While the idea of owning rental properties is appealing to many Americans, the ability to vet and afford such investments in single-family homes is out of reach for a large part of the population.
mogul club is a new startup that wants to help more people achieve their dreams of becoming a landlord. It’s hardly the only one. A number of startups have emerged in recent years with the same goal, including Arrived, Fintor and Fractional, among others.
Founded last year by two former Goldman Sachs real estate investors, Washington, D.C.-based mogul club is launching to the public today with a total of $4.2 million in funding, $3.6 million of which was recently raised in a seed round of funding. The startup claims that its differentiators are twofold. For one, it’s a fractional real estate investment platform built on the blockchain, which CEO and co-founder Alex Blackwood believes ultimately makes it more efficient.
Blackwood also believes that his and co-founder Joey Gumataotao’s experience at Goldman Sachs gives them an edge in that they have experience in looking for properties not just suitable for investment, but that would be more likely to provide higher returns and appreciation.
“We started the company because we were looking for low-touch ways to deploy personal capital into high-quality real estate outside of the office,” Blackwood told TechCrunch. “Scouring through the options, there were no fractional ownership platforms out there that offered the caliber of deals we were trained to expect, so we built the solution…We are redefining who can be a real estate mogul and what that stereotype looks like.”
Each property on its platform (so far there are only a few) goes through “the same level of rigorous diligence and underwriting as institutional-level investors,” said Blackwood. In other words, the startup is discriminating. Less than 1% of properties offered to the company both on and off market make it onto its platform.
“For example, our most recently sold out property has appreciated 34% in the past two years alone, and another recently offered property appraised for well above the purchase price only two months after acquisition,” Blackwood said.
The company says it shares all legal documentation so that the process is transparent to investors.
“The information available per property is even more information than we would provide when going through the Investment Committee at Goldman Sachs,” he said. “Our fees are some of, if not the lowest among the competitor set. All projected underwriting on our site takes into account these fees.”
Investors on the platform will be eligible to apply for access into the “mogul club,” a community of investors that can participate in quarterly in-person events and masterclasses.
So far, mogul has been focused primarily on the supply side of the equation, forming relationships with “inventory partners.” It launches to the public today with about $2.5 million worth of assets (and growing).
The company plans to use its new capital to build new features and offer $10 million worth of single-family rental properties by year’s end.
Its revenue model includes charging a flat 3% fee for onboarding a property, capitalized in the property raise. If the property requires capital expenditure, maintenance or leasing up, mogul will set up the property and only offer it to end users when leased up. In those situations, it will charge a 2% fee.
“On the go-forward, we have negotiated wholesale discounts with property managers on their fees. To align incentives with users, we charge a 2.5% fee on rental income,” Blackwood said. “Because of our property manager wholesale discounts, the total fees on rental income are lower than any other platform or fund.”
Although mogul is built on the blockchain, users will not be required to have experience with blockchain, according to Blackwood.
“Blockchain makes it possible for more people to get started with investing because it reduces the obstacles that usually exist in the market,” he said. “We’re not approaching it for novelty’s sake but rather to provide a more efficient back office.”
AY Ventures led mogul club’s seed round, which also included participation from Tim Draper & Associates, Draper B1, InterVest, Draper Dragon and Blizzard Fund, in addition to several angel investors, including Rosie Rios, the 43rd Treasurer of the United States and executives from Goldman Sachs, J.P. Morgan and Carlyle, among others.
In an interview with TechCrunch, Draper described mogul club’s approach as “somewhat of a standout.”
“They focus on making it really easy for the individual to buy real estate securely, keep perfect records, to pay their taxes and get the tax refunds — so it works for everybody,” he said.
Having also invested in equity management startup Carta, Draper said he can see parallels between the two companies.
“Carta for stocks is very much like mogul for real estate,” he said. “It’s the same approach of ‘We’re going to keep track of everything for you, your whole back office, and everything will be done exactly as it’s supposed to.”