Doorvest this morning announced a $39 million funding event, including $14 million worth of equity financing and a $25 million credit facility. The latter makes sense given the startup’s business model, namely helping consumers buy and manage rental properties.
M13 led the round (not to be confused with M12, Microsoft’s venture arm, or M25, the Midwest-focused firm), with participation from Mucker Capital and others, including a number of angels.
In today’s funding round blizzard that we find ourselves in, it takes a little to stand out from the flow of inbound. But Doorvest caught our eye due to the fact that it sounded like it was building a too-consumer-friendly model for a for-profit business. So we got Andrew Luong, the company’s co-founder and CEO, on the phone to discuss the funding event and how Doorvest’s business shakes out economically.
Doorvest’s model
Doorvest wants to help individual consumers buy a rental property and manage it. Folks bring their own financial information to Doorvest, which helps them select a home to purchase — the startup has a number of listings already on its platform, including houses like this. Once a house is selected and a small deposit paid, Doorvest buys the house in question and fixes it up.
The eventual owner then takes out a mortgage and buys the home from Doorvest, with the company handling its management for a cut of its rental income. The idea is that the consumer gets help selecting, buying and running a rental property without having to pick up a hammer. But what about Doorvest — why not just buy the houses it thinks make attractive rental candidates and run them itself?
Per Luong, individuals can leverage government subsidies and tax advantages that companies often do not get. So, it makes more sense, in his view, to help individuals buy and manage rental units than to keep them intra-company after they are remodeled.
Doorvest makes money in a few ways during the process. It looks to snag a roughly 5% slice of a property’s final selling price, and the company indicated that the 10% cut of rental incomes it takes for managing properties has margin in it as well.
As a consumer, it all sounds rather excellent. I, an impractical human, would love to add more real estate to my personal portfolio. But I know effectively zilch about how to go about picking, updating and running properties. This limits my options to REITs, or, terrifyingly, trying to learn how to run a small property business myself.
Or, Doorvest. It’s a good pitch.
The startup has been operating for consumers since April 2020 and has purchased 170 homes to date. Doorvest’s growing capital base — it had raised around $3.5 million in equity funding before its latest $14 million infusion — and its expanding geographic footprint should help it get more homes through its process, collecting not only more data for the company but regular revenue streams.
If the math all shakes out, I dig what Doorvest is doing. Let’s see how it scales.
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