Seattle startup CityBldr is getting into the home buying game, taking on real estate heavyweights in its backyard. But unlike Zillow and Redfin, which have both started buying properties directly from homeowners, CityBldr is targeting homes that can be converted into multi-family residences.
CityBldr’s software identifies underutilized land in cities, like Seattle, and makes connections between homeowners and developers to repurpose properties. For example, CityBldr helped seven homeowners in the Seattle area realize that if they sold their properties as a bundle to a real estate developer, they could make more money. Going forward, CityBldr will start buying properties like those directly, then sell them to builders and developers who will convert single-family homes into multi-unit residential buildings.
“We’re only going to be targeting properties that are zoned for multi-family development,” CityBldr CEO Bryan Copley said. “The big problem we’re trying to solve is that everybody’s moving to the city and there aren’t enough homes in the city to accommodate that growth.”
CityBldr will start buying houses sometime in the fourth quarter of 2018 or first of 2019. The startup is currently raising its Series A round and searching for a Chief Investment Officer to oversee the home buying business. Copley says that CityBldr should be able to guarantee a higher price on properties it targets because the resale value to real estate developers is higher than the listing price for a home that would be resold as a single-family residence.
“The reason we’re able to do that is we’ve built a tool that understands the development potential of every property … Instead of only looking at what would a homebuyer pay for that property, we look at what would an investor or builder or developer be able to pay for that property,” Copley said.
CityBldr is taking a different approach than Zillow, Redfin, and Opendoor, the incumbent instant offers company based in San Francisco. Opendoor just raised a whopping $325 million to expand into new markets and defend against new challengers. Unlike CityBldr, all of those companies are buying homes to sell to other home buyers, not brokering deals to convert properties into multi-unit buildings.
“We’re not competing with Zillow and Redfin directly on their instant offer,” Copley said. “We just believe that property owners will come to CityBldr first to see if they can get a better offer than all the other companies looking at the same underwriting for the property.”