Backflip Raises $15 Million to Help Real Estate Investors Flip Homes

Flipping houses is not for the faint of heart, no matter how fun or easy HGTV may seem.

One startup wants to make the process less complicated by offering another way to borrow money to finance such a purchase. Founded at the end of 2020, Backtracking offers a service to real estate investors to obtain short-term loans. In addition to helping users obtain financing, Backflip’s technology also helps investors research, track, form and evaluate potential investments. Think of it like a cross between Zillow and Shopify.

Backflip makes 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 ups and downs mostly related to its management and market conditions, but has been praised for its technology.

“We help investors research properties and organize their pipeline, analyze deals they might want to invest in, and hopefully make better purchasing decisions with lower risk.” 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 were starting to rise was a challenge, said Ernst, a former banker at investment and venture capitalist (he has supported companies like Capitale Polychain). However, the company managed to multiply its turnover by almost 5 in 2023 and reach an annualized turnover of $10 million. It also claims to be “close to profitability.”

And today, the company announces that it has raised $15 million in a Series A funding round led by FirstMark Capital, a company that invested early in companies like Airbnb, Shopify and Pinterest, a- she declared exclusively to TechCrunch.

Existing backers Vertical Venture Partners, LiveOak Venture Partners, Revel Partners, ECMC and real estate firm Crow Holdings also participated in the round, as did angel investors. In total, Backflip collected $28 million in equity and $67 million in debt financing.

To provide an overview of the volume of business conducted so far on the Backflip platform, Ernst said that users analyze an average of $5 billion in properties each month on the platform and that the startup has financed more than 900 homes since its launch in mid-2022. launch. Users have made an average gross profit of $82,000 per property on the platform and typically repay their loans within six months.

Most of Backflip’s loans are for 12 months (called bridge loans), but are provided at an interest rate 2 to 4 percent higher than a typical residential loan, according to Ernst.

Investors can either sell the property and repay Backflip, or refinance and take out a longer-term loan from 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 do is give them the money, guarantee the asset, guarantee the business plan and guarantee 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. Additionally, the company consolidates rehab and construction loans, making it easier and faster for an investor to complete all of these transactions.

“We guarantee business plans, assets and people, not just W-2 income…and we provide capital for home renovation and provide credit for post-repair appraisal,” said Ernst.

The company currently does not charge subscription fees. Its business model consists of serving as a market for financial products. It makes money by taking rates on loans through the loan origination business, which it operates in partnership with capital providers.

“We help underwrite the properties and, during this time, we obtain more and more data which can then be used to make a quick and accurate underwriting decision on a specific loan product, which our members use to purchase the property and renovate the property,” Ernst said.

So investors get the money from Backflip, which issues the loans and then sells them in turn.

Adam Nelson, chief executive of FirstMark, told TechCrunch that the turnaround opportunity is huge. In the United States, more than 50% of homes are more than 40 years old, according to Research 2023 of the National Association of Home Builders and “no on par with new homeowners and institutional buyers of single-family residences,” he said.

“Contractors in the fix-and-flip industry provide an important service in bringing existing housing stock up to standard and put their own capital and equity on the line to do so in both up and down real estate markets,” he said. he declares.

Nelson was impressed by the company’s ability to grow nearly 5x year over year “with an effective consumer multiple of <1x," he added.

“We view Backflip as the operating system for this $100+ billion annual trading market, with the potential to add value and monetize several different parts of the fix and flip transaction and, at ultimately, to institutionalize the asset class,” Nelson added.

Currently, the startup has 47 employees with headquarters in Dallas and Denver.