The new venture “Go iBuyer” is focused on buying up multifamily rental properties, raising the rents and then reselling them.
A growing number of companies are rushing to let American homeowners offload their homes to investors online for cash. Collectively, they are known as iBuyers, and now a new startup has entered the fray with the goal of purchasing, renovating, and re-selling entire multifamily properties in Los Angeles, California.
The startup is called Go iBuyer, and it was launched this week by co-founders David Bramante and Kayla Horwat — real estate agents and founders of another company called My Home Agent, which offers a voice-activated lead generation too for Amazon Alexa devices (the company was formerly known as HomeyPoints).
Bramante and Horwat told Inman they were motivated to launch Go iBuyer based on their assessment that the current crop of iBuyers — which include Zillow Offers, Opendoor and Offerpad, among others — is not offering good enough deals to sellers, nor agents.
Opendoor, which recently announced its own expansion to Los Angeles in 2019, charges 6 to 13 percent service fees to sellers who accept the company’s cash offers. Go iBuyer claims it will not charge sellers any transaction fees.
“These iBuyer programs are greedy investors,” he told Inman. “They’re not only trying to get the property, but they’re trying to get rid of the commission and charge a fee on top of that. It’s a little corrupt.”
Go iBuyer’s founders say it can offer better deals for consumers and agents than its iBuyer rivals by being closely aligned with Bramante and Horwat’s other business. However, the two businesses are clearly designed to benefit each other.
Realtors or agents who have signed up the separate platform My Home Agent and claimed a zip code (the tool is an Amazon Alexa Skill that can be installed on Amazon Echo and other Alexa devices) will automatically get the listings of properties that Go iBuyer puts up for re-sale in that zip code. They will receive a traditional 5 to 6 percent commission (split with a buyer’s agent).
My Home Agent charges a $99 setup fee, plus an $89 per month subscription. Only one agent can claim any given zip code within My Home Agent. Agents can belong to any brokerage, and the subscription comes with access to My Home Agent’s various digital and voice marketing tools.
“We’re really trying to move in the direction where Realtors are protected,” he added. “There’s so much money to be made that the Realtors’ commission doesn’t have to be squeezed, it can be protected.”
Go iBuyer will also differ from other cash offer companies by focusing on multifamily properties with deferred maintenance in, at least initially, east Los Angeles. Right now, its offers are being funded privately by wealthy investors that Bramante and Horwat know from their days as agents. They say they have raised $10 million to began buying and selling properties.
So far, the company says it has made around 20 offers, and is near to closing a transaction on a duplex in L.A.’s intensely gentrified Silver Lake neighborhood.
The sale price has been set at $725,000 and the property requires up to $100,000 in renovations. The duo believes they can rent out the individual units for around $3,000, before ultimately reselling the entire property for around $1 million.
The property epitomizes the way Go iBuyer’s business model differs from other iBuyers.
“Our program is going to be more in the duplex or multifamily arena,” Horwat said. “So we can come in and increase rents, renovate, and sell.”
Most other iBuyers, by contrast, have so far focused on well-maintained, middle-range single family homes in places like Phoenix and Atlanta. However, Opendoor recently announced it planned to begin making offers on homes in Los Angeles, a city with both more older and pricier homes than other iBuying hotspots.
Bramante said that Go iBuyer is currently interested in vacant or owner-occupied properties and does not plan on evicting tenants, which has become a controversial issue in Los Angeles as housing prices have soared.
So what sets Go iBuyer apart from run of the mill property flipping?
For one thing, Bramante said the company wants to offer full market rate prices for properties — something he argued even current iBuyers cannot do because they charge a premium for speed.
“The sellers are inherently getting kind of gouged and it’s costing them,” he said. “Our design is we don’t want to gouge sellers.”
Go iBuyer will use proprietary software to determine the value of a property. However, sellers and their agents will also be allowed to set a price that they want. If a seller’s price falls within a range that, according to the company’s algorithms, will still be profitable, Go iBuyer will purchase the property — even if the price isn’t the absolute lowest it might have been.
Bramante cited the example of the Silver Lake property, where he said the seller asked for $725,000. The company’s analysis indicated the property could be profitable at that price once it was flipped and rented out, so Go iBuyer agreed to the seller’s number.
“If you’re going to sell your house online, why would you have to pay a discount?” Bramante said. “Just because it’s faster and easier?”
He added that technology should make transactions more profitable for everyone, including sellers and agents, and that fixing that issue is one way Go iBuyer aims to correct shortcomings of the existing iBuyer model.
A statement from the company further explained that it is dedicated to offering “clean ‘as-is’ terms and no renegotiating throughout the process.”
Go iBuyer also has an unorthodox plan to pay for future expansion: the company plans to unveil a tech-enabled crowdfunding feature within a month. The service will let individuals invest small amounts of money, say $50, which would then give them partial ownership in investment property.
Bramante said that the targeted returns on investments in the company are “20 percent or greater.”
So far, Go iBuyer has only made offers on off-market properties, but the company’s website also has a portal where interested sellers and their agents can obtain instant offers. Sellers who approach the company without a representative will be routed to the Realtor who has claimed their zip code with My Home Agent.
Though Go iBuyer’s approach is a fairly significant departure from that of other iBuying companies, its existence illustrates the growing clout and diversity of the sector. Following Opendoor’s founding in 2013, iBuying has spread to over a dozen cities across the U.S., with both startups such as Offerpad and established companies such as Zillow entering the ring.
However, iBuying may get its first serious test in 2019 if the housing market experiences a slowdown, as many experts expect.