Real estate startups changing the way homes are bought and sold rely on technology to make the process more efficient. But while some of them hire tech workers in San Francisco, they often operate out of Texas and other Sunbelt states.
Entera, which makes it easy for investors to buy in bulk, is based out of Houston. Door, which charges a flat fee to list a home, operates out of Dallas. And Jovio, which charges a third of the traditional listing fee, calls Austin home. Giant hedge funds specializing in buying single-family homes to turn into rentals are also often based in the region — Invitation Homes, which owned more than 80,000 homes across the country at the end of 2018, is based in Dallas.
Martin Kay, the co-founder of Entera, discussed why real estate companies look outside of Silicon Valley.
"Houston’s an awesome market because the knowledge level of real estate is very high here," he said. "So we can find people who have a ton of experience in transaction, in negotiation."
The reason for that, according to Kay, can be seen all around.
"There’s so much new construction," he said. "In other places, because you don’t tear it down and build something else, the knowledge you have on the lot is from 50 years ago."
The Houston area sees more residential construction and Houstonians move more frequently than their counterparts in Silicon Valley, which means real estate professionals have more experience to draw from.
That could be especially important when trying to craft an algorithm that can predict repair costs, optimal offers and capitalization rates.
"There are a lot of smart people in Houston who have worked on thousands of projects, so we can actually work with them to think about how do we build a construction model that works? That is accurate?" Kay said. "Because we can find people who have done this before."