Bungalow, a real estate tech startup has raised $14 million in funding to offer what a board member and Opendoor co-founder likens to the “renter’s equivalent of Opendoor.”
Bungalow acts as a proxy landlord by leasing homes and apartment buildings from landlords and then sub-leasing units room by room to a target demographic of 20-something professionals.
“The business works by renting rooms individually at rates that total slightly higher than the rate that we lease from homeowners,” said Julianna Wright, a spokeswoman for Bungalow. “Homeowners benefit from a guaranteed income without the hassle of property maintenance, tenant evaluation, or rent collection.”
Prospective tenants can browse hundreds of listings, each of which shows the number of vacant rooms available.
“Users can expect a turn-key experience from the moment they arrive, with crazy fast Wi-Fi and modern furniture hand-picked by a team of local designers,” users are told on its website.
“One major challenge of today’s residential real estate market is the lack of desirable and accessible rental options for young people in urban areas, a problem that will become more pervasive in years to come,” said Keith Rabois, managing director at Khosla Ventures, in a statement.
The frequent invocation of Opendoor in Bungalow’s public relations and the involvement of Bungalow board member, Rabois and Khosla Ventures — which is also a major investor in single-family rental marketplace Roofstock — seems to underscore how Opendoor, essentially a tech-powered home flipper, has captured the imagination of some deep-pocketed investors and entrepreneurs and emboldened them to launch other big experiments in the real estate industry.
What if Opendoor decided to rent out some of the homes it buys, and used Bungalow to handle the job?
“We’re open to exploring a range of partnerships both within real estate and those direct-to-consumer companies that are popular among our residents,” Wright said about this possibility.
Once a landlord chooses to lease a home to Bungalow, it takes on the role of property manager. In addition to signing a minimum four-month lease, tenants pay a membership fee that covers utilities, such as WiFi, monthly cleanings and events hosted by Bungalow, according to Wright.
Those events are intended to foster a community for residents who may be new to the area or are looking to expand their social circle. The platform also claims to make things easier for landlords by guaranteeing rental payments to them in addition to filling and managing units.
Bungalow is off to a running start with lots of fuel from some Silicon Valley titans. It’s already managing hundreds of properties — each generally containing four to seven rooms — with over 750 tenants, and over the last year and a half, has quietly signed up landlords in the Bay Area, Los Angeles, New York, San Diego, Seattle, Portland and Washington, D.C. By the end of 2018, it is on track to be in 12 major metro markets.
The platform officially launched Thursday with $14 million in equity financing from Khosla Ventures; Atomic VC, which is funded by Silicon Valley bigwigs Peter Thiel and Marc Andreessen; Founders Fund, co-founded by Peter Theil, Cherubic Ventures and Wing Ventures. It’s also secured a $50 million line of credit to spend on home furnishing and property improvements and maintenance, Wright said.
The debt “allows Bungalow to grow without needing access to the equity market, and will enable the company to scale rapidly,” she said.
The startup’s backers cast Bungalow as performing an important social service: helping millennials of modest means find shelter and their place in the world. The press release points out that rents have outpaced income gains while student debt has grown rapidly, putting the squeeze on many early career professionals.
“Though many of them aren’t looking to live alone, finding roommates on traditional ad platforms is fraught with financial and personal risks,” the press release reads. “Plus, the existing housing stock is dominated by studios and one bedrooms built when most people who were just starting out were living with a spouse”.
With characteristic Silicon Valley enthusiasm, Jack Abraham, managing partner at Atomic, a Bungalow investor, said in a statement that “By leveraging the existing housing stock and connecting demand with compelling long-term leases, Bungalow is poised to continue its growth to the rest of the country and around the globe.”