To the abyss and back: how fintech firm Flyhomes survived a boom-bust housing cycle

In the decade since its founding, fintech company Flyhomes has witnessed a variety of events. From a global pandemic and record low interest rates to a historic increase in interest rates and the drying up of previously free-flowing venture capital funds, the Seattle-based company has navigated it all.  

“I think these last three years or so have been some of the most fundamentally challenging times for our industry,” said Tushar Garg, co-founder and CEO of Flyhomes, a provider of Buy Before You Sell solutions, offered through a wholesale lending platform. “Between January 2022 and October 2022, interest rates went from 3.0% to over 7.0% and that put a lot of pressure on all of the industry.”

The drop in market activity caused by the interest rate shift was a massive headwind for Flyhomes, as it was for much of the industry, but Garg said that wasn’t his company’s only challenge.

“We had the market shift, but I think what sometimes gets lost, is what happened in the venture capital markets,” Garg said. “A lot of the proptech and fintech players, including us, were venture backed with a lot of access to capital, and we were leaning into that capital to drive fast growth and acquire consumers.”

Garg said they and others in the space were building companies with the assumption that access to venture capital would always be there, but that suddenly changed when the housing market began rapidly cooling in 2022.

“This put a lot of pressure on models like ours that were heavily invested in growth with a direct-to-consumer platform,” Garg said. “A lot of these models are built around fixed costs, so when the customer acquisition costs started to increase dramatically, it fundamentally challenged the profitability and scalability of models like ours.” 

Early days as a real estate brokerage

In its early days, Flyhomes operated both a mortgage lender and real estate brokerage, as the company looked to create an end-to-end experience for consumers, using its own loan officers and agents to connect homebuyers and sellers with its lending products, including the “buy before you sell” mortgage product the company is still known for. But when the housing market slowed and venture capital money stopped flowing in 2022, Flyhomes and its leadership team were faced with the choice of finding a way to pivot or potentially face the end of the company. 

“We were staring into the abyss,” Adam Hopson, Flyhomes chief operations officer, said. “Rates were going up and up and it just put the skids on the entire industry and suddenly the things that had worked beautifully before didn’t work anymore, so it forced us to make a lot of really difficult decisions.” 

So, the leadership made the decision to home in on their buy before you sell product offering and in early 2024 they shuttered their own lending operation in favor of launching a wholesale lender channel. This move enabled third-party mortgage brokers and lenders to leverage Flyhome’s wholesale products behind the scenes, while still maintaining their position as the originator of record. 

“When the market pulled back, we realized that the financial products we had, while very powerful, have to be delivered by an expert that the consumer trusts,” Garg said. 

A strategic shift

Ultimately, the expert Flyhomes settled on to bridge the gap between its offerings and the consumer was local loan officers, which Garg said Flyhomes felt made the most sense as they were already fluent in having financial conversations with borrowers. 

Although it was a challenging decision to lay off loan officers and brokers, Garg and Hopson said they felt it was necessary as they did not want their company to be directly competing for the same customers they were asking loan officers in their wholesale channel to serve. 

Additionally, while the constraints of the housing and venture capital markets posed numerous challenges to Flyhomes, Garg said they are also what forced the company to figure out what its core strengths were and what parts of the business could really take off if given the right support. 

“Our whole distribution and go-to-market was reliant on customer acquisition and this forced us to clarify and rather than look at trying to do everything in the home-buying transaction, to focus on the core problem that we were trying to solve, which brought us to the financial products we were pioneering,” Garg said. 

Pivots led to success

While the journey may not have been the smoothest, the executives said these difficult choices and pivots are eventually what enabled Flyhomes to grow 400% year-over-year last year and become profitable in a housing market that still remains quite slow in a lot of places. 

“Focusing on the wholesale channel, I think foremost, gave us a tremendous amount of focus as the whole company was marching in the same direction and working to solve the main problem, which is buy before you sell,” Garg said. “It also gave us a deeper alignment with the industry. When we started on the consumer side, we were never looking to compete in the industry, but inevitably with our model we were forced to compete for consumers. But this enabled us to go from being seen as a competitor by the industry to the biggest cheerleader for loan officers and agents.” 

Transition to wholesale channel allowed Flyhomes to go nationwide

Hopson added that this transition to the wholesale channel model is what enabled Flyhomes to go nationwide.

“With our prior iteration, we were in Washington state, but primarily in the Seattle area, and we were in California, but mostly in the Bay Area, and we were really contained to those metro markets,” Hopson said. “We couldn’t do a deal in Eastern Washington or Sacramento because we didn’t have agents on the ground there. But this new model has enabled us to cover every square inch of those states and beyond.” 

Flyhomes currently offers its buy before you sell and other financial products in 44 states and Washington, D.C. as a wholesale lender.

Biggest lesson learned

Looking back, Garg said one of the biggest lessons he is taking away from this whole experience is how he and his team approached growth and expansion in the early days of Flyhomes.

“As we were expanding and growing, we implicitly assumed that venture capital was going to be there and that wasn’t hubris, that was just how the market was for everyone,” Garg said. “In order to drive growth, we leaned very heavily into that money and so for us, when the situation changed, we had to make tough decisions like letting go of a lot of our employees, which was an incredibly hard thing to do and it impacted the culture of the company.” 

As Garg and his team look to further grow Flyhomes, they want to maintain profitability, so they don’t find themselves in need of any extra capital. 

Hopson added that the company remains focused on the discipline execution of driving their products into the hands of as many consumers as possible.

“We want to grow really fast, but we also want to do it profitably, and we want to write our own destiny and not find ourselves again in a vulnerable position where we are burning money every month,” he said. “So we are focused on making sure that we are delivering enough value to consumers and loan officers that someone is willing to pay us for this in a profitable way.”