Is iBuying is structurally broken?
OPEN -0.86%? is the news again and its got me thinking, I’ve been following this company since its early days, I had a few friends from FundingCircle who worked/are still there. What is the dream vs reality?
The Pitch vs. The Math
The original iBuyer promise was intoxicating, What if selling your home could be as easy as selling shares of Apple?
Click a button, get a fair price, close in days — liquidity in a market that normally takes months. Opendoor pitched itself as the market maker for homes. It would do what Wall Street did for equities: stand in the middle, buy from sellers, and resell to buyers.
The reality? Housing is not equities. It’s illiquid, lumpy, and capital intensive. Every home is idiosyncratic. Renovations, carrying costs, interest rates, and local market swings all pile into the spread.
Instead of acting like an exchange, Opendoor has looked more like a house flipper at industrial scale — and the margins show it. On $5 billion of revenue, they’re scraping 8%. One bad quarter of home price declines wipes that out.
What started as a fintech story quickly looks like a low-margin, high-risk balance sheet business — closer to a REIT than to a tech company.
The Core Problem: Thin Margins
The numbers bear this out:
- 2024 revenue: $5.15B
- 2024 gross profit: $433M (8.4% margin)
- 2024 net loss: –$392M
- 2024 adjusted EBITDA: –$142M
On billions of volume, Opendoor ekes out an 8% gross margin. That’s not a tech margin. That’s a grocery store margin.
For context:
- Homebuilders regularly run at 20–30% gross margins.
- Insurance brokers clip 20–25% EBITDA margins on largely capital-light businesses.
Opendoor, meanwhile, is stuck playing a balance-sheet game with margins that vanish the second home prices dip or renovation costs rise. It doesn’t take a housing crash — a quarter-point in mortgage rates, a 5% swing in local prices, or contractor cost inflation can erase the entire spread.
This is the iBuyer paradox: huge revenue, fragile economics. Scale doesn’t help if every dollar is this thin.
The Attach Fantasy
The bull case for Opendoor often pivots here: “Sure, flipping is thin, but we’ll make money on the extras — mortgage, title, insurance, warranties, solar…”
It sounds familiar. Carvana says the same thing about extended warranties and financing. Airlines say it about baggage fees. The story is: the attach is where the margin lives.
So I ran the math.
- At 50% attach penetration across mortgage, title, insurance, warranty, and solar:
- Incremental EBITDA ? $120M/year
- Blended gross margin nudges from 8.0% ? 8.9%
- At 10% attach penetration (a far more realistic assumption):
- EBITDA uplift ? $20–25M
- Which is a rounding error against $162M in core EBITDA losses in 2025.
The reality: attaches are gravy, not salvation. They make a good business better, but they don’t turn a broken business profitable.
In fact, for attaches alone to cover the losses, penetration would have to exceed 70%.
That’s fantasy land.
The Rental Pivot: Flipper or Landlord?
One alternative bull case is simple: what if Opendoor stopped flipping and just became a landlord? Buy homes, rent them out, and build a recurring cash-flow portfolio.
Modeled Scenario
- Acquire ~8k homes per year
- By 2030: ~48k homes worth $19B
- Gross rents at a 5% yield: ~$960M
- Net operating income at 3% yield: $576M
That NOI is actually larger than the iBuyer EBITDA projection (~$414M by 2030). On paper, rentals look more stable and more profitable.
But here’s the catch:
- It requires billions of capital — you’re effectively running a REIT.
- Operations shift from standardized renovations to tenant headaches: leaky faucets, broken HVACs, evictions.
- The “tech company” story vanishes. You’re no longer a liquidity platform; you’re a landlord with a thin tech layer.
- And politically, institutional landlords are already in the crosshairs for driving up housing costs.
So yes, the rental pivot makes money. But it’s a different business with a lower multiple. You don’t get to be valued like a fintech disruptor — you get valued like a REIT.
Tech Leverage: Flipping vs. Renting
If there’s any hope for Opendoor, it has to come from tech leverage. The question is: where does AI and automation actually move the needle?
In the flipper model:
- Renovations are repeatable and SKU-able: paint, flooring, fixtures, appliances.
- You can package them into “light rehab” vs “heavy rehab” bundles.
- AI can scope jobs from inspection photos, generate work orders, dispatch vendors, and even QA the results with image recognition.
- The ceiling for standardization is high — flipping looks a lot like a manufacturing line once you abstract it.
In the rental model:
- Maintenance is noisy, tenant-driven, and unpredictable.
- One day it’s a leaky faucet, the next it’s an HVAC failure or pest infestation.
- AI can triage, offer DIY fixes, or schedule vendors, but execution always needs people on the ground.
- Tech can reduce friction, but it can’t eliminate the chaos.
The takeaway:
- Flipping is a manufacturing problem ? high potential for automation and margin lift.
- Renting is a service ops problem ? messy, long-tail, and human heavy.
If Opendoor wants to stay a “tech company,” the leverage is in flipping. Renting might stabilize earnings, but it drags the company into the world of property management — where software helps, but never dominates.
How to “Fix” iBuying
If there’s a way to make iBuying work, it won’t come from cosmetic changes — it has to be a redesign of the engine itself. The levers look like this:
- Cut hold times in half: Going from 90 days to 45 days isn’t cosmetic; it’s existential. Carry costs, capital costs, and market risk all collapse with faster turnover. Think just-in-time housing inventory.
- Price like a market maker, not a flipper: The future of iBuying is real-time, dynamic pricing — closer to NASDAQ spreads than to a home appraisal. Opendoor has to act like a liquidity desk, not a speculative investor.
- Redesign the capital stack: Balance-sheet risk is a killer. Move toward fee-for-service, securitization, and wholesale flow desks with institutional buyers. Offload risk; keep the spread.
- Industrialize renovations: Treat rehabs like factory work. SKU-ify them, automate scoping with AI, dispatch vendors through a marketplace. Consistency beats craftsmanship at this scale.
- Keep attaches as dessert, not the main course: Mortgage, title, and insurance are margin boosters. But they only matter once the core meal is edible. Don’t confuse the gravy with the steak.
Without these changes, iBuying stays what it is today: an asset-heavy, low-margin gamble. With them, it might resemble a scalable liquidity platform.
My Thesis
After all this analysis, here’s where I land:
- Attaches don’t move the needle unless penetration is implausibly high.
- Rentals can generate stable cash flow, but they turn Opendoor into a REIT with a tech veneer — not a high-multiple software company.
- Core flipping is structurally fragile: thin spreads, cyclical, capital intensive.
I want Opendoor to succeed — the promise of instant liquidity in housing is compelling. But I can’t see a path where this works.
Sometimes the simplest answer is the hardest to accept? You can’t scale a business on 8% spreads in the most volatile asset class in America. You can standardize, you can automate, you can attach insurance and mortgages. But unless the core iBuyer engine fundamentally changes, is Opendoor just a clever idea with broken economics?