Real Estate

Opendoor In Talks To Raise $200M In New Funding

Opendoor Labs, the buyer and reseller of homes, is in discussions about raising $200 million in a fresh round of financing.

The Wall Street Journal, citing people familiar with the company, reported Opendoor Labs would have a $2 billion valuation as a result. If it is able to close the fresh round of funding, it will have raised more than $500 million since the company launched in 2014. It has also raised $1 billion in debt to bankroll purchases of homes, reported The Wall Street Journal. Previous investors in Opendoor Labs include Access Industries, Felicis Ventures, GGV Capital, Khosla Ventures, New Enterprise Associates and Norwest Venture Partners.

Proceeds from the round will go to fund expansion in six metro markets in the U.S. It needs more cash to buy homes and to enter into new markets, noted the report. People familiar with the matter said the company believes that by growing fast it can have economies of scale that will enable it to get more profit from each home it flips. The faster it can sell the home, the more money it makes, noted the report. The paper noted that at a recent tech conference, Executive Chairman Keith Rabois said the company purchased $1 billion of real estate last year and plans to increase that to between $3 billion and $4 billion this year.

Opendoor is the biggest of a new crop of companies that will buy houses with cash over the internet and then flip them for a profit. While the company does well in a strong real estate market, if it starts to cool there could be risk to the business model. There are concerns that the real estate market could slow, given that the Federal Reserve is in the process of raising interest rates. Opendoor, noted the paper, says it could spot declines early and lower offer prices to reflect that. They also contend they could raise their fees in a tight market because their service would be more valuable, noted The Wall Street Journal.

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