Fix-and-Flip Fintech Backflip Expands to 41 New U.S. Markets

Backflip, a proptech company that focuses on investors looking to buy residential properties, fix them up, and then flip them for a profit, recently announced that it had expanded to 41 additional metro markets.

“First-time and experienced residential real estate investors from Alaska to Hawaii can now leverage Backflip’s data, technology, and capital to make better real estate investment decisions and quickly fund the rejuvenation of America’s 65 million aging homes,” a press release said. “Alongside expanding nationwide, Backflip has experienced notable business, product, and team growth, and completed its first acquisition as a seed-stage startup.”

Since around 2015 to 2020, house flipping gained a lot of attention with cable television shows that made the activity seem fun, easy, and profitable. It actually is far harder.

In 2020, RealtyTrac ran an analysis for Money.com showing that 12% of flips sold at breakeven, which mean a loss before expenses. In 28% of flips, gross profit was less than 20% of the purchase price. Twenty percent margin on the purchase price is the bare minimum flipping needs to cover rehab, carrying costs like mortgage and taxes, staging, and other expenses, and often isn’t close to enough. Many flippers use a rule of thumb that they need to get 30% margin plus repairs to be profitable. Investors in the process therefore need to get significant discounts to competing market priced units. Many without experience don’t realize the financial dynamics.

Backflip mentioned a number of advances in its business in the press release: “Backflip has grown 3X year-over-year, against a real estate market backdrop that has declined by 50% as a result of FED interest rate hikes in 2022. Membership continues to grow by more than 15% month-over-month. As of May 2023, its members are analyzing over $2B worth of single-family residential investments per month using the Backflip app.”

However, most of those figures are comparisons without any baseline, so there is no way to know how well the company is actually doing in relation to actual or near competitors. Also, the dollar figure of SFR investments could mean based on some absolute market price or as devalued figures, taking into account discounts necessary to make a flip profitable.

The company’s product roadmap includes “a computer vision and machine learning feature for members to instantly analyze a property by holding up their phone camera; innovative capital products like Buy Now Pay Later, flexible mezzanine products and capitalized interest structures; as well as the launch of new and unique features like ‘My Leads’ to more-easily assess properties, which will be available to members later this year.”