Flock Homes, which allows individuals to own rental homes through portfolio shares, has landed $26 million in a Series A round led by Andreessen Horowitz (a16z) with participation from 1Sharpe Ventures and Human Capital as well as other existing backers.
Founded and launched in 2021, Flock Homes aims to give landlords the ability to own shares of a portfolio made up of multiple properties—typically only accessible through real estate investment trusts (REITs) comprised of companies that own or finance income-producing real estate.
After raising a $6.5 million seed round last March, this latest round of financing brings its total equity raised to date to $32.5 million.
Flock Homes' target user is a landlord of single-family homes with 1 to 4 units that no longer wants to handle the day-to-day management of their investment but also doesn't want to sell their property either.
Once a property is purchased by Flock Homes, the company owns and operates the asset while the landlord receives shares in a diversified portfolio of multiple properties, similar to a REIT, but without the hassle and burden of day-to-day management, maintenance, and property taxes.
The best part is that as the portfolio appreciates in value, so do the shares. Landlords also receive a share of all rental income as well—minus a small portion kept to pay for maintenance, property taxes, and insurance.
Landlords can then choose to either reinvest their proceeds or opt for cash flow with the ability to redeem their shares over a period of time. In fact, many landlords choose to hold onto their shares in perpetuity, live off the diversified income-producing asset, and then pass it on to their heirs as a sort of real estate planning succession tool.
On the flip side, Flock generates revenue through management fees (1% of the value of all user's accounts) as a result of acting as an asset manager for the entire fund.
Eventually, Flock hopes to build a standardized portfolio of homes using third-party valuation models and a proprietary valuation system to determine fair market value for homes—adjusting for repairs and maintenance. Unlike typical iBuyers, Flock claims to never profit off of a home but instead is focused on developing a system that is fair and transparent for every home owner.
The company is also quite selective when it comes to purchasing homes—ensuring they only invest in properties they believe can operate efficiently, provide solid returns on investment, and deliver exceptional experiences for the residents who reside in them.
Flock Homes currently owns 110 homes in its portfolio across Colorado, Texas, and Kansas and plans to launch in Seattle and other markets later this year.
CEO Take: Essentially, Flock Homes is using technology to streamline a process that has existed for decades, called a 721 Exchange, while providing easier and widespread access for everyday American property owners to take advantage of this opportunity.
The company also uses an asset-light model which doesn't require cash to purchase homes but rather uses the money generated from when landlords are rolling in their equity from their homes instead.
Ultimately, Flock is developing a powerful technology-forward tool, backed by machine learning and data, to evaluate purchases, aggregate a portfolio of real estate properties, democratize investor access, and enhance resident experience all-in-one.
It's an impressive deployment of proptech that's still in its infancy (founded in 2021 during the pandemic) and we can't wait to see what's next for Flock Homes!
Congratulations to the team over at Flock on your recent Series A funding round and your expansion plans later on this year. If you are searching for rich property data to help with information verification and property valuation, let's connect, we'd love to partner with you!
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