Can Opendoor’s iBuying bring the trillion-dollar housing market online?

Billionaire investor Chamath Palihapitiya is taking Opendoor public via his SPAC. Can this iBuying firm win the $1.6T home buying opportunity?

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?

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)

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