Some startups are founded to solve one big problem. Backflip, however, solves two of them – the lack of both technology and access to capital in the fix-and-flip real estate investor market. Founded in late 2020 – when the COVID-19 pandemic was turning the real estate industry upside down – Backflip aims to equip entrepreneurs with the tools they need to renovate homes by creating an “end-to-end residential investment operating system.” –Co-founder and COO Jake Rome describes the app as “Shopify for real estate entrepreneurs.”

Rome recently sat down with Originate Report to discuss how his company has leveraged technology to make becoming a residential real estate entrepreneur more approachable to everyone.

“After hundreds of early customer conversations, we honed in on the fact that lack of purpose-built technology and difficulty accessing sophisticated capital are common pain points shared by real estate entrepreneurs,” Rome said. “We began originating fix-and-flip loans using a small debt fund to generate revenue, which allowed us to raise sufficient venture capital to invest heavily in our technology products.”

Backflip’s technological product – its platform for analysis, tracking, and real estate data – are available for free to entrepreneurs who download the app and create an account.

Currently, Backflip only monetizes its loan products. In July 2021, the company started testing fix-and-flip loans for investors and has since unveiled an array of different capital products, each crafted to “solve specific pain points,” Rome said. Backflip’s loans have had a significant impact on the market, growing rapidly in volume from approximately $4 million in 2021 to nine times that amount the following year to over $135 million in 2023, with the current year growth “forecasted to be substantially higher.” And, in 2023, Backflip members analyzed approximately $35 billion worth of investment properties using its app, a 775% increase over the $4 billion analyzed in 2022. 

Backflip’s membership numbers have seen similar growth; as of early 2024, 15,000 real estate investors had created an account on the app. The company is expecting to double its staff size this year in response to the rising demand.

“Backflip aspires to be the most trusted technology and capital partner in the ecosystem. Our technology products are highly valued by our members, who are primarily digital natives used to managing their entire lives on their phones. In fact, they expect it,” Rome said.

With the Backflip app, real estate entrepreneurs can quickly calculate the value-add investment potential of a home by inputting an address or simply pointing their phone’s camera at a house. The app instantly generates “as-is” and “after-repair” values, key metrics in the loan underwriting model. Once a member has found a property that meets their criteria for a flip, they can submit a loan application from the app.

“Our belief is that the entire financial process of managing an investment should be able to be done from the palm of your hand – in the field,” Rome said. “Simply put, our business model is to bring all the tools – financial, analytical, informational, community, and more – for residential real estate entrepreneurs into one platform, unlocking significant value for them at every turn.”

For Backflip, access to technology and capital products goes hand in hand with a commitment to transparency. Being open and transparent not only builds trust and loyalty among its thousands of members, it also creates a culture focused on continuous improvement: “Backflip’s culture is one of hyper-transparency; we routinely publish data to share how we are doing. We publish these reports to hold ourselves accountable. It’s hard to improve what you can’t measure, so it’s important for us to quantify the impact of our efforts,” Rome said.

Rome launched Backflip with co-founder and CEO Josh Ernst, and both bring an extensive background of real estate, investing, and innovation. Rome, who has over $2 billion in transaction experience across multiple types of institutional real estate classes, previously worked as the SVP of Corporate Development and Founding Partner of Daydream Apartments, an integrated flexible living platform (which was acquired by ICONIQ Capital in 2020 and rebranded as Sentral).

Prior to Backflip, Ernst was the COO at DeShong Companies (dba “Trelly”) and Myers the Home Buyers, managing all internal operations, including product development, sales, marketing, and accounting, and leading the company during a period in which it completed over 1,500 investment and sales transactions annually.

Other key C Suite leaders include Leslie Jordan, the Chief Product Officer, who previously held that position at Realtor.com prior to joining Backflip in April 2023; Richard Porteous, VP of Capital Markets, who started in August 2022 after holding positions for traditional financial institutions like UBS, Bank of America Merrill Lynch and Citi; and, most recently, Pierce Spitler, another alum from Realtor.com who now serves as Backflip’s Head of Data Science and Analytics, effective this past January.

“Our employees are attracted to Backflip’s mission and culture. We attract individuals who are inspired to reimagine and rebuild an outdated and unbalanced system, and to support and celebrate America’s local entrepreneurs. Backflip is a 100%-remote organization with a unique operating heartbeat that is unlike anything the private credit markets have ever seen,” Rome said.

Backflip’s entry and expansion into the fix-and-flip real estate market comes at a time when housing affordability is at a historic low. According to a recent Redfin report, the typical American household could afford to buy 15.5 percent of the homes on the market in 2023, a drop of 40 percent from pre-pandemic figures. The problem of affordability is exacerbated by the “dramatic undersupply of housing,” according to Rome. Besides these market factors, most homes are too old to meet the needs of the modern homebuyer. “Essentially, we don’t have enough homes – and too many of the ones we do have are unaffordable and largely obsolete,” Rome said.

By empowering their members to make informed investment decisions and expanding access to capital, Rome says Backflip is having a positive impact on “one of society’s most important challenges.”

Backflip is also changing the makeup of who invests in real estate. Over half of Backflip’s loans go to people of color, 27% go to women, and the average borrower is 39 – eight years below what is typical for the industry. Backflip’s membership base is also economically and geographically diverse: 64% of its loans went to ZIP codes where the median income was below the average in the state and the company is now taking on a more active role in rural communities that have been underserved by more traditional real estate lenders.

“We love connecting with the individuals behind the loans and their unique stories. Our borrowers are more than just a directional indicator of default probability in a rating agency’s forecast model. Our members are heroes. They are doing the important work of rejuvenating the American housing stock, which is in desperate need of modernization at affordable price points,” Rome said.

For more information about Backflip and its products, visit https://dobackflip.com/