Here is Opendoor’s pitch from its website: “Sell your home from the comfort of your couch.”
![Can Opendoor’s iBuying bring the trillion-dollar housing market online?](https://20627419.fs1.hubspotusercontent-na1.net/hub/20627419/hubfs/The%20Hustle/Assets/Images/1723353598-News-Brief_2020-09-24T011606.276Z.webp?width=595&height=400&name=1723353598-News-Brief_2020-09-24T011606.276Z.webp)
Like, from your iPhone.
Billionaire investor Chamath Palihapitiya likes the pitch so much that he recently announced he’ll be taking Opendoor public via a SPAC ($IPOB).
The deal values the real estate startup at $4.8B and Palihapitiya believes it will be a “10x in 10 years” play.
Consumer real estate is a $1.6T opportunity
As explained in a one-page investment thesis Palihapitiya posted on Twitter.
The document further explains the pain of the current buying process: it’s offline, slow, inconvenient, unpopular (low NPS) and — with less than 1% of its sales done digitally — ripe for disruption.
Opendoor was launched 6 years ago to tackle this problem with an iBuying solution and — to date — has done $10B in home sales and worked with 80k homeowners, per the company’s investor presentation.
How it works
Opendoor allows you to digitally buy or sell a home through these steps:
- Pricing: A real-time pricing model that tells you how much a home is worth… click buy.
- Home ops: If there’s a sale, the company handles inspection, data collection, repairs, and renovations.
- Fulfillment: The closing process is automated.
Its pricing model has been trained on 145 unique features (e.g., countertops, roofs), and the company has conducted 175k on-site inspections.
Currently, its margin on a home sale is 4%, but Opendoor believes it could reach 7% with better pricing and upsells (e.g., titles and escrow services).
Opendoor currently operates in 21 US markets
With annual revenues of ~$5B.
The company says its playbook can be successfully implemented across the US, ringing up $50B per year.
At a macro level, Palihapitiya notes the following tailwinds:
- Americans relocating because of housing affordability issues
- 75m millennials will soon enter the homebuying market
- Working from home is here to stay, meaning you can be location agnostic
If imitation is the sincerest form of flattery, then $22B real estate marketplace Zillow has flattered the sh*t out of Opendoor (and validated its business model) by making iBuying a mission-critical part of its business.
(For a deeper dive, check out smart takes from 2 Trends members: Anuj Abrol and Packy McCormick)