Fintor Raises $6.2M To Lead The Fractional Real Estate Movement For Gen Z And Millennials

Enterprise Tech Fintor Raises $6. 2M To Lead The Fractional Real Estate Movement For Gen Z And Millennials Frederick Daso Senior Contributor Opinions expressed by Forbes Contributors are their own. I write about college students and recent graduates founding startups.

Following New! Follow this author to stay notified about their latest stories. Got it! Oct 6, 2022, 11:00am EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin Up until recently, exorbitant home prices kept all but the wealthiest out of the residential real estate market. Farshad Yousefi and Masoud Jalali saw that Gen Z and Millennials would continue to be left behind, leading them to start Fintor.

Fintor is a “first-of-its-kind mobile real estate investing platform that allows users to buy and sell fractional shares of real estate properties with as little as $5. ” The startup raised a $6. 2M seed round with participation from Public.

com, Hustle Fund, 500 Global, VU Ventures, Graphene Ventures and angel investors, including real estate influencer Manny Khoshbin, Andy Madadian, Cindy Bi and Marcus Ridgway, co-founder of Invitation Homes. “Real estate is a great investment to make, but the hardest aspect of getting started is saving the initial capital and navigating the complex home-buying processes. Fintor is revolutionizing this asset class by opening access for its users to invest in a market that has historically ostracized young investors,” said Elizabeth Yin, General Partner and cofounder at Hustle Fund.

Fintor has raised $9M to date. The startup will use its freshly raised funds to drive growth and expand the team. Fintor’s team consists of over fifty employees.

The startup was founded in 2021. Fintor is competing with established real estate investment firms and large corporate banking funds with real estate investment arms. The startup generates revenue from one-time sourcing fees, as well as an annual asset under management (AUM) fee based on equity sold.

Fintor cofounder and CEO Farshad Yousefi. Fintor Frederick Daso : What are the challenges with the process of owning real estate for investment purposes? Farshad Yousefi : While building our last company and on a daily routine driving around Stanford University, my co-founder and I were impressed by the real estate and quickly realized that we were outpriced to participate as investