Jay-Z and Will Smith Back Rent-to-Own Firm in $165M Round
bloomberg.comI really hope they can do something to improve the lives of their customers. Your average hackernews reader knows nothing of the indignities of not being able to get banking services and having to rely on using services from check cashing/title loan companies, rent to own furniture companies, and having to rent from slum lords. I really hope Will Smith and Jay-Z take only a modest return on their investments.
There are plenty of extremely low down payment financing options from the federal government. There is no way a few private lenders are going to be operating a business with less margin than those.
Here’s how it works:
customer pays an up-front down payment, then pays two years of rent, then either buys the house at full price, or the company keeps the up-front payment, kicks them out, and sells to the highest bidder.
Sorry; I’m calling this one for ‘likely scam’. The reason is the same reason ‘rent-to-own’ is always a scam: price has no memory. Those past rent payments have zero value against a competing bid. Neither does this up-front down-payment, which makes this extra scammy.
That is not a normal use of the term “down payment”.
A deposit is a better word for it. If it can be used towards the purchase price, then maybe even earnest money.
I really hope they're not taking advantage of big names + engineered complexity + financial naïveté to gouge their customers on price. There's a long history of seriously predatory practices in this space and the cost of VCs' capital is very high. (Jay-Z and Will Smith might be investing as a lifestyle/vanity project and willing to accept lower returns, but Sequoia isn't.)