for them, they have the option to walk away from the home, taking the equity they’ve built up with them.

Read more: Should you pay off your mortgage or invest?

Purchase and buyback process

After a buyer chooses the home they want to buy Divvy closes on the purchase and takes on the buyer as a tenant. Divvy and the buyers enter a 3-year lease period which is designed to give buyers enough time to become eligible for a regular mortgage.

As part of the lease agreement, a portion of each month’s rent goes towards a home savings fund. Approximately 10-25% of each month’s rental payment is set aside in this fund to put towards a future down payment.

The buyback process can begin once a buyer obtains pre-approval from a lender. Divvy works directly with the buyer’s lender to proceed with the process. Divvy manages the buyback process, including the remittance of a buyer’s home savings fund, on behalf of the buyer.

Buying back your home early

At any point during the rental period, the buyer can use the equity they’ve built in the home to make a down payment.

Divvy sets two buyback prices for homeowners who wish to purchase their home early. One price is set at 18 months the other at 36 months. The 36-month price is based on the forecast of the home’s appreciated value during this period of time. According to Divvy, the buyback price is around 5-15% higher than Divvy’s original purchase price.

The 18-month price is an average of Divvy’s original purchase price and the expected price of the home after 3 years. This is the cheaper of the buyback prices and will save the buyer the most money in the long run.

Divvy prorates rent for buyers in the buyback phase, including early buybacks. As the buyer works through the process of closing on the home, they're still required to make rental payments.

Only once the buyer successfully closes on the home, Divvy will refund the prorated rental amount for that month back to the buyer. At this point, the lease is ended and the buyer takes over mortgage payments on the home.

Choosing Not to Purchase a Home

One of the benefits of buying a home through Divvy is that the buyer can test out home ownership without committing to purchasing a home upfront. After the lease period comes to an end, a buyer can walk away from the home.

Divvy will return the accrued home savings portion of the monthly rental payment saved up during the rental payment, minus the initial 2% price of the home the buyer originally put down. This is used to compensate Divvy for reselling the home.

Even if a buyer decides not to purchase their home, Divvy can act as a de facto savings for home buyers. Utilizing Divvy’s program allows a buyer to set aside money for a future down payment. Because the buyer has built equity in their home during the rental period, they can use this equity to either buy back their home from Divvy or use it to buy a home elsewhere.

Related: Should you buy? Is real estate a good investment right now?

What are the fees and costs?

When a buyer purchases a home through Divvy, they aren’t actually putting a down payment toward the home. The 2% “down payment” made by the homebuyer up front is actually similar to a security deposit. Divvy credits the buyer with the initial payment as an equity credit, but the buyer forfeits it if they break their lease or decide not to go through with purchasing their home.

In addition to purchasing a home on the buyer’s behalf, Divvy also covers insurance, closing costs, and taxes. If a buyer does not move forward with purchasing a home, the 2% initial payment goes towards compensating Divvy for these fees and reselling the home.

Divvy covers all maintenance and repair costs during the rental period. While this can save buyers the headache of out-of-pocket maintenance costs, they do not necessarily get a say in how repairs are made. Divvy must approve the expenses first. If repairs are made without prior approval, the buyer may be on the hook for those costs.

In the event of a broken lease, Divvy may assess “outstanding fees and payments owed to Divvy.” It is unclear what these fees consist of and how they are assessed. Buyers who do not complete the lease term could inadvertently be penalized and lose some of the equity they’ve built up in the home.

When buying back their home, a buyer may end up paying more than the home is worth. According to Divvy, buyback prices are non-negotiable. If the home appraises for less than the buyback price, Divvy can work with the buyer to contest the evaluation, but ultimately, the buyer will be on the hook to make up any difference.

What are the risks of using Divvy Homes right now?

Divvy is an attractive option for home buyers who might otherwise not qualify for a mortgage. That being said, there are a few risks to consider.

The current housing market exposes buyers to price volatility. A rapid appreciation in a home’s value could make a down payment unaffordable, even after the rental period comes to an end.

Even though Divvy can be a useful forcing mechanism to help a home buyer set aside money to eventually buy a home, the volatility in the current housing market might not be worth the risk. A buyer will need to understand their local housing market and determine if forecasted price changes make Divvy a worthwhile venture.

Renting with Divvy is more expensive

Divvy sets its rent based on the fair market rent for the neighborhood a house is located in. Given that many rental markets are also overpriced, a buyer could risk paying more than the house is actually worth. If the housing market in a particular area declines by the end of the rental period, it might not be worth buying the home. In that case, the buyer would forfeit 2% of the home’s value if they decide not to purchase it.

Buyers opting to use Divvy’s platform can also expect to pay more than renting or purchasing a home outright. This is because a portion of the rent is set aside as “home savings” for a future down payment. While this can build a good savings habit, it will increase a buyer’s cost of living in the short term. This could make it harder to make monthly payments and risk damaging their credit score in the event they miss a payment and break the lease.

