Despite the bursting housing bubble, real estate remains one of the most important purchases — and one of the biggest investments — in the consumer marketplace. Yet, for most of us, it can be arduous and time-consuming to measure the investment potential of a particular property.
Revestor, a San Francisco startup, seeks to change that. Founded in May 2011 by Bill Lyons, Revestor helps potential buyers identify properties that are likely to offer the biggest bang for their buck.
Designed for both first-time homebuyers and expert investors, Revestor enables users to search homes for sale by the highest potential return using two common investment criteria: cash flow and capitalization rate (or “cap rate”).
Here’s how it works:
Along with entering a ZIP code and a target price range like you might at other property search sites, you also select whether you’d like to view properties by cash flow or cap rate. The results are displayed on a map and in a list format.
You can then drill down on specific properties to get a look at other details, including photos and financial indicators like estimated rent and return on investment (ROI).
For those who want to take a deeper dive, Revestor offers a control panel with a calculator that allows users to adjust the variables and view how different scenarios might affect the income potential.
The company is also developing a proprietary property rating called RevestorRating that will combine all of the research, data and key indicators into an easy-to-understand graph.
Functionality on the site is limited at this stage because Revestor is still in beta, having just launched last week in Lyons’ hometown of San Diego, Calif. Until it’s available in other markets, users can test-drive the service at Revestor.com by entering a San Diego ZIP code, such as 92103 or 92115.
A finance and real estate executive with more than 15 years of business experience, Lyons is bullish on his startup’s prospects to become a significant player in the real estate search market. He believes Revestor will save homebuyers and agents hours of research, and give people greater confidence that they’re making a solid investment.
I asked Lyons about how he got started with Revestor, and what’s in the works.
Q: When did you first start working in the real estate industry?
A: I grew up in real estate. My father is one of my mentors, and is a developer in Coronado, Calif. I love real estate, but I love technology just as much.
I started my business career in telecom, and bought my first investment property when I was 21. I listened to some Carlton Sheets tapes and read “Rich Dad, Poor Dad” by Robert Kiyosaki and thought I was an expert. I jumped in like any hungry kid.
I trusted the agent, but ultimately she was out for her commission. Meanwhile, the margins in telecom were getting way too thin and I saw it as an opportunity to switch careers to real estate and do it the right way. I started cold-calling, but ultimately decided to start out on the mortgage side.
Q: You invented a patent-pending algorithm to generate and search key investment indicators that is now at the heart of Revestor. What made you decide to take that initial idea and build a company around it?
A: There is a lot of cool technology that has come out over the past five years, but the truth is that our industry is still stuck in the 1980s for the most part. Out of frustration, I wanted to change that and make a difference. I developed our algorithm in late 2010 for two main reasons:
1. The average consumer has no idea what cap rate or cash flow is, and the sad part is that a good portion of agents don’t either. Most of the time cap rate is left blank or is inaccurate in the multiple listing service. Consumers today want to be empowered. They want transparency. They want to make decisions based on quantifiable numbers — not decisions based on salesmanship or hyperbole.
2. Real estate agents spend hours’ worth of research and analysis just to find one potential investment opportunity for their investor clients. Their time could be better spent. I knew if we could find a way to instantly generate and search the homes for sale with the highest potential returns we would be on to something. There currently isn’t any viable service out there for residential one- to four-unit investors.
Q: Other than the fact that you’re probably much busier, how has your life changed since you made the decision to start Revestor?
A: I’ve met some amazing people in the tech space. I’m the most happy when I’m growing, learning, creating and making a positive impact. I’m really passionate about what we are doing. I’m excited!
Q: I understand that you’re looking to raise additional capital. How much are you looking to raise and what will it be used for?
A: We are currently bootstrapping the company and are raising $2 million in capital.
We are focused in on improving the site in the markets we are in and are patiently waiting to find the right partner who understands our vision and support it. As soon as we find the right partner, we will flip the switch and go national. The capital will be used for technology, data, marketing and working capital.
Q: How do you plan to appeal to homeowners and homebuyers who aren’t as familiar with evaluating properties in terms of criteria like cap rate and cash flow?
A: First and foremost, our target is the apprehensive homebuyer who wants relevant, useful information to help them gain more confidence in their buying decision/purchase.
The algorithm takes the top five indicators (cap rate, cash flow, etc.) and combines them into one easy-to-understand number called a RevestorRating on a scale of one to 10. This helps simplify things a bit. (It’s) not live on the site yet, but will be released in next update.
A homebuyer is oftentimes making the most important financial decision of his/her life and should understand cap rate and cash flow. Consumers are becoming smarter and more informed because of the Internet, and it should be pretty easy to educate them and bring about the awareness.
Q: Where do the property listings on Revestor come from?
A: We are partnered with ListHub and Point2 and are in direct talks with various MLSs and additional data sources. If brokers and agents want to ensure that their listings populate on Revestor, they should make sure they are syndicating through ListHub.
Q: Right now, users can search by ZIP code, price range, and either cap rate or cash flow. Do you plan to offer other search criteria in the future?
A: Yes. The basic search will also include a better location search adding in MLS number, address, neighborhood and city.
Our premium users will be able to do advanced searches by whatever filter they can think of … location, price range, cap rate, cash flow, VestorValue, RevestorRent, bedrooms, baths, property type, square footage, list prices that are X percent of VestorValue, year built, exclude short sales, fixer-uppers only, number of days listed, listing type, and keyword search. Just to name a few. I can’t release all of them at this point due to confidentiality.
Q: How does Revestor estimate the rental value of a property?
A: We estimate our rent based on similar comps in the neighborhood by number of bedrooms. We go beyond county and ZIP codes into the neighborhood level. We will be the first to admit our “estimated rent” and our algorithm is not accurate 100 percent of the time.
Over time, and as the algorithm recognizes patterns in our database, it gains more intelligence and will eventually get very close. At this point, Revestor is not an end-all, be-all, but rather a pre-due diligence tool.
You certainly aren’t going to call up your real estate agent and say, “Buy 1234 Main St. — now!” without doing any additional research. But it sure is going to give you a good place to start.
Q: Which city, or cities, will you launch in next?
A: We plan on going directly from San Diego to nationwide. However, if we do release anything in the meantime it will be Phoenix, Las Vegas, San Francisco, South Florida and parts of Texas.
Q: What other products or features are you’re working on that you can tell us about?
A: RevestorTrend, which is a live tool that shows investors and purchasers what topics and investments are trending and what geographic area they are in.
We are also working on the dashboard for our premium subscribers that tracks their portfolio of properties and total monthly cash flow.
Lastly, we are working on the integrated services platform that integrates real estate professionals into the users’ buying process.
Want to recommend a real estate tech startup for an upcoming Startup Scene? Send your ideas to Natalie Fonseca at email@example.com.
Natalie Fonseca is the co-founder and executive producer of Tech Policy Summit and the Privacy Identity Innovation (pii) conference, and the content producer for Inman News’ Data Summit and Real Estate Connect. You can follow her at @TechPolicy.