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A company that built an application to help investors analyze and finance properties has secured a $15 million Series A round of funding, according to an April 29 press release sent to Inman.
FirstMark Capital led the round, known for its early support of Shopify, Airbnb and Pinterest. Backing FirstMark were a number of previous investors, such as Vertical Venture Partners, LiveOak Venture Partners and Revel Partners, among others, as well as angel backers Greg Waldorf, Rob Barber, Gregg Freishtat and more.
Backflip was reviewed by Inman in July 2023, earning high marks for its marriage of acute market analysis and strategic direction with its onboard mechanism for accessible financing. While flipping has lost some caché among the investing community, it remains a viable method to profit from real estate.
“Backflip is an outstanding example of just how well technology can flatten the long-manual, vexing real estate practice of finding and eventually flipping, single-family properties. Its intent is to make real estate investing something for everyone, or at least those comfortable enough to buy and borrow from a mobile app,” the review stated.
Funding is done through private, or “hard money,” sources. This is common in real estate investing.
The company stated in the release it has funded 900 homes to date, with members reporting an average gross profit of $82,000 per property.
About the funding round, CEO Josh Ernst said his software’s intent isn’t merely to flip houses, but to change what it means to be a real estate entrepreneur.
“Over 400,000 homes are flipped every year in the U.S. and growing. Our mission is to help everyone access the funding and tools they need to participate,” he said in the release. “We put information, support, and capital products designed for entrepreneurs in the hands of more individuals in an industry that has historically had too many barriers to successfully starting and scaling. In doing so, we’re empowering our members to rejuvenate communities one modernized home at a time.”
Built-in underwriting helps minimize the traditionally time-consuming and opaque process between offer acceptance and closing and demonstrates that when these commonly disparate processes become vertically integrated, a real estate deal can move much faster.
The software is accessed in both web and mobile environments for both major platforms. The company likens its mobile experience to “an analyst in your pocket.”
The Inman technology review called attention to what could be suspect after-repair valuations as result of the absence of local labor rates and specific material costs. “But generally speaking,” the review said, “home rehab projects are all but guaranteed to include cost overruns, and it could be cool to see the app offer regional data for the average, ‘after-budget’ costs.”
Home flipping is down considerably, Attom found in its year-end 2023 U.S. Home Flipping Report, published in March of this year.
The report “shows that 308,922 single-family homes and condos in the United States were flipped in 2023. That was down 29.3 percent from 436,807 in 2022 — the largest annual drop since 2008,” Attom wrote. “The report further reveals that as the number of homes flipped by investors declined, so did flips as a portion of all home sales, from 8.6 percent in 2022 to 8.1 percent last year.”
However, investors are bullish on homes for long-term rent, upping their interest considerably in the last 12 months, Inman reported.
In October, November and December [of 2023] the share of single-family homes purchased by investors was 28 percent, 27.3 percent and 28.7 percent respectively, according to a report released this week by CoreLogic — beating out the previous all-time high share of 28.3 percent recorded in February 2022. The share of purchases made by investors could exceed 30 percent in 2024, the report posits. More than 41 percent of investors said in the report that they expected conditions to be “better” or “much better” in six months compared to now.
Backflip’s funding could be a signal that 2024 will see flip projects climb back into investors’ portfolios. The app’s ability to cut deal friction might also explain why Backflip became attractive to its backers, as tools that assist in smoothing out transactions have been one of the few proptech categories finding money, according to an Inman story last week that found venture capital has largely been withholding from the sector.
Total proptech venture capital investments hit just $1.491 billion in the first quarter of 2024 — a 12.4 percent year-over-year decline from $1.7444 billion in Q1 2023, and a far cry from a peak of $7.444 billion tallied in the first quarter of 2022, data from the Center for Real Estate Technology and Innovation shows.
