Flipping houses is not for the faint of heart, no matter how fun or easy HGTV might make it seem.
One startup wants to make the process less complicated by offering a different way to borrow money to fund such a purchase. Founded in late 2020, Backflip offers a service to real estate investors for securing short-term loans. Beyond helping users secure financing, Backflip’s tech also helps investors source, track, comp and evaluate potential investments. Think of it as a cross between Zillow and Shopify.
Backflip originates loans through its subsidiary, Double Backflip, LLC. Interestingly, among its processing team are former employees of Better.com, a digital mortgage lender that has had its shares of ups and downs mostly related to its management and market conditions, but was lauded for its technology.
“We help investors source properties and curate their pipeline, analyze the deals that they might want to invest in, and hopefully make lower risk, better buying decisions,” CEO and co-founder Josh Ernst told TechCrunch in an interview.
Backflip launched a stealth private beta in 2021 that ran through the first half of 2022. Entering the market at a time when interest rates began to surge was challenging, said Ernst, who is a former investment banker and venture capitalist (he’s backed the likes of Polychain Capital). Yet the company managed to grow its revenue nearly 5x in 2023 and reach an annualized revenue of $10 million. It also claims to be “near profitability.”
And today, the company is announcing it has raised $15 million in a Series A funding round led by FirstMark Capital, a firm which invested early in the likes of Airbnb, Shopify and Pinterest, it has told TechCrunch exclusively.
Existing backers Vertical Venture Partners, LiveOak Venture Partners, Revel Partners, ECMC and the real estate company Crow Holdings also participated in the round, as did angel investors. In total, Backflip has raised $28 million in equity — and $67 million in debt financing.
To give some context on how much business has been conducted on the Backflip platform thus far, Ernst said that users analyze an average of $5 billion in properties each month on the platform and that the startup has funded more than 900 homes since its mid-2022 launch. Users have realized an average gross profit of $82,000 per property on the platform, and typically repay their loans in six months.
Most of Backflip’s loans are for 12 months (called a bridge loan) but are provided at a 2% to 4% higher interest rate than a typical residential loan, according to Ernst.
Investors can either sell the property and pay back Backflip or refinance and move into a longer-term loan through another lender.
“Our interest rates are higher than a retail bank, so our customer pays more for our loans than a bank,” Ernst said. “But what we’re doing is giving them money, underwriting the asset, underwriting the business plan and underwriting the person.”
The conventional (and cheaper) loan process, he said, is slower. And with Backflip, customers don’t need a W-2 to qualify for a loan. Plus, the company bundles in the rehab and construction loan so it’s easier and faster for an investor to move quickly through all these transactions.
“We underwrite business plans, assets and people, not just W-2 income… and we provide capital for home renovation and give credit for post-repair valuation,” Ernst said.
The company does not currently charge subscription fees. Its business model is to serve as a marketplace for the financial products. It makes money via take rate on the loans on the lending origination business, which it operates by partnering with capital providers.
“We’re helping to underwrite the properties and all the while, we’re getting more and more data that can then be used to make a quick and accurate underwriting decision on a specific loan product, which our members use to buy the property and renovate the property,” Ernst said.
So the investors get the money from Backflip, which originates the loans and then in turn sells the loans.
Adam Nelson, managing director at FirstMark, told TechCrunch that the opportunity for flipping is enormous. In the U.S., more than 50% of homes are over 40 years old, according to 2023 research from the National Association of Home Builders and “not up to the standard of new homeowners and institutional single-family residential buyers,” he said.
“The entrepreneurs in the ‘fix and flip’ industry provide an important service to bring the existing housing stock up to spec and put their own capital and sweat equity on the line to do it in both bull/bear housing markets,” he said.
Nelson has been impressed by the company’s ability to grow nearly 5x year over year “with an efficient <1x burn multiple,” he added.
”We view Backflip as the operating system for this $100 billion+ annual transaction market, with the potential to add value and monetize multiple different parts of the fix and flip transaction and ultimately institutionalize the asset class,” Nelson added.
Presently, the startup has 47 employees with headquarters in Dallas and Denver.
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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
The Canadian Press. All rights reserved.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
The Canadian Press. All rights reserved.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
The Canadian Press. All rights reserved.
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