Backflip raises $15 million to help real estate investors flip houses | TechCrunch

House flipping is not for the faint of heart, no matter how fun or easy HGTV makes it look.

One startup wants to make the process less complicated by offering a different way to borrow money for such purchases. Established in late 2020, backflip Provides a service to real estate investors to secure short-term loans. In addition to helping users secure financing, Backflip’s technology also helps investors source, track, compare, and evaluate potential investments. think of it this way A mix between Zillow and Shopify.

Backflip originates loans through its subsidiary, Double Backflip, LLC. Interestingly, its processing team includes former employees of Better.com, a digital mortgage lender whose shares have fluctuated, mostly related to its management and market conditions, but also to its technology. It has been appreciated for this.

“We help investors source properties and build their pipeline, analyze the deals they want to invest in, and hopefully make lower-risk, better purchasing decisions.” CEO and Co-Founder Josh Ernst told TechCrunch in an interview.

Backflip launched a stealth private beta in 2021 that ran until the first half of 2022. Entering the market at a time when interest rates began to rise was challenging, said Ernst, who is a former investment banker and venture capitalist (he has backed the likes of Polychain Capital). Yet the company managed to increase its revenue by almost 5 times and reach an annual revenue of $10 million in 2023. It also claims to be “close to profitability”.

And today, the company is announcing that it has raised $15 million in a Series A funding round led by FirstMark Capital, a company that has made early investments in companies like Airbnb, Shopify, and Pinterest, tells TechCrunch exclusively. .

Existing backers Vertical Venture Partners, LiveOak Venture Partners, Revel Partners, ECMC and real estate company Crow Holdings also participated in the round as did angel investors. Overall, backflips have increased $28 million in equity – and $67 million in debt financing.

To give some context on how much business has been done on the Backflip platform so far, Ernst said users analyze an average of $5 billion of properties each month on the platform and the startup has sold more than 900 homes by mid-2022. Is funded. launch. Users have received an average gross profit of $82,000 per property on the platform, and typically repay their loans in six months.

According to Ernst, most of Backflip’s loans are for 12 months (called bridge loans) but are offered at interest rates 2% to 4% higher than typical residential loans.

Investors can either sell the property and pay off the backflip or refinance and take a long-term loan through another lender.

“Our interest rates are higher than a retail bank, so our customers pay more for our loans than a bank,” Ernst said. “But what we are doing is giving them the money, underwriting the asset, underwriting the business plan and underwriting the person.”

That said, the traditional (and cheaper) loan process is slower. And with Backflip, customers don’t need a W-2 to qualify for a loan. Additionally, the company also offers rehab and construction loans, so it is easier and faster for an investor to move through all these transactions quickly.

“We underwrite not just W-2 income, but also business plans, assets and people… and we provide capital for home renovations and credit for post-repair appraisals,” said Ernst. Are.”

The company currently does not charge membership fees. Its business model is to serve as a marketplace for financial products. It makes money through interest rates on loans to the lending core business, which it operates in partnership with capital providers.

“We are helping underwrite properties and all the time, we are getting more and more data that can be used to make quick and accurate underwriting decisions on a specific loan product that our members are using to purchase a property. and renovate the property,” Ernst said.

So investors get money from Backflip, which originates the loans and then sells the loans in return.

Adam Nelson, managing director of FirstMark, told TechCrunch that the opportunity for flipping is huge. More than 50% of homes in the US are more than 40 years old, according to 2023 research From the National Association of Home Builders and “No.” Up to the standard of new home owners and institutional single-family residential buyers,” he said.

He said, “Entrepreneurs in the ‘fix and flip’ industry provide a vital service in bringing existing housing stock up to specification and put their capital and sweat equity on the line to do so in both boom/bust housing markets “

Nelson has been impressed by the company’s ability to grow nearly 5x year over year “with an efficient <1x burn multiple," he added.

Nelson said, “We see backflips as the operating system for this $100 billion-plus annual transaction market, adding value and monetizing the many different parts of fix and flip transactions and ultimately institutionalizing the asset class.” Has the ability to.”

Currently, the startup has 47 employees and is headquartered in Dallas and Denver.

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