Our algorithm is very similar in concept to this strategy. However, by the time Starbucks or Trader Joe's opens in an area, it's often towards the middle or late stages of a neighborhood's growth. We can find amenities that are even earlier indicators than Starbucks. Think your one-off local coffee shop named "Bob's coffee" or something similar.

We are focused on the appreciation potential of residential real estate, which has single family houses, condos, and town homes. However, we have noticed that in areas where home prices are growing, rents typically are growing as well. So our customers are welcome to rent out the properties for cash-flow.

We do not have data on a lot of commercial properties, but we can still underwrite the agreement on duplexes and smaller multifamily units.

It typically takes 3-5 years on average for neighborhoods to see the exponential portion of their growth curve, so our agreement is for 3 years by default.

Our share of the profit is 20% of the gross profit. So, if you had bought something for 100,000 and you sold it for 200,000 in 3 years. Then, we would get 20% of the gross profit ($100,000), which would be $20,000.

edit: made numbers in example more clear.

From my limited research, property flipping every few years isn't a great idea because of how much is lost in the actual buying and selling process e.g. realtor fees.

Or they can choose to buy us out. At which point the 20% is based on the "on paper appreciation" calculated by using the rate of change for the median home price in their neighborhood.

If they use the latter option, they of course, will not have to pay the fees associated with a sale.

We are also looking into whether we can partner with listing agents, who will share some of the commission with us, which we will then refund back to our customer to offset their fees.

Lofty makes this sound risk-free but it certainly sounds possible that your obligation to them would cancel out your entire NET profit. Buyer beware, as always.

Our belief is that there shouldn't even be all these fees for home buyers and sellers, because most of the process can be automated to a degree. At a minimal the fees can be reduced. It's early now, but we really do intend on becoming the most honest and transparent ibuyer model on the market.

As such, we are looking for ways where we could build on top of our service to help people reduce their transaction fees either through partnerships or some new service that we would provide. Partnering with listing agents, where they give us a portion of the commission, and we refund it back to the customer is one way of doing this.

But the goal is always to align our interests with our clients'. The more money you make, the more money we make. If you make no money, we not only make no money, but we might lose money.

EDIT: There is an existing response from another comment thread:

>That's a great point! This is why we deduct any home improvement costs from the gross profit calculation. So, if you spent 10,000 fixing the pipes and the gross profit was originally 100,000, we would actually deduct that from the gross profit. So our 20% share would be on top of 90,000 and not 100,000.