How 2 California Startups’ Lease-to-Own Programs Aim to Ease Dallas-Area Homeownership

ZeroDown and Divvy, two San Francisco-based startups that facilitate lease-to-own programs, have expanded into the Dallas market since the start of the year.

These digital real-estate companies are not reinventing the wheel. ThinkTrio operates a similar online model in Texas. Traditional real-estate firms have lease-to-own programs.

But ZeroDown and Divvy are the latest business models to catch the eyes of investors looking to capitalize on a competitive real-estate market and less-than-formidable mortgage rates with a digital approach.

Except for lease duration, ZeroDown and Divvy’s game plans are simple: Customers apply for move-in-ready homes, the companies purchase and rent the homes back to the customers with the goal of the customers eventually buying the home from the companies.

The companies have some differences, but their primary objective is getting customers into homes while also profiting from the process.

ZeroDown first determines whether a potential customer qualifies for homeownership. ZeroDown gives its customers five years to buy the home. Renters can earn purchase credits for each year they stay in the home.

“It gives people time to build up more savings or get a higher salary,” Abhijeet Dwivedi, ZeroDown co-founder, and CEO told TechCrunch. “Their buying power five years out is hopefully higher than it is today.”

In the case of Divvy, renters contribute an initial 1 percent to 2 percent of the home value. Renters have 36 months to work toward a 10 percent down payment. Since 2018, Divvy has seen nearly half of its renters buy back the homes.

“Even the most experienced players in the space, maybe have low single-digit buyback rates so it’s definitely quite a bit higher than what the rest of the industry is seeing,” Adena Hefets, Divvy co-founder and CEO told TechCrunch.

ZeroDown and Divvy make money through acquisition fees, the rents they collect, and home-price appreciation.

In a news release, ZeroDown said it has assembled a network of local Dallas real estate agents as part of its launch efforts and is looking for more Dallas agents with whom to partner.

ZeroDown also has launched in Austin, Seattle, and its hometown of San Francisco. Divvy operates in Atlanta, Cleveland, Memphis, St. Louis, and Tampa, with more cities on the expansion wishlist.

In its release, ZeroDown said it realizes that a large down payment is a challenge for many buyers, even those with high incomes and strong credit.

“The housing market has changed,” Dwivedi said. “Why should our approach to it stay the same?”