Startup Brings REIT-Style Backing to Single-Family Rentals

A Denver-based startup that aims to use shares of its stock to buy up single-family homes as a way around taxes for sellers has followed its latest funding round with a lease for a new headquarters.

Flock Homes, which counts famed Silicon Valley venture capital firm Andreessen Horowitz among its early investors, just finished a $22 million funding round that takes its total to around $50 million. Part of the funds will go to the new offices at 2930 Umatilla Street in the LoHi district of Denver — a shift from a prior base in Cherry Creek.

Flock has gained traction with a strategy that brings some real estate investment trust-like aspects to its portfolio of single-family homes. Flock has so far acquired about 850 houses valued at around $200 million, paying sellers with shares of the startup.

About half of the company’s staff of 30 are attached to headquarters, with others in San Francisco and New York, the Denver Post reported.

A key to the strategy is finding sellers who don’t need the cash from the sale and want to avoid tax implications without hanging on to a home as a rental property.

“Our clients are the millions of Americans who have owned real estate for a long time, and they’re just like, ‘I need an exit strategy. I don’t wanna deal with real estate. I don’t wanna deal with the property manager,’” said Ari Rubin, founder of Flock.

Taking shares of Flock instead means sellers avoid capital gains taxes and have the possibility of appreciation on their shares in the company and dividends or distributions.

The company gives sellers shares based on its appraisal of a home minus fees that are similar to what a real estate agent or broker would get on a standard sale. Flock charges ongoing asset-management fees; manages some of the properties and hires some property managers; and has been paying quarterly dividends to shareholders.

Rubin said he plans to add multifamily properties to Flock’s portfolio later this year.