ProptechReal Estate

Proptech Doorvest raises $39M for fresh investors to buy rentals

Single-family home rentals are raising the roof in the U.S. residential market, with a number of high-profile institutional investors scrambling to get in on the action. By one estimate, single-family rentals generate roughly $250 billion in annual rental income, and that figure is climbing.

In a September report, the National Multifamily Housing Council cited federal data showing single-family rentals housed a larger share of U.S. renters in 2019 (41%) compared with apartments (37%).

Nationally, median single-family rent jumped 10.2 percent from September 2020 to September 2021, according to a Nov. 16 report from CoreLogic, a supplier of housing data and analytics. That represented the fastest year-over-year rent increase in 16 years.

“Single-family rental vacancy rates remained near 25-year lows in the third quarter of 2021, pushing annual rent growth to double digits in September,” Molly Boesel, principal economist at CoreLogic, said in a news release. “Rent growth should continue to be robust in the near term, especially as the labor market improves and the demand for larger homes continues.”

To help investors capture a piece of the increasingly lucrative single-family rental market, San Francisco-based proptech startup Doorvest has built an online platform designed to simplify ownership of these homes. And it just raised $39 million — a $14 million Series A equity round and a $25 million credit facility — to expand the platform.

M13 led the round, with participation from Mucker Capital, Gaingels and Socially Financed, along with executives such as Tom Willerer, chief product officer at Opendoor, an online marketplace for buying and selling homes; Adam Nash, co-founder and CEO of charitable-giving platform Daffy and former CEO of robo-advisor Wealthfront; and Marcus Ridgway, founder of Invitation Homes, a home-leasing company. 

Earlier this year, Doorvest collected $2.5 million in seed funding. The company, founded in 2019, kicked off its services last year.

Brent Murri, principal at Los Angeles-based M13, said Doorvest’s platform “democratizes” investors’ access to single-family rentals.

“For most people, the obstacles to owning a rental home — a high down payment, geographic limitations, finding and keeping residents, and maintaining the home — are insurmountable,” Murri said in a news release. 

Doorvest will use the fresh equity and credit facility to grow its workforce to around 100 full-time employees next year, up from the current 32. The bigger workforce will pave the way for entering new markets. The company rolled out its investment platform last year in Houston and later moved into the Dallas market. Next year, Doorvest plans to break into the San Antonio and Atlanta markets, said co-founder and CEO Andrew Luong, who’s been a real estate investor since 2013.

Aside from the investment platform, Doorvest has introduced a program that enables people, including agents and wholesalers, to sell homes to the company regardless of their condition.

Doorvest’s main platform simplifies the process of an investor buying a single-family rental home. After an investor — typically someone who’s never owned an investment property — puts down a cash deposit, Doorvest finds a home for that person, then buys and renovates the property. Most of the homes purchased by Doorvest have been “uninhabitable,” Luong said. The investor buys the newly renovated home from Doorvest, which already has lined up a tenant and goes on to manage the single-family rental on the investor’s behalf for a fee equaling 10% of the gross monthly rent.

“You get the benefits of owning rental real estate while being able to lean on our platform and institutional knowledge built into the Doorvest product,” Luong said.

So far, Doorvest has purchased about 170 single-family rentals and now manages a portfolio valued at more than $20 million, according to Luong. Characteristically, these homes are three-bedroom, two-bathroom properties in “great” suburban neighborhoods, he said.

As Doorvest targets the San Antonio and Atlanta markets, the company will seek opportunities in other major metro areas that offer an abundance of high-quality, single-family rental homes, Luong said.

To supplement its supply of rental homes, Doorvest has added an iBuying component. However, Luong emphasized that Doorvest’s iBuying program differs from that of Offerpad, Opendoor and the recently shuttered Zillow Offers platform, which accumulated more than $380 million in losses in just 3½ years. Whereas typical iBuying programs purchase homes and rely on algorithms to forecast homebuyer demand, he said, Doorvest’s “bespoke” iBuying platform is driven by investor demand.

“It’s obviously unfortunate what happened at Zillow. It’s unfortunate in the sense that it hurts a very big, established company, and it took away jobs from many people. Hopefully some of those folks can find a home at Doorvest,” Luong said.

Luong said Doorvest’s combination of an iBuying program and an investment platform lives “somewhere in the middle” between fintech and traditional real estate.

“We have a long way to go,” he said of the business, “but what unifies is … the mission of helping advance others to financial security, hopefully as quickly as possible.”

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