the market shifts, others are bringing a deeper level of disruption to the traditional SFR model. “Divvy is a fractional homeownership company,” said Adena Hefets, co- founder of Divvy Homes, a San Francisco-based real estate tech startup that is focused on three markets east of the Mississippi: Memphis, Atlanta and Cleveland. Neither renting nor owning is the future of the housing market, but “some combination of both,” according to Hefets. “In most single family rental businesses the landlord is seen as an adversary. We want to be seen as a partner with the renter.” The Divvy Homes model involves buying homes for prospective homeowners who can’t afford or qualify to buy. The company then rents the property back to that

prospective homeowner for three years, during which time the renter builds up equity credits that can be used toward buying the home from Divvy at a pre-set price. Hefets experienced the wealth- building effect of homeownership from an early age. “For me it’s a personal story. My parents were immigrants and came here without any money … The only way we made any money was we invested in rental properties. There is this amazing risk adjusted return you can get with owning a home … and start to build wealth over time,” she said, adding that many missed out on that wealth- building opportunity in the wake of the Great Recession. “The wealthy saw tremendous wealth gain over the last decade, and the middle class did not. … they were left out of this giant period of economic prosperity for the U.S.”

Although Divvy’s business model may appear markedly different than a traditional SFR operation, Hefets said that the company makes money the same way — at least for now. “We make money like any other rental platform; we make it off rent yields … we are very selective about the markets we move into to make sure they have enough rent yield,” she said, noting that the company has future plans for additional revenue streams. “If Divvy helps you buy your home, don’t you think Divvy will be a trusted partner for other things? There is a lot of ways to monetize the largest asset for most people. We don’t think the relationship will end when they become a homeowner.” Divvy has purchased around 100 homes since launching in October 2017, according to Hefets.

“When you are buying in decline … stick to the primary markets — B to A class properties in primary markets that are experiencing population growth.”

CHOOSE YOUR OWN BUY BOX A sampling of potential SFR returns in Montgomery, Alabama

Class A Properties • $180,000 to $220,000 for turnkey rental • $1500 to $2000 per month rent • 10.0% to 10.9% gross annual rental yield Class B Properties • $120,000 to $160,000 for turnkey rental • $1100 to $1500 per month rent • 11.0% to 11.3% gross annual rent yield Class C Properties • $70,000 to $90,000 for turnkey rental • $850 to $950 per month rent • 12.6% to 14.6% gross annual rent yield


Source: Jared Garfield



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