Real estate is the largest asset class in America

At $33.6T, it’s nearly as large as the GDP of the two largest global economies combined

Over $1.5T of residential real estate changes hands each year

Let's compare the big three real estate disruptors

$RDFN $Z $OPEN

// THREAD
Over the next ten years, these three companies will reinvent the process of buying, selling, and financing residential real estate

The market is highly fragmented with 2M real estate agents and has been relatively undisrupted by digital transformation so far
1) Zillow $Z

- A real-estate media tech giant, founded in 2004

- The largest of the three by market cap by far

- Think of Zillow as the “Google” of online real estate search, making most of their revenue selling ad space and leads to realtors and property management companies
Zillow Continued...

- Advertising has been Zillow’s core business

- $Z did $3.3B in sales in 2020

- Zillow has been pivoting towards more of a real estate brokerage model to compete with Redfin and has used Zillow Offers to branch into iBuying to directly compete with Opendoor
Key Advantages- $Z

- First-mover advantage on RE tech

- Strong brand awareness

- Database of over 110M US homes (out of ~139M total) to draw on data and insights

- Website traffic hit a record high of 9.6 billion visits (up 19% YoY), the most trafficked real estate platform
Key Disadvantages- $Z

- Late entry into iBuying

- iBuying is a lower margin business, $Z lost $316M in 2020 in iBuying

- Shifting towards brokerage model inherently means cannibalizing part of its own ad revenue, grabbing realtor customers' would-be commissions and fees
2) Redfin $RDFN

- IPO'd in 2017, has soared over 700% since its March low

- First and foremost, a tech-enabled brokerage, the 4th largest in 90+ markets in the US with full-time, salaried agents

- Growing sales at 70%+ YoY

- Currently the smallest market cap of the three
Redfin Continued...

- Generates majority of its revenues from commissions and fees charged on each real-estate transaction

- They’ve expanded their offerings to include concierge services and iBuying

- Differentiator- $RDFN offers a full menu of flexible brokerage services
Key Advantages- $RDFN

- Fully integrated brokerage offering salaried agents, title services, lending services

- #1 most-visited brokerage site, opportunity to capture a large piece of the $82B+ made in real estate commissions each year

- Redfin is ACTUALLY profitable
Key Advantages- $RDFN

- Redfin’s profit margins are increasing, while Zillow’s are decreasing

- Lowest rate option to sell your home: 1% commission when you buy & sell with Redfin within 12 months (vs. typical 6%)

- Gross margins increased to 39%, up from 22% a year earlier
Key Disadvantages- $RDFN

- Fully salaried Redfin agents may be less incentivized than a traditional agent to get you the highest price possible for your home

- Redfin agents handle 3x more customers than traditional agents, so you’re competing for agents' time and attention
3) Opendoor $OPEN

- Founder-led

- Served over 80,000 customers across 21 markets in the US, with $10B in homes sold

- Opendoor grew sales at +150% over the three-year period leading up to the pandemic

- Evolved into a pure-play digital “instant buying” real estate company
Opendoor continued...

- A platform to connect home buyers and sellers and allows for a quick and convenient way to transact real estate in the digital era

- Digital offer process, quote on your home in as little as 1 minute

- 5% in fees for selling with Opendoor
Key Advantages $OPEN

- Data-driven offers help expedite the real estate process for quick liquidity and low hassle, making 63% of its offers automatically due to its access to data

- Market share leader in iBuying- Responsible for 50% of homes bought and sold online in 2020
Key Disadvantages $OPEN

- iBuyers can often charge higher fees than traditional agents due to carrying costs, less flexible fee options than Redfin

- High volume, low margin model

- iBuyers accounted for just 0.2% of all US home purchases in 3Q20

- Fierce competition
1) Summary

The real estate market is finally undergoing a digital transformation, as a new generation of buyers (led by Millennials and Gen Z account = 40% of the US population) looks for convenience and online tools
2) Summary

Nearly 15% of a home’s value changes hands in the series of transactions related to moving homes. That value, along with expanded related services, is the opportunity for Zillow, Redfin, and Opendoor
3) Summary

In the end, data is the new oil

Whichever company can collect the most AND the best data and execute on it to offer the better, most convenient and cost-effective customer experience compared to the traditional purchases will win

But a rising tide lifts all boats

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More from @BackpackerFI

22 Feb
Matterport- $GHVI

Allows customers to produce, store, and distribute 3D virtual property tours and 360-degree models

Transforming the $230T global building stock that remains largely offline into valuable data that can provide property insights and analytics

// THREAD
Total Addressable Market-

Real estate is the largest asset class in America

There are 4 billion buildings globally and over 20 billion spaces

At a conservative $1 per space per month, the opportunity could surpass a $240B total addressable market
The Opportunity-

The “digitization of real estate assets"

They're in the business of turning offline physical space into online digital space

This may just look like a virtual tour or 3D camera company, but this is about turning physical space ➡️ data

Read 15 tweets
18 Feb
Current Stock Portfolio (in order of position size)-

*BTC not included here (~10% of net worth)

1. $TSLA
2. $NVDA
3. $TDOC
4. $SHOP
5. $SQ
6. $PINS
7. $RDFN
8. $EXAS
9. $CRWD
10. $SE
11. $TWLO
12. $SPOT
13. $ETSY
14. $LMND
15. $APPS
16. $ABNB
17. $DMTK
18. $FVRR
19. $TTD
20. $MELI
21. $PLTR
22. $ROKU
23. $AMZN
24. $AAPL
25. $PENN
26. $DKNG
27. $GRWG
28. $VRM
29. $ENPH
30. $GHVI
30. $GDRX
31. $ADBE
32. $PTON
33. $NVTA
34. $RNG
35. $OPEN
36. $IIPR
37. $NVTA
38. $FTHM
39. $DOCU
40. $PRCH
41. $UPST
42. $CRSP
43. $TWST
44. $AFRM
Read 5 tweets

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