It hasn’t been an easy few years for proptech or homebuyers, but a Dallas-based startup at the intersection of those businesses has pulled in significant new funding.
Backflip, which finances loans for residential fix-and-flip projects, has raised $184 million to expand. As part of the deal, Backflip created a $20 million joint venture with education lender ECMC and a $10 million private credit fund. The bulk of the fresh funds comes from a $100 million warehouse line extended by Performance Trust Capital Partners.
Setpoint, an Austin-based startup working in warehouse lending for customers including iBuyers, provided Backflip a $54 million credit facility. In August, Setpoint raised $31 million from a16z, Citi and Wells Fargo for its own software platform.
Backflip’s niche, known as residential transition loans, are typically short-term bridge or construction loans that mature between 12 and 36 months after issuance. Due to the tight supply of homes nationwide, flips have become more popular. With demand outpacing construction in the years since the Great Recession, more homebuyers need to take aging houses and update them rather than buy new ones.
RTLs are becoming increasingly institutional. Some $4 billion in RTLs were securitized in the first half of the year, according to Backflip. Morningstar Credit began rating these securitizations this year.
“This trend toward standardization is a key turning point for a growing asset class, when word spreads and what was once a niche product gains mainstream acceptance,” said Corina Gonzalez, a ratings executive with Morningstar. The agency expects the market to mature similarly to how single-family rentals did on its way to becoming a booming asset in Texas.
In April, Genesis Finance securitized $500 million of RTLs with three classes of bonds, Globe Street reported. Toorak Capital Partners closed its second RTL securitization in September, covering loans for about 660 homes worth $237.5 million.
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