Breaking your lease early means leaving money on the table

One of the main drawbacks of Divvy is that it is a big commitment. While a buyer doesn’t have to purchase the home at the end of their lease term, they do enter into a contractual obligation to rent the home for 3 years.

Divvy states that they allow buyers to move out early with a 60-day notice. However, Divvy’s Help center states that a buyer is obligated to their lease and does not mention what conditions permit a renter to break their lease. If the lease is not carried out to term (i.e. the buyer stops making payments) then it is considered to be broken.

A buyer who breaks their lease will be refunded the equity they’ve saved up, minus 2% of the value of the home. Divvy may also deduct “outstanding fees and payments owed to Divvy” to cover selling costs.

Given that Divvy retains ownership of the home on a buyer’s behalf and any funds they have set aside for a future down payment, Divvy holds leverage over buyers who do not follow through with their lease agreement. Divvy can deduct fees that reduce the value of a buyer’s equity stake in the home and breaking a lease can adversely affect a buyer’s credit score.

These are important things to take into consideration when purchasing a home with Divvy. Ending the lease agreement early could put homebuyers in a worse position than when they started out.

Divvy Homes markets

Divvy is currently available to the following metro areas:

  • Phoenix
  • Denver/Colorado Springs
  • Ft. Lauderdale
  • Ft. Meyers, FL
  • Jacksonville, FL
  • Miami
  • Orlando
  • Tampa
  • Atlanta
  • Macon, GA
  • Minneapolis
  • St. Louis
  • Cincinnati
  • Cleveland
  • Memphis
  • Dallas
  • Houston
  • San Antonio

Future areas of expansion could include the Carolinas, Detroit, and Las Vegas. Divvy is avoiding expensive housing markets like San Francisco, as those markets reduce the number of buyers Divvy can work with.

What are customers saying about Divvy Homes?

One of the biggest complaints Divvy customers have is the poor quality of maintenance. While some buyers may find Divvy’s coverage of maintenance costs a benefit, the quality of maintenance might not be to a buyer's liking. At the end of the day, Divvy isn’t building equity in the home, the buyer is. They do not have as much of an incentive to make quality repairs as a buyer might like.

Other buyers report unexpected fees cropping up during the purchase process. Divvy’s main customer base is individuals who have typically been excluded from home ownership. Thus coming up with extra money to cover unplanned expenses can be a huge burden on buyers.

Some buyers even reported difficulty receiving their equity payment after deciding not to pursue a home purchase at the end of the rental term. Divvy retains a buyer’s equity which means Divvy can return that payment on their timing rather than the buyer’s.

How's the customer service?

Divvy provides customer support via their online Help Center. This is largely automated with pre-populated answers while customer support is conducted via email. Divvy’s customer support email is support@divvyhomes.com.

Other than its digital Help Center, Divvy does not appear to have any other customer support options. Even when it comes to buying back a home, users working with Divvy are directed to funnel all questions through a designated email address.

Other ways to ease into homeownership

Divvy Homes is one of many new rent-to-own companies cropping up to help renters transition into home ownership. While these programs can be great ways to ease into homeownership, there are other options a home buyer can consider.

Finding lease-to-own properties in your neck of the woods

Renting a property before buying it is not a new idea. While Divvy and its competitors like ThinkTrio and Verbhouse have created a more streamlined process for finding these properties, there are other ways to go about your search.

One way to find a property is to talk to landlords and realtors in your area. A homeowner may have wanted to sell their home but was unsuccessful. As a result, they started renting out their property instead. According to realtor.com, these are “reluctant landlords” who may be amenable to entering into a rent-to-own agreement with the right tenant.

Another way to locate a property is to use online housing search engines like HomeFinder. Sellers can list their property as rent-to-own. When you find a property you can work directly with the seller to negotiate the terms of a rental agreement and what transitioning to full ownership of the home might look like.

Save for a down payment with a high-yield savings account

One of the draws of a program like Divvy is that it forces buyers to save money each month towards a future down payment. While this is a great way to save money, it isn’t the only way.

If you're eager to buy a home, start saving money now. Open a high-yield savings account where you will get the highest return on your savings. Designate a portion of each paycheck to go to this savings account.

Treat saving for a down payment the same way you already contribute to your 401K or other retirement accounts. Automate the savings into a segregated account. If it’s out of sight you will be less tempted to touch it. Before you know it, you’ll have enough saved up for a down payment.

Bottom line

While Divvy helps solve a major pain point for unqualified home buyers, it also exposes that same group of people to an overvalued housing market. Buyers who break a lease or choose not to purchase their home risk forfeiting 2% of the value of the home in fees.

Thankfully, Divvy’s rent-to-own model is not the only way to purchase a home. Dozens of programs exist to help unqualified home buyers purchase a home. Consult with a mortgage broker or realtor first to see what your options are.

Learn more about the options:

Amanda Claypool Freelance Contributor

Amanda Claypool is a writer, entrepreneur, and digital nomad. She writes about wealth, blockchain technology, consumerism, and the future of work


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