Simply Homes: $22M Funding Boost for Innovative Affordable Housing with AI
TL;DR:
- Simply Homes secures $22 million in funding to address the US affordable housing crisis.
- The startup buys and renovates single-family homes in distressed areas, offering them to low-income families.
- Over 80% of tenants are single parents who benefit from the Housing Choice Voucher (HCV) program.
- Simply Homes plans to expand into Baltimore, Maryland, and other Midwest markets.
- The company uses an AI-driven approach to underwrite properties accurately and operate profitably.
- Funding will support the development of AI-powered virtual analysts for data interpretation.
- Gutter Capital and Watchung Capital co-led the recent funding round, expressing strong belief in Simply Homes’ mission.
Main AI News:
The affordable housing crisis in the United States has reached critical levels, exacerbated by soaring mortgage interest rates and limited inventory. The dire situation primarily impacts lower-income families, leaving them struggling to find stable housing. Enter Simply Homes, a Portland, Maine-based startup that aims to alleviate this crisis by purchasing single-family homes in distressed neighborhoods, revitalizing them, and offering them for rent to very low-income families, the elderly, and individuals with disabilities, including Section-8 voucher holders. Recently, Simply Homes secured $22 million in funding to expand its mission.
CEO and co-founder Brian Bagdasarian stated, “We’re dedicated to resolving the affordability crisis for those facing the greatest housing instability. While others have attempted programmatic home purchases in the past, no one operates in our market, providing well-maintained affordable homes to those in dire need.”
Most iBuyers and home builders typically focus on middle to upper-class neighborhoods, leaving a gap in affordable housing solutions for vulnerable populations. Bagdasarian emphasized that “most home builders are out of touch and building homes that no one who needs affordable housing could ever afford.”
Simply Homes was founded in 2020 and spent its initial years developing its platform and models before acquiring its first home in January of this year. By the end of this month, the startup is expected to have 108 units in its portfolio. Since its first-quarter launch, the company has experienced more than a 50% increase in revenue quarter over quarter.
Bagdasarian highlighted that over 80% of Simply Homes’ tenants are single parents who would need to work an estimated 150 hours a week to afford market-rate rent. Through the Housing Choice Voucher (HCV) program, these families pay no more than 30% of their income for rent.
Currently, Simply Homes operates in Pittsburgh, Pennsylvania, and Cleveland, Ohio, with plans to expand into Baltimore, Maryland, and parts of the Midwest, including additional markets throughout Ohio and St. Louis, Missouri. The company strategically targets stable markets to mitigate the risks associated with housing industry fluctuations.
Simply Homes adopts an operating company/property company structure, utilizing its technology platform and operational teams to source, acquire, renovate, and manage properties. The property management company holds these properties long-term.
Unlike many proptech companies struggling due to high interest rates, Simply Homes anticipated this challenge early in its model, allowing it to remain resilient in a changing macroeconomic environment. Bagdasarian explained, “Everything is underwritten to a worst-case scenario, including high-interest rates. We ensured our return rates accounted for this, enabling us to operate profitably.”
The company’s founders, Bagdasarian and CFO Robert Kavanagh, leveraged their expertise in AI and real estate to streamline the underwriting process, using data and machine learning to make accurate and rapid assessments.
Simply Homes collects rent from its properties, covering property management costs, and charges a transaction fee along with an ongoing 3% management fee for its portfolio.
The future looks bright for Simply Homes, as it plans to use its recent capital infusion to develop AI-powered virtual analysts capable of rapidly interpreting vast data sets to support its acquisition strategies.
Gutter Capital and Watchung Capital jointly led the recent $22 million funding round for Simply Homes, with participation from Village Global, Ambush Capital, RavenOne Ventures, Neil Parikh, Gabe Flateman, Luke Sherwin, and others.
James Gettinger, managing partner at Gutter Capital, expressed his belief in Simply Homes’ mission, stating, “By rejuvenating the aging housing stock, they’re able to make homes available to people who are affected by the affordability crisis the most. One facet of the housing shortage that I think doesn’t get enough attention, frankly, is the fact that starter homes are no longer built. The average size of new construction homes has gone from something like 1,400 square feet 50 years ago to 2,200 square feet today. The downstream consequence of that is…basically, none of the new homes that are coming on the market are affordable to the majority of Americans.”
He added, “I haven’t seen anyone who’s addressing affordability for the bottom end of the market like this.” Simply Homes’ innovative approach to affordable housing indeed presents a promising solution to a critical national issue.
Conclusion:
Simply Homes’ successful funding round demonstrates investor confidence in its innovative approach to solving the affordable housing crisis. By leveraging AI, the company efficiently acquires and manages properties, providing stability and affordability to low-income families. This signals a positive trend in the market, showcasing the potential for technology-driven solutions to address critical societal issues while maintaining profitability.
