An era of ever-rising interest rates and dwindling supply has made home ownership an increasingly unlikely dream for many Canadians.
Toronto-based proptech startup Requity Homes aims to help Canadians bridge the gap between renting and homeownership with its rent-to-own platform. The startup is looking to use 2024 to bolster its current markets after securing $26 million CAD in funding in late December.
“The average home price we buy right now is $300,000. Let’s say I have a million dollars. I can help over three families in [smaller] cities versus in Toronto, I probably couldn’t even help one family,”– Amy Ding, Requity CEO
The seed round, which was co-led by Highline Beta and the chairman of Zhuhai Asset Management Company Sam Sun, consisted of equity and debt financing. The round also featured participation from Boardwalk Investment, Conconi Growth Partners, Archangel Adrenaline Fund, and several angel investors.
Requity declined to disclose the specific breakdown between equity and debt, but said the equity financing will be used to grow the team and execute on its growth plan, while the debt financing will be used to purchase homes for its customers when needed.
At the time of the startup’s $1.2-million pre-seed financing round in 2022, Requity planned to raise a separate investment fund of at least $10 million to purchase homes for its clients. In an interview with BetaKit this week, Requity CEO Amy Ding said that through this funding round, the company now has a lending partner for when it needs to fund real estate purchases.
As a result of his returning investment in the company, round participant and venture partner at Framework Venture Partners Mike Dobbins will join Requity’s board of directors. Ding, who worked under Dobbins at RBC Ventures before she left to start Requity, said Dobbins has been a “true mentor” to her and instrumental in helping Requity grow to this point.
Requity’s platform facilitates the pre-approval and approval process of customer applications by assessing credit and banking information through API integrations. Approved clients are then given a budget to find a home they would like, which Requity then purchases for them. Clients can then move into the home while a portion of the monthly “rent” they pay to Requity is set aside to save up for a down payment until clients can purchase the home back from Requity at a fixed, pre-determined, price.
While the United States has similar offerings in Landis and Divvy Homes, which recently went through three rounds of layoffs within one year reportedly due to high interest rates, Requity said it has been operating in Canada relatively uncontested since its founding in 2020 and has now secured capital rather than downsizing.
“There are local rent-to-own operators that have existed for quite some time,” Ding said. “We’re the only ones actually in Canada taking that scaling approach to create a financial product to make homeownership more accessible.”
High-interest in home ownership
Home ownership has been a hot button issue in Canada as supply has weaned, prices have increased, and interest rates have risen in recent years. A Canada Mortgage and Housing Corporation (CMHC) report released in September 2023 found that Canada will need 3.5 million more housing units on top of what’s already being built to restore housing affordability.
This report followed the federal government’s commitment of $2 billion in August 2022 to build 17,000 new homes, $200 million of which was earmarked to a new rent-to-own program managed by the CMHC. The initiative was aimed to encourage developers and builders to create more opportunities for first-time homebuyers overwhelmed by down payment requirements, Canadian Prime Minister Justin Trudeau said in the announcement.
“One key lesson I learned is to always stay close to the target markets and target geographies that we actually operate in, because they could be very different from Toronto and Vancouver,” Ding said.
Requity has identified that gap outside of the Greater Toronto and Vancouver areas as its target cities. Ding said families and newcomers to Canada “can’t find anything to rent with a backyard” and don’t want to live in apartments or condos.
“We’re [targeting smaller cities] to maximize our impact. The average home price we buy right now is $300,000. Let’s say I have a million dollars. I can help over three families in those cities versus in Toronto, I probably couldn’t even help one family,” Ding said.
Requity started its operations in Northern Ontario by servicing Thunder Bay, Sault Ste. Marie, Sudbury, and North Bay. The company has recently expanded across Saskatchewan, Alberta, and Manitoba, including in Regina, Saskatoon, Calgary, Edmonton, and Winnipeg.
Ding credited Requity’s small portfolio of homes for helping the startup survive ever-growing interest rates.
Ding claimed that Divvy’s portfolio, which included variable interest rates, resulted in greater financial challenges compared to those faced by Requity, and that growing Requity in a challenging real estate market turned out to be advantageous by equipping the startup with the knowledge to effectively navigate similar market conditions if they arise in the future.
“The interest rate is going to come down at some point. If we can make the model work in the current higher interest rate environment, we know it’s going to work when the interest rate sentiment changes,” she said.
Ding said Requity is looking to replicate the success it has seen in Northern Ontario with Regina, Saskatoon, Calgary, Edmonton, and Winnipeg before expanding further. While that means there are no expansion plans in 2024, Ding said the startup is still seeing a good deal of interest.
“We have received thousands of applications with zero marketing spent,” Ding said.
While Requity said it can’t disclose the specific number of customers it has already served, Ding said it’s in the “dozens,” adding that 80 percent of Requity’s early customers have been able to buy back the home in an average of 18 months.
As it builds out its presence outside of Ontario, Requity also plans to develop new partnerships across the public and private real estate ecosystem in 2024 and aims to operate coast-to-coast by 2026.
Feature image courtesy Amy Ding.