Farshad Yousefi and Masoud Jalali used to drive through Palo Alto neighborhoods and marvel at the outrageous home prices. But the drives sparked an idea. They were not in a financial position to purchase a home in those neighborhoods (to be clear, not many people are) either for investment or to live. But what if they could invest in homes in up and coming cities throughout the U.S.?
Then they realized that even that might be a challenge, considering that with all their student debt, affording a down payment would be impossible.
“There was nothing available out there besides a crowdfunding platform, which when we first signed up, took away $1,000 from our account that we didn’t have, and then our capital would be locked up for three to 10 years,” recalls Yousefi.
So the pair started doing research and spoke to 1,000 individuals under the age of 35. Eight out of 10 said they would like to invest in real estate but were deterred by all the barriers to entry.
“There is clearly a large demand for access to real estate,” Yousefi said. “And we wanted to give people a way to invest in it like they can in stocks, via a mobile app.”
And so the idea for Fintor was born.
Yousefi and Jalali founded the company in 2020 with the goal of purchasing homes via an LLC, and turning each into shares through an SEC-approved broker dealer. Individuals can then buy shares of the homes via Fintor’s platform. Its next step is to sign agreements with individual real estate investors or bigger real estate development firms to list their properties on the platform and give people the opportunity to buy shares.
And now Fintor has raised $2.5 million in seed money to continue building out its fractional real estate investing platform. The startup aims to “fractionalize” houses and other residential property, giving people in the U.S. access to investment opportunities “starting with as little as $5.” The company attracted the interest of investors such as 500 Startups, Hustle Fund, Graphene Ventures, Houston-based real estate investor Manny Khoshbin, Mana Ventures and other angel investors such as Cindy Bi, Skyler Fernandes, VU Venture Partners, Minal Hasan, Andrew Zalasin, Alluxo CEO and founder Safa Mahzari, SquareFoot CEO and founder Jonathan Wasserstrum and Teachable CEO and founder Ankur Nagpal.
Image Credits: Fintor
Fintor is eying markets such as Kansas City, South Carolina and Houston, where it already has some properties. It’s looking for homes in the $80,000 to $350,000 price range, and millennials and Gen Zers are its target demographic.
“Fintor can give the same return as the stock market, but at half the risk,” Yousefi said. “As two [Iranian] immigrants, we’ve seen how much this country has to offer and how real estate sits at the top of everything, yet is so inaccessible.”
The pair had originally set out to raise just $1 million but the round was quickly “way oversubscribed,” according to Yousefi, and they ended up raising $2.5 million at triple the original valuation.
Jalali said the company will use machine learning technology to filter and rate properties as it scales its business model.
“We’ll use ML to categorize neighborhoods and to come up with the price of properties to offer to potential sellers,” he added. “Our ultimate goal is to create indexes so that people can invest in multiple properties in a given city. That creates diversification right away.”
Elizabeth Yin, co-founder and general partner of Hustle Fund, believes that Fintor is solving a generational problem with real estate.
“Retail investors have almost no access to great real estate investments today and the best opportunities are reserved for the select few,” she told TechCrunch. “Not to mention that in addition to access, retail investors often need a lot of capital in order to have a diversified portfolio or be accredited to join funds.”
Fintor’s approach to securitize real estate assets will give millions of investors who are not accredited investors access they would otherwise not have had, Yin added.
“Simultaneously, it provides increased liquidity to property owners, while improving the user experience for both parties,” she said. “Effectively this becomes a new asset class, because it’s entirely turnkey and is fractionalized, which opens up many new pockets of investors.”