Wayhome and Divvy Homes

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Wayhome and Divvy Homes

Divvy Homes and WayHome are PropTech companies that provide prospective home buyers with unconventional financing options. The go-to-market models of these companies include setting a clear target audience and forming partnerships.

DIVVY HOMES

Business Model

  • Divvy Homes offers alternative financing options for prospective home buyers who do not qualify for conventional mortgages,
  • In cities the company operates in, it allows customers to select a home they would like to own and buys the home outright. It then allows these customers to make a 2% down payment, while it pays for the rest. Afterwards, customers make monthly payments.
  • Exactly 25% of the monthly payments customers make goes toward building equity and is added to a future down payment for customers to buy the home outright, while 75% goes toward paying rent to Divvy Homes for the home. The goal is to build an equity credit of 10% of the home in three years.
  • After three years of judiciously making these payments, customers can then apply for a mortgage and fully buy out the remainder of the home, using the 25% payment/credit they made to Divvy Homes, as a down payment.
  • Customers may choose to buy the home at any point during those three years if they are ready to do so. Customers can also choose not to buy the home once the three-year lease is up. If this happens, Divvy Homes will sell the home, cash out the customer's equity credits and only share 8.5% of the home's final sale value.
  • According to Divvy Homes, its customers have "about $4,000 saved up in the bank, about $60-80,000 in income, and generally have about a 635 FICO score."

Go-To-Market Model

  • Divvy Homes kicked off its go-to-market strategy by recognizing an issue and building a target audience. Specifically, it recognized that millennials find buying a home complicated and expensive.
  • Its main aim was to change the way people buy homes and make the home buying process easier for people, therefore revolutionizing the rent-to-own market.
  • The company focused on middle-class Americans who need time to build their credit to qualify for a traditional mortgage.
  • Its go-to-market model involved using algorithms and data science to make sure the property the customer is interested in will appreciate and is not significantly above the market rate.
  • Divvy Homes sought funding and expert advice from well-known venture capital firms like Andreessen Horowitz and investors such as Max Levchin.
  • The company used several channels and strategies to get customers, including pay per click advertising and search engine marketing on Google, branded content on social media platforms, and out-of-home advertising.

Competitors

Easy Knock

  • Easy Knock is a company that helps homeowners mitigate financial difficulties by offering them two programs: Sell and Stay which is a residential sale leaseback program and MoveAbility, its "sale-leaseback product designed for homeowners planning on moving."
  • Similar to Divvy Homes, Easy Knock's mission is to empower homeowners in the US.

ZeroDown

  • Based in the Bay area, ZeroDown's aim is to create a new pathway to home ownership. It does this by offering access to homes at a fraction of the cost via its rent-to-own program.
  • Customers find a home they are interested in, apply with ZeroDown, and then partner with the company to buy the home.
  • ZeroDown requires a $10,000 flat fee and subsequent monthly payments. Customers move in and lease the property through ZeroDown for two to seven years, which is enough time to repay the cost of Zerodown's down payment.

WAYHOME

Business Model

  • WayHome, previously known as Unmortgage creates an alternative way for people to partially or fully own a home with a minimum of 5% deposit or £12,500, whichever is higher. Investors on Wayhome will then buy the rest of the home.
  • When a home is purchased through Wayhome, customers are required to pay rent to the investors monthly on the portion of the home they do not yet own.
  • The amount of rent customers pay is dependent on the percentage they put down as a deposit and the value of the home.
  • Customers can choose to buy the home in full by increasing their monthly rent payments to "top-up" or making one-off payments.

Go-To-Market Model

  • WayHome's go-to-market model relied on defining and laying out its target audience. Its customers are expected to have a household income of £30,000 or above.
  • The company partnered with long-standing institutions who it now calls its investment partners.
  • WayHome also collaborated with an asset management firm, Allianz Global Investors to pair buyers with an investor.
  • It also made sure it solved a problem. In the UK, mortgage lenders typically apply unrealistic salary-based lending caps on more expensive homes. With WayHome, consumers do not have to worry about this.

Competitors

  • Landbay is a peer-to-peer platform that offers investors access to mortgages and "borrowers quicker access to a mortgage."
  • Proportunity "helps first-time buyers get on the property ladder by using machine learning to forecast the future value of a property and then letting buyers borrow against the estimate."

