A startup flush with venture capital funding wants to pay cash for homes, targeting sellers who don’t have time to waste, and then flip them.
San Francisco-based OpenDoor Labs Inc. pays for homes in cash then quickly resells the properties at an average profit of $10,000 to $15,000, the Wall Street Journal reported. Investors are paying attention: the company’s most recent funding round in October, its third, raised $80 million at a $580 million valuation, according to the newspaper. Those backing the startup include PayPal co-founder Max Levchin and Yelp CEO Jeremy Stoppelman.
Since it began in March 2014, OpenDoor has bought and sold more than 200 homes, according to Michael Orr, director of the real estate center at Arizona State University. It conducts a market analysis, makes an offer on the home and then resells the property within 90 days. The system is meant to appeal to sellers who need to move quickly.
“We’re introducing liquidity to a marketplace that doesn’t have any,” Keith Rabois, co-founder of OpenDoor Labs, told the Journal.
There are risks, of course. As of mid-December, the company had 30 homes that it had failed to sell for at least six months. But CEO Eric Wu said that in the case of a market downturn, OpenDoor would be protected because sellers would rush to ditch their homes and the startup could charge larger fees.
The decline in homeownership, in New York City and nationwide, has driven investors to bet big on multifamily properties. The Blackstone Group recently purchased the Caiola family’s Manhattan portfolio for $700 million. [WSJ] —Kathryn Brenzel
Source: The Real Deal