Doorvest closes $39M in funding, moves into iBuying as Zillow departs

Doorvest, a rental real-estate investment startup that refers some of its local customers to mortgage companies for financing, has received $39 million in Series A funding and entered the “instant offer” business Zillow just left.

The company is a small but fast-growing player that plans to use the new funds to fuel an expansion after seeing 14-fold customer growth in the past year, Andrew Luong, Doorvest’s CEO and co-founder, said in an interview. Its funding round consisted of a $14 million equity investment by a group of companies led by early-stage consumer-tech venture capital firm M13, and an additional $25 million line of credit the company will use to fund discount purchase of homes it will rehab for rental investors to purchase, he said. In addition to M13, investors that participated in the $14 million equity investment included Mucker Capital, Gaingels and Socially Financed. An undisclosed lender is providing the LOC, Luong said.

“We quarterback customers through the [rental investment] process, and 70% of them have never owned real estate directly before. They can bring their own mortgage lenders, or they can work with one of our partners,” said Luong.

The company prefers to work with digital home lenders like Beeline that offer the kind of streamlined customer experience Doorvest aims to provide in line with its turnkey rental investment services. Doorvest helps with both the investment and the property management involved. Marcus Ridgway, founder of single-family rental firm Invitation Homes, is one of Doorvest’s investors.

Doorvest eventually plans to expand nationally, but it currently buys homes only in the Houston and Dallas metropolitan areas. It’s on track to expand into San Antonio and Atlanta in the first quarter of next year. In addition to its new iBuying channel, Doorvest purchases homes from wholesalers and through multiple listing services.

Luong started Doorvest after seeing his middle-class family lose a beloved vacation home due to a loss of income while growing up. He decided as an adult that consumers should have ancillary sources of income. Luong found benefits to that end in rental investing and wanted others to as well. Along the way, he met co-founder Justin Kasad through social circles, who offered to help with some of the automation involved. Kasad became the company’s chief technology officer.

The nature of Doorvest’s business model puts it in a position where it won’t have the kind of challenges some other iBuyers have had, Luong noted.

“We know we have the end customer lined up before we actually go out and acquire homes vs. some of the traditional iBuyers such as Zilllow. They’re buying a home and they forecast the future value and that there will be demand for it,” he said.