Homeownership has been known as a hallmark of the American Dream, but for many, it has remained a dream.
Over 65% of Americans think it is much harder to become a property owner now compared to the last decade, according to a report from Ramsey Solutions.
Dallas-based Pathway Homes is hoping to forge a path to homeownership through a rent-to-own model that aims to break down barriers homebuyers face, like income restraints, high credit score requirements, and a lack of savings.
The company assists potential homebuyers who would otherwise be unable to attain homeownership, according to the Dallas Business Journal (DBJ).
Pathway launched in December 2021 and now has 50 employees. The company helps buyers identify their ideal home, purchases it on their behalf, invests in improving the quality of the house, and then gives the buyer an option to buy the home within three to five years.
After the home has been purchased, Pathway establishes rent and home purchase option prices with fixed annual increases.
“We’ll buy that home. We’ll fix the home to make sure it’s safe and functional. Make sure the roof is in good order, HVAC, the flooring, countertops, all of that. We’ll put that work in, sign off with them about what it is we’re doing, how much we’re going to spend.
“That money will go on the purchase price, but they won’t pay any of that money upfront. Then the customer can move into the home of their choice,” company CEO Josh Gould said in an interview with the DBJ.
The CEO said buyers often spend all their money on the down payment and cannot afford to fix the things that need fixing, finding themselves only one roof leak away from hardship.
“That’s something that we purposely designed into the product from the start. We want to make sure that people are moving into good quality homes so that when they do purchase from us, they’re not going to be left in a mess,” Gould told the DBJ.
Pathway Homes currently operates in DFW, Atlanta, Orlando, Phoenix, and Tampa, and is expected to branch out into other markets in 2023.
The company counts Dallas-based Invitation Homes Inc., UK-based Regis Group, and venture capital firm Fifth Wall as investors, according to Gould.
Pathway uses a mechanism called shared equity ownership, where the lender and a borrower share ownership of a property. Under this agreement, the borrower must occupy the property, according to Investopedia. It is more commonplace in the UK, said Gould.
The company launched a rent-to-own product last year called the Home Start program and a Savings Match program, “which is if a customer wants to come in and put 2.5% of the purchase price down and over five years, we’ll match that giving them 5% towards that down payment.
“If the customer stays for five years, at the end, we’ll match their 2.5% and then that gives them a much better chance for the down payment that they need to purchase the home,” Gould told the DBJ.
Gould said demand for rent-to-own programs has remained the same, despite a rocky market.
“There are a lot of people that want to rent with an option to purchase. It’s a great option. If prices go up a huge amount, you’re in the money.”
So far, the company has acquired 350 homes, with about 40 of those in the Dallas-Fort Worth area.