Opendoor = We’re Doomed?

Question

Hi All,

I was hoping to get some of y’alls opinions on how today’s news about Opendoor could impact our business.

I have personally received a slick letter from this company, offering to buy one of my rentals.

They just received $325 million in funding, just as I am attempting to get my business’s first Deal.

I will not give up - if anything, this is an indication that there are still deals to be found in the USA.

But is it reasonable to be worried that big companies like this will squeeze us out with razor thin margins?

https://www.cnbc.com/2018/06/13/house-flipping-start-up-opendoor-raises-325-million-series-e.html

Ross Denman · Answer

It's like anything else. When the market saturates, the investors find new opportunities. We saw this in Indianapolis with American Homes for Rent. They raised millions of dollars publically and were buying everything on the auction block built after 1990. Unfortunately, they were paying more than most of us were willing to pay and we had to source our deals differently. Markets always change. Inventory suppliers always change. You just have to go to where the deals are. Find motivation and desire and you will always find opportunity.

When you discover creative real estate tactics, you don't worry too much about these monstrous companies as they tend to have one tool to rely on... throw money at it. It's doubtful that they have a "grass roots" acquisition division. Some of my favorite case studies have been from people who found a property by just walking or biking a street in an area that they like.

In Indianapolis, decent inventory is getting slim and I imagine that's the case most everywhere, but there will always be deals. Beware, there are a lot of people investing in speculation right now as well. A deal has to be a deal from the beginning... let the big guys take on the bad eggs and wait it out.

Learn how to search for motivation and you can get to the deals before they can. Tired landlords, divorces, problematic rentals, probate, foreclosures, regulatory issues, etc.

Chrissy Parsons · Answer

@Barrett A. I agree with @Ross Denman. If you are in a market with stiff competition, you need to get creative. It seems like these guys are mailing to the Absentee Owners - so you need to mail to other off-market segments.

In any competitive market, consider Seniors with Long Time Ownership (ready to downsize or transition to assistance) and Homeowners with Low Financial Stability Scores (FSS). You can work with a mailing list broker to get recommendations - it shouldn't cost you any more than the on-line systems.

@Vinay H. has a good point. Respond to their letter and learn as much about how they operate as you can. They are probably pretty formulaic. Find their weaknesses and that can help you to emphasize what you can do better.

@Alexander Felice makes the point about competing. You just have to find area's that they aren't in or doing well with.

Alexander Felice · Answer

we aren't doomed, we just have to compete.

zero change

Mike D'Arrigo · Answer

@Barrett A. I'm not sure how they are different from the "We Buy Ugly Houses" people. They've been around a long time but they're have still been deals to be found.

Omar Khan · Answer

@Barrett A. What's the big deal? Like you've said you're looking for the first deal. You're too small for the big guys to worry about.

Steve Vaughan · Answer

Because they buy like wholesalers but actually have cash and can close quickly, yes I think they will take business from wholesalers.

I'm glad to see that motivated sellers have another option. My interests are always aligned with the seller though.  More choices for consumers is usually good. In this case the consumer is the seller.

Ben Eaddy · Answer

This is an old thread, but VERY relevant to all of us RIGHT NOW. I agree with Chrissy Arnold. We have to get nimble. These guys own 5-10% of the MLS leads I'm marketing to and a good amount of seller's I speak to are less motivated because they have an offer from Opendoor/Offerpad, etc. That sucks. They're skimming the motivated sellers right off the top before we can get to them. And because they buy "pretty houses" like me, they're a real threat. I see too many investors discrediting them or downplaying them. So Mr. Investor, you're gonna go in there with your 65% offer after they have a moderate/fair offer from these iBuyers?!? NO SIR! You've got to change your strategy! Wake up, guys!

Vinay H. · Answer

There is only one way to find out. Respond to their letter and find out how much they are offering. If they try to lowball you then you know they will be tough. If they offer over your own valuation, then you know they are the signs of a bubble and will soon fail.

The smart equity groups have been buying distressed houses since 2011, so these guys are late to the game.

Matt K. · Answer

The deals you chase are probably the leftovers lol

Opendoor = We’re Doomed?

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