For Divvy Homes's property selection process, should we prioritize homes with higher appreciation potential or those that are more affordable for customers?

Introduction

The trade-off we're examining today is whether Divvy Homes should prioritize properties with higher appreciation potential or those that are more affordable for customers in their property selection process. This decision is crucial as it directly impacts Divvy's business model, customer acquisition, and long-term sustainability. I'll analyze this trade-off by considering various factors including market dynamics, customer needs, and business objectives.

Step 1

Clarifying Questions (3 minutes)

• Based on Divvy's business model, I'm thinking affordability might be a key driver for customer acquisition. Could you share more about our current customer demographics and their primary motivations for choosing Divvy?

Why it matters: Helps tailor our property selection strategy to meet customer needs. Expected answer: Majority are first-time homebuyers with limited savings. Impact on approach: Would lean towards affordability if this is confirmed.

• Considering market trends, I'm curious about the average appreciation rates in our target markets. Can you provide insight into how our current portfolio has performed in terms of appreciation over the past 2-3 years?

Why it matters: Helps assess the potential upside of prioritizing appreciation. Expected answer: Moderate appreciation, varying by market. Impact on approach: Strong appreciation might justify focusing on higher-potential properties.

• Looking at our financial model, I'm wondering about the balance between rental income and appreciation in our revenue structure. How does each contribute to our overall profitability?

Why it matters: Helps understand which factor has a greater impact on our bottom line. Expected answer: Rental income is currently the primary revenue driver. Impact on approach: Would influence whether to prioritize properties that generate higher rent or appreciate faster.

• Considering our tech capabilities, I'm curious about our ability to predict property appreciation accurately. How sophisticated are our current prediction models, and what's their track record?

Why it matters: Affects the confidence we can have in selecting high-appreciation properties. Expected answer: Models are still evolving, with moderate accuracy. Impact on approach: Less sophisticated models might suggest a more balanced approach rather than heavily weighting appreciation potential.

• Thinking about our growth strategy, I'm interested in our expansion plans. Are we looking to enter new markets in the near future, or focusing on deepening penetration in existing ones?

Why it matters: Influences whether we need a more diverse property portfolio or can specialize. Expected answer: Planning to expand to 2-3 new markets in the next year. Impact on approach: Might suggest a more balanced approach to property selection to test different strategies in new markets.