UK REAL ESTATE MARKET

Strengths

  • The UK real estate market is currently worth £1.66 trillion, accounting for 21% of total net wealth. The market contributes £101.2 billion to the UK economy, 7% of its GDP.
  • The UK real estate market supports a million jobs and directly employs over an additional one million people in the country.
  • Property price in the UK have risen over the past few years and continue to rise in the aftermath of the UK's exit from the EU.
  • In February 2020, property prices in the UK increased by 2.8% pushing the average home price to £240,677 (US$312,904).

Weaknesses

  • In February 2020, Zoopla mentioned that the UK housing market had its strongest start in four years, leading to a 1.6% annual growth across over ten cities in the country.
  • This surge did not last. Due to the COVID-19 pandemic, people in the UK are reflecting on whether to buy or rent a house and are delaying big purchases. Home ownership has frozen in the country.
  • In March 2020, demand in the UK real estate market dropped by 40% and experts predict it will fall by 60% from April to June 2020.
  • The worsening economic conditions in the UK means that domestic buyers are at a disadvantage. Consumer spending in the country has been shrinking since the start of 2020. This means that UK consumers are increasingly wary of making large purchases.

Opportunities

  • Suspending or reducing the stamp duty tax required from property owners in the UK could encourage people to buy properties in the country.
  • UK lenders are beginning to overhaul their product lines by offering reduced interest rates. This is expected to continue after the pandemic so these lenders can restore their success.
  • This presents an opportunity for the UK real estate market. Households that manage to remain stable despite the pandemic are expected to leverage this unprecedented interest rate and start buying homes again.
  • The UK's real estate industry is becoming innovative as more companies in the market are leveraging technology. These companies are called PropTech (property technology) companies. This presents an opportunity for growth in the industry.
  • The UK is already the dominant PropTech market in Europe, and "will continue to present UK investors and occupiers with plenty of choice when devising technology procurement strategies."

Threats

  • The COVID-19 pandemic is a major threat to the UK real estate market as it could potentially set the market back. According to experts, if the conditions persist, "foreign investment could drop off and house prices could take a hit."
  • In March 2020, it was reported that buyer demand and price expectations in the UK real estate market dipped, while near-term sales sank to their weakest level in over 20 years.
  • Real estate agents in the UK have since halted property viewings. Lettings have also seen "flat-lining demand from tenants sending rent expectations below zero for the first time since the financial crash."

US REAL ESTATE MARKET

Strengths

  • Before the pandemic, there was optimism in the US real estate market. There was an increase in jobs which led to higher wages and more money to spend on purchasing a home.
  • Since residential real estate is deemed an essential service in the US, the "vast majority of home inspectors, closing attorneys, lenders, appraisers, and the like are continuing to provide incredible service."
  • Due to the coronavirus outbreak, US lenders are offering "historically low interest rates" that are attracting buyers who still have secure jobs.
  • According to Redfin, home prices increased by 7.1% year-over-year in March 2020, while home sold rose 0.9%.
  • Zillow reported that mortgage applications in the US increased by 12% for the week ending April 24, 2020.

Weaknesses

  • In March 2020, growth in home prices in the US dropped to 3.3% year-over-year. In addition, new property listings in the US have reduced by 13.1% from the previous year.
  • Based on a recent study by the National Association of Realtors, almost 60% of Realtors "said buyers are delaying their home-buying searches for at least a few months, while 13% said they're seeing buyers postpone their searches and sellers hold off on listing their properties indefinitely."
  • Up to 80% of Realtors in the US stated that they are seeing fewer homes for sale and 75% have stopped holding open houses.

Opportunities

  • As more millennials settle down and decide to by homes, demand in the US real estate market is expected to increase.
  • Despite the pandemic, Americans are still eager to buy homes. A study by Gallup revealed that 50% of Americans say that amid the coronavirus pandemic, it is a good time for them to buy a house.
  • Americans are expected to move to suburban areas after watching the pandemic unfold. Realtors are seeing more interest in the suburbs among people living in New York City, the "epicenter of the pandemic" in the US.
  • A survey by Harris Poll revealed that almost 40% of Americans are considering moving to less crowded areas after the pandemic. This presents an opportunity for growth in these suburban real estate markets.

Threats

  • The COVID-19 outbreak is a major threat to the US real estate market. As a matter of fact, some sellers in the US have pulled back and postponed selling their properties due to the pandemic and the uncertainty around when it will end.


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