It's been quite volatile lately. And Earnings on the 5th. Any current thoughts? I'm waiting on earnings. Put in a bid for 1.50 in case it tanks. Not sure how this one will work in a 40% real estate haircut but I'm thinking, not great. :)
They have changed their business model from i-buying to facilitating transactions. I don’t think they have the huge inventory exposure that they did before. It’s not zero, probably closer to half. Carrie Wheeler has been focusing on de-risking.
this used to be such a hot company for the best san francisco engineers to work at. but that's obviously not the case any more. i would keep an eye on what the culture is like after the last cycle.
hmm but it always needs to employ a huge amount of capital just to try to get 6-7% gross margins/contributions?
The most encouraging part to me is their market share in the original market, Phoenix, mostly due to word of mouth brand spread. They need enough volume for profitability, and time can do a lot of work here
I don’t like these ibuyer business models. I suspect there tends to be adverse selection in their real estate portfolio (if the sellers struggle to sell with speed in the open market then maybe the property/location isn’t great! Worse locations don’t usually benefit much from the nationwide house price appreciation.
I think it’s a red flag that OPEN doesn’t consistently report the average holding period for their properties.
And more importantly I don’t think the business model is scalable without substantial capital raises.
If you are making 7-8% gross margins (as they have for a while) you are not going to increase your volume of purchases by more than 7-8% (assuming most of the gross is net profit).
One more observation on OPEN: like I said, the gross margin tends to be around 7-8%. This strikes me as low when Opendoor often charges a fee of 5-7% to the seller (similar to a real estate agent fee). So if they get a 5-7% fee, then they aren’t really selling the property by a lot more than what they paid (maybe 1-3% more than the PP).
I may be grossly mistaken as I don’t know if they always charge this seller fee. But even if most of the gross margin comes from the difference between purchase price and sale price, this seems quite low when taking into account taxes, opex and cost of debt.
It's been quite volatile lately. And Earnings on the 5th. Any current thoughts? I'm waiting on earnings. Put in a bid for 1.50 in case it tanks. Not sure how this one will work in a 40% real estate haircut but I'm thinking, not great. :)
They have changed their business model from i-buying to facilitating transactions. I don’t think they have the huge inventory exposure that they did before. It’s not zero, probably closer to half. Carrie Wheeler has been focusing on de-risking.
this used to be such a hot company for the best san francisco engineers to work at. but that's obviously not the case any more. i would keep an eye on what the culture is like after the last cycle.
hmm but it always needs to employ a huge amount of capital just to try to get 6-7% gross margins/contributions?
The most encouraging part to me is their market share in the original market, Phoenix, mostly due to word of mouth brand spread. They need enough volume for profitability, and time can do a lot of work here
I don’t like these ibuyer business models. I suspect there tends to be adverse selection in their real estate portfolio (if the sellers struggle to sell with speed in the open market then maybe the property/location isn’t great! Worse locations don’t usually benefit much from the nationwide house price appreciation.
I think it’s a red flag that OPEN doesn’t consistently report the average holding period for their properties.
And more importantly I don’t think the business model is scalable without substantial capital raises.
If you are making 7-8% gross margins (as they have for a while) you are not going to increase your volume of purchases by more than 7-8% (assuming most of the gross is net profit).
One more observation on OPEN: like I said, the gross margin tends to be around 7-8%. This strikes me as low when Opendoor often charges a fee of 5-7% to the seller (similar to a real estate agent fee). So if they get a 5-7% fee, then they aren’t really selling the property by a lot more than what they paid (maybe 1-3% more than the PP).
I may be grossly mistaken as I don’t know if they always charge this seller fee. But even if most of the gross margin comes from the difference between purchase price and sale price, this seems quite low when taking into account taxes, opex and cost of debt.