the business model is fascinating. the capital requirements make opendoor seem crazy on the surface, but it is not at all insane if you dig deeper.
the short term model is predicated on managing inventory like a retailer and diversifying holdings like a trader. mastering both functions, let alone one, is very challenging, but far from impossible. if opendoor can acquire data and predict transactions better than competitors, the mountain top becomes eminently more climbable. from a portfolio perspective, the early stages are actually the least risky because opendoor can cherrypick the best real estate markets, and within those markets, cherrypick the best homes, where "best" means the properties most likely to sell quickly and profitably.
the long term vision has not been articulated, but it seems like opendoor could grow into a platform for homes much like amazon is a platform for consumer goods. opendoor would provide the buyers, product guarantees (e.g., home inspections passed), the open house experience, and predictive analytics (e.g., home X has a 80% chance of turning over in 30 days if priced at $1M) while others manage financing and inventory risk. if this conjecture is right, look for opendoor to (a) lower prices and (b) streamline real estate transactions with automation where possible and where not possible, to empower untrained (i.e., cheap) individuals with computer vision and smart software to perform tasks like certified professionals. if neither happens, consider the conjecture wrong. :)
Thanks for the comment -- and it's very accurate in terms of where we'd like to go.
On a tangential note: empowering untrained individuals is important, but we often do the opposite too. Many of our internal tools are designed to make trained professionals/experts as efficient as possible.
yup, i also wrote a deeper analysis after someone posted about opendoor in december.
what will be super interesting to watch is how the market size (i.e., annual real estate transactions) changes in response to reduced friction. historically, disruptive technology like uber widens the market substantially because it unlocks all this demand artificially suppressed by friction. because of opendoor and similar startups, will transaction volume increase by 10%? 50%? 200%?
opendoor is the classic VC investment: huge upside with controllable, sane risks.
It would be great to move as a home owner and be able to avoid the 5-6% realtor cost on both ends (10-12% total). This could enable millions of people choose better living arrangements. Unfortunately for people in California, Prop 13 will still create huge costs to moving.
the short term model is predicated on managing inventory like a retailer and diversifying holdings like a trader. mastering both functions, let alone one, is very challenging, but far from impossible. if opendoor can acquire data and predict transactions better than competitors, the mountain top becomes eminently more climbable. from a portfolio perspective, the early stages are actually the least risky because opendoor can cherrypick the best real estate markets, and within those markets, cherrypick the best homes, where "best" means the properties most likely to sell quickly and profitably.
the long term vision has not been articulated, but it seems like opendoor could grow into a platform for homes much like amazon is a platform for consumer goods. opendoor would provide the buyers, product guarantees (e.g., home inspections passed), the open house experience, and predictive analytics (e.g., home X has a 80% chance of turning over in 30 days if priced at $1M) while others manage financing and inventory risk. if this conjecture is right, look for opendoor to (a) lower prices and (b) streamline real estate transactions with automation where possible and where not possible, to empower untrained (i.e., cheap) individuals with computer vision and smart software to perform tasks like certified professionals. if neither happens, consider the conjecture wrong. :)