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00:00A SERIES A. YOU HAVE A LOT OF EXPENSE WITH REAL ESTATE. YOU HAVE ANOTHER REAL ESTATE COMPANY. WHAT MAKES YOU SO EXCITED ABOUT THIS OPPORTUNITY? > > RESIDENTIAL REAL ESTATE IS THE LARGEST ASSET CLASS IN THE UNITED STATES, AND IT HAS BASICALLY BEEN UNAFFECTED BY TECHNOLOGY. ALL OTHER AREAS OF THE ECONOMY HAVE BEEN REINVENTED OVER THE LAST 20 YEARS, AND IT'S TIME FOR REAL ESTATE TO ADJUST TO THE MODERN WORLD. BUNGAL OW TAKES EXISTING INVENTORY BUILT IN THE 1940'S TO 1960'S WHERE FAMILIES AND LIFESTYLES WERE VERY DIFFERENT AND CONVERTS IT INTO THE DEMAND WE SEE FROM MILLENNIALS IN URBAN ENVIRONMENTS. EMILY: IT IS SO HARD TO GET AN APARTMENT. IT IS SUCH A HEADACHE. HOW DOES IT WORK? > > WE STREAMLINE THE PROCESS. WE MAKE IT MUCH EASIER WITH OUR ONLINE LISTINGS. WE HAVE WALK-THROUGHS ON OUR WEBSITE WHERE PEOPLE CAN COME, EVEN IF THEY ARE NOT DOING IT IN PERSON, TO WALK THROUGH, THEN WE HELP INDIVIDUALS WITH FINDING OTHER GREAT PEOPLE TO LIVE WITH AS WELL. THAT'S THE REAL BREAD AND BUTTER OF BUNGALOW. EMILY: WHY ISN'T THIS SOMETHING AIRBNB COULD DO? > > AIRBNB IS NOT IN THE BUSINESS OF PERMANENT HOUSING. BUNGALOW IS IN THE BUSINESS OF PROVIDING PERMANENT PLACES TO LIVE. THEY ARE VERY DIFFERENT. AIRBNB PROVIDES VACATION TRAVEL AND DOES IT VERY WELL, BUT THERE'S A DIFFERENCE BETWEEN PROVIDING A PLACE TO LIVE BETWEEN THREE TO FIVE YEARS AND BETWEEN THREE TO FIVE DAYS. EMILY: AIRBNB HAS RUN INTO A LOT OF REGULATORY ISSUES. HOW DO CITY REGULATORS FEEL ABOUT THIS? > > WE ARE HELPING INCREASE THE INVENTORY OF LONG-TERM HOUSING. AIRBNB HAS PAVED THE WAY WITH SUBLETTING, NOW EXPLICITLY PROVIDED FOR AS LONG AS IT'S GREATER THAN 30 DAYS. OUR LEASES ARE GENERALLY FOUR MONTHS TO 18 MONTHS AND RENTERS STAY WITH US FOR CLOSE TO A YEAR. > > YOU HAVE BEEN WORKING ON THIS FOR 18 MONTHS. YOU HAVE ALREADY RAISED $64 MILLION. THAT'S A LOT OF MONEY, ISN'T IT? > > YOU MENTIONED WEWORK. REAL ESTATE IS EXPENSIVE. REAL ESTATE WORKS REALLY WELL WHEN YOU KNOW WHAT YOU ARE DOING, WHEN YOU HAVE AN ADVANTAGE AND CAN PRICE THINGS ACCURATELY. IT'S NOT CHEAP. EVERY HOUSE OPEN-DOOR BUYS COSTS $234,000. WHEN WE DO IT WELL, WE GET MORE THAN THAT BACK. REAL ESTATE CAN'T BE DONE WITHOUT DOLLARS. EMILY: OPENDOOR HAS BEEN CALLED A HOME FLIPP ER. YOU BUY HOMES, FIX THEM UP, TURN THEM AROUND. WHAT SORT OF TRENDS ARE YOU SEEING IN THE REAL ESTATE MARKET, GIVEN WHAT'S HAPPENING WITH RATES, THE ADMINISTRATION, THE STOCK MARKET? > > OPENDOOR IS LIVE IN 13 CITIES ACROSS THE UNITED STATES. WE ARE ADDING ONE CITY PER MONTH. BY THE END OF NEXT YEAR, WE WILL BE IN 50 PLUS CITIES. SAN FRANCISCO IS A UNIQUE REAL ESTATE MARKET. THE PRICES HERE ARE FOUR TIMES THE NATIONAL AVERAGE. THE DAYS ON MARKET FOR A HOUSE IS 1/4 THE NATIONAL AVERAGE. NEW YORK CITY IS ALSO VERY DIFFERENT. AT THE HIGH-END OF THE MARKET, WHICH IS NOT MAINSTREAM, THERE HAS BEEN A SOFTENING OF SEVERAL MILLION DOLLAR HOMES. IN THE MAINSTREAM PART OF AMERICA, PEOPLE WANT PLACES TO LIVE. THEY WANT TO GET AN EXTRA BEDROOM FOR THEIR KID. THEY WANT TO MOVE TO A BETTER JOB. NONE OF THAT HAS CHANGED. THE NUMBER OF HOUSES BEING EXCHANGED, WHICH IS THE PRIMARY METRIC, HOW MANY HOUSES ARE BEING BOUGHT AND SOLD, IS NOT CHANGING RIGHT NOW. EMILY: WHERE DO YOU THINK THE MARKET IS GOING? > > I THINK THE MARKET IS STILL LIKELY TO HAVE APPRECIATION ACROSS THE BOARD, EXCEPT AT THE TOP 1% OF HOUSES. IF YOU TALK ABOUT THE 83% OF HOUSES, THE MEDIAN HOME IN THE UNITED STATES IS WORTH $234,000. EVEN TWO DISTRIBUTIONS AWAY FROM THAT IS WORTH $500,000. AS YOU THINK ABOUT THOSE HOMES, THERE IS MORE DEMAND FOR THEM. YOU SEE IN URBAN ENVIRONMENTS, WHICH IS WHY BUNGALOW IS SUCH AN ATTRACTIVE INVESTMENT, THERE ARE MORE PEOPLE WHO WANT TO LIVE IN SAN FRANCISCO THAN THERE ARE SUPPLY OF BEDROOMS. A LOT OF CITIES DIDN'T. -- DIDN'T BUILD ENOUGH. THERE IS AN ISSUE WITH HOW DO YOU HAVE ALL THE PEOPLE WHO WANT TO LIVE THERE. IT'S LIKE THE IMMIGRATION DEBATE. PEOPLE SHOULD BE ABLE TO LIVE IN THE CITY THEY WANT AND PURSUE THE CAREER THEY CAN FIND WITH THE COMPANY IS AND THAT ALIGNS -- WITH THE COMPETITION -- THERE'S NOT ENOUGH HOUSING IN MANY CITIES IN THE UNITED STATES, AND THAT MAKES NO SENSE. THINGS LIKE BUNGALOW CAN HELP FIX THAT. OPENDOOR ALLOWS PEOPLE TO FLEXIBLY MOVE WHENEVER THEY WANT, WHICH IS A BETTER -- ANOTHER PART OF MOVING TO A BETTER JOB, BETTER CAREER. EMILY: WHAT ABOUT THE SAFETY AND SECURITY QUESTION HERE? YOU ARE MATCHING UP ROOMMATES. YOU HAVE TO DO BACKGROUND CHECKS, I PRESUME. THERE ARE A LOT OF SCARY ROOMMATE STORIES OUT THERE. > > THERE ARE A LOT OF SCARY ROOMMATE STORIES BECAUSE PEOPLE CAN'T DO THOSE BACKGROUND CHECKS, SO THEY DON'T HAVE THE SAME CAPABILITIES WE AS A COMPANY CAN PROVIDE. THAT'S ONE OF THE THINGS THAT WE THINK THE MOST STRONGLY ABOUT. AS AN ORGANIZATION, WE CAN PROVIDE THAT SAFETY AND TRUST THAT YOU CAN'T DO IF YOU ARE SEARCHING ON CRAIGSLIST FOR A ROOMMATE ON YOUR OWN. EMILY: HOW CAN YOU CONFIDENTLY SAY YOU CAN DO THOSE BACKGROUND CHECKS? WE'VE SEEN UBER AND LYFT STRUGGLE TO DO BACKGROUND CHECKS ON THEIR OWN DRIVERS. > > THERE ONE PIECE OF THE PUZZLE. WE ARE DOING REFERENCE CHECKS, INTERVIEWS. IT'S NOT JUST BACKGROUND CHECKS. THAT'S ONE CRITERIA. EMILY: KEITH, DO YOU THINK TRUMP AND THE RATE ISSUE WILL AFFECT PRICES? > > THERE'S A CONNECTION BETWEEN REAL ESTATE VALUES AN INTEREST RATES. MOST PEOPLE BUY FOR A MORTGAGE. AS INTEREST RATES GO UP, MORTGAGES GET MORE EXPENSIVE WHICH MEANS PURCHASING POWER, OF A HOMEOWNER DECLINES. I THINK THERE IS A FUNDAMENTAL CONNECTION THERE. THAT SAID, EVERYBODY WHO LIVES IN THE UNITED STATES NEEDS A PLACE TO LIVE, AND WE ARE NOT ADDING ENOUGH SUPPLY IN CITIES FAST ENOUGH, SO THAT CAUSES APPRECIATION WHICH CREATES A MISMATCH. NOBODY KNOWS EXACTLY HOW IT'S GOING TO PLAY OUT. EMILY: WHAT'S THE COST OF THE SERVICE? YOU ARE PAYING FOR CONVENIENCE, RIGHT? > > THAT'S CORRECT, BUT BECAUSE WE ARE HELPING INDIVIDUALS FIND GREAT OTHER INDIVIDUALS TO HELP WITH AND ARE RENTING BY THE ROOM, IT'S 40 TO 50% LESS THAN

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Why Khosla Ventures Is Excited About Bungalow

Keith Rabois, Khosla Ventures managing director, and Andrew Collins, Bungalow's co-founder and chief executive officer, discuss how Bungalow is disrupting the real estate market. They speak with Bloomberg's Emily Chang on "Bloomberg Technology." (Source: Bloomberg)

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