As home ownership in Canada becomes increasingly less attainable for many Canadians, Toronto-based proptech startup Requity Homes wants to offer a new alternative.
Requity aims to build a world where rent-to-own a home is as easy as lease-to-own a car by catering to a particular subset of prospective homebuyers that have been turned down by traditional lenders.
“There was no one doing anything helping the segment in Canada, but there were proven models in the US, so I thought, why not take a Canadian approach?”
-Amy Ding, Requity Homes
“Two years ago, I saw an opportunity in Canada for an underserved market: aspiring homebuyers who have the cash flow to afford a home, but cannot qualify for a mortgage,” Requity Homes co-founder and CEO Amy Ding told BetaKit in an interview. “At the time, there was no one doing anything helping the segment in Canada, but there were proven models in the [United States], so I thought, why not take a Canadian approach at it?”
Led by Ding, an RBC Capital Markets and RBC Ventures alum, Requity Homes offers a similar rent-own home ownership model as San Francisco-based Divvy Homes and New York’s Landis provide in the US.
After testing out its model in Northern Ontario, the Toronto-based proptech startup has secured $1.2 million CAD to bring its rent-to-own model to Western Canada by the summer. To get there, Requity plans to put the capital towards expanding its team and developing its tech-enabled platform, and raise a separate real estate investment fund to buy the houses it plans to offer.
Requity’s pre-seed financing was led by Calgary-based Boardwalk Investment Limited, with participation from Toronto’s Highline Beta, Vancouver-based Conconi Growth Partners, and several angel investors, including Mike Dobbins, former group head of RBC Ventures and corporate development at RBC. The round, which closed in December, was raised via a SAFE.
“If you can’t qualify for a mortgage today in Canada, the only option is to rent,” said Ding. “And now we’re saying is, ‘you know what, actually, there’s a third option.’”
According to Ding, there are approximately five million rental households in Canada, and roughly two million of them have the cash flow necessary to afford a home and are paying their rent payments consistently, but can’t qualify for a mortgage. These renters are typically turned down for a few reasons: they are self-employed, newcomers to Canada without a Canadian credit history, or they lack the 20 percent down payment required to purchase their own home.
Enter Requity, which purchases the home of clients’ choice up front, then rents said home back to them on two to three-year terms, taking a premium from each rental payment towards an eventual down payment, before eventually allowing users to buy back said home from them at a pre-approved price (based on a fixed annual increase of five percent per year). During the rental period, Requity reports customer rent payments to credit bureaus to improve their credit score, and offers clients personalized coaching and tips on credit, personal finance, and budgeting.
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To enable it to purchase these homes, Requity plans to raise a separate investment fund later this year that will bring on real estate investors as LPs as well as lenders, setting a target of “at least $10 million” in terms of total purchase power. Ding described this fund as “like a special purpose investment vehicle.” Through it, and other funds like it as the company grows, Requity aims to connect investors to home buyers.
Sam Kolias, CEO of Boardwalk REIT and president of Boardwalk Investment Limited (which led the round), described Requity as “a new innovative way to help Canadians reduce barriers to home ownership.” By allowing investors to partner with home buyers, Kolias says Requity helps bridge the gap between renting and owning a home.
Requity’s service is currently available in four Northern Ontario markets: North Bay, Sudbury, St. Sault Marie, and Thunder Bay. According to Ding, the startup decided to focus on these “secondary cities”—as opposed to Toronto—for two reasons: in these markets, rental prices exceed the cost of owning a home, and there is a shortage of single family homes available for rent.
Now, Requity has set its sights on Western Canada, where the startup is currently exploring Saskatoon and Regina, which have similar characteristics to the Northern Ontario cities Requity currently serves.
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As part of the round, Highline Beta Founding Partner Ben Yoskovitz is joining Requity’s board of directors. Over the past nine months, Requity has worked with Highline Beta’s Venture Studio to build out its product and go-to-market plan, and recruit its team.
“We see the scope of the problem Requity Homes is trying to solve,” Yoskovitz told BetaKit. “Home affordability is absolutely crushing, and many people can’t participate in the housing market as a result. And without Requity Homes, there aren’t enough meaningful solutions.”
Yoskovitz described Requity’s market opportunity as “enormous and growing,” adding that there are many home seekers unable to get mortgages from traditional financial institutions, which puts prospective buyers in a difficult spot.
“They can try and get a mortgage from a more predatory lender with exorbitant interest rates, taking on too much risk, or they can look for alternative solutions such as Requity Homes,” said Yoskovitz. “Our bet is that buyers will increasingly look to alternative, low-risk options that help them get into the homes they want.”
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Requity Homes is part of Canada’s growing proptech sector, which features firms like Toronto-based tech-enabled real estate brokerage Properly and Ottawa home auction platform Unreserved. Properly and Unreserved take a different approach than Requity to removing friction from the home-buying and selling process.
The space has been heating up recently, as a number of proptech companies have raised money looking to roll out rent now, pay later products, and valuation tools like Edmonton’s HonestDoor. Toronto proptech companies like Willow and BuyProperly, which offer fractional real estate investment platforms, also recently secured capital.
Willow and BuyProperly take a different approach to helping consumers access home ownership than Requity, offering platforms that help users invest in fractions of certain properties.
Toronto-based Key takes a similar approach to Requity by making home ownership more accessible through rent. The startup, which recently raised $11 million to pilot its home co-ownership platform in new markets, describes its model as a hybrid between renting and owning, where monthly payments are comparable to market rent and a portion serves to increase clients’ home equity over time.
“We see the scope of the problem Requity Homes is trying to solve. Home affordability is absolutely crushing, and many people can’t participate in the housing market as a result.”
-Ben Yoskovitz, Highline Beta
However, Requity’s model more closely resembles what Tiger Global-backed Divvy Homes and Sequoia-backed Landis are doing. Both American companies have seen success and raised major funding rounds to fuel the growth of their rent-to-own offerings in the US.
According to Ding, there aren’t currently any other companies in Canada offering rent-to-own in the same fashion as Requity. The CEO acknowledged that there are some “local, mom and pop real estate investors” in Canada who are taking a rent-to-own approach, but says she isn’t aware of any other Canadian firms currently trying to roll out a scalable, tech-enabled rent-to-own model on a national basis.
Going forward, Yoskovitz said he expects to see more competition in the space Requity serves over time given that housing affordability is such a large issue. “Housing affordability is a big, obvious problem, so I think many will try and solve it, and do so in a variety of ways,” he added.
“We’re not looking to replace mortgages,” said Ding. “We’re creating a stepping stone to transition rental clients from renting to owning a home. We just want to provide more financing options for Canadians to access homeownership.”
Feature image of Amy Ding, courtesy Requity Homes.