Landis, a startup that aims to make homeownership more accessible to first-time buyers, raised a $40 million Series B round led by Google Ventures as investors continue to pour money into the rent-to-own sector.
Repeat investors including Sequoia Capital and Arrive, the venture capital arm of Jay-Z’s Roc Nation, also participated in the round, as did Operator Partners and the National Association of Realtors’ Second Century Ventures. The funding follows a $165 million capital raise last year led by Sequoia with participation from Roc Nation and actor Will Smith’s Dreamers VC.
Landis’ business model involves buying homes for clients, who then rent them from the company. The client works with a Landis-provided personal financial coach to both pay rent and contribute toward a down payment, ideally purchasing the home within two years. Its clients are often renters with low credit scores or those who cannot afford a down payment, the company previously told The Real Deal.
Led by Cyril Berdugo and Tom Petit, Landis said it has earmarked $2 million of the new funding to expand its coaching program. Since its first capital raise, it said its applications have increased sevenfold. Landis did not provide a valuation with the latest funding round.
The rent-to-own model is not a new one, but the space is growing increasingly competitive as interest from venture capital and private equity rises along with home prices. San Francisco-based Divvy Homes, a Landis competitor backed by Andreessen Horowitz and Tiger Global Management, among others, raised $200 million in Series D funding a year ago at a $2 billion valuation.
One of the largest players in the sector, Home Partners of America, was acquired by Blackstone last year for $6 billion.
Though it is promoted as a means of expanding access to homeownership, the model has drawn criticism from consumer protection groups and politicians who argue that it preys on low-income families. Landis’ latest fundraise comes at a time when the average rate for a 30-year fixed mortgage is hovering around 7 percent for the first time in 20 years, making homeownership more costly and leading to a slowdown in sales.
Berdugo has said Landis differs from other rent-to-own companies because it only intends to collect rent for a short period.
“We are not a landlord, we are a homeownership program,” Berdugo told TRD last year. “We do not want to be perceived as a single-family rental fund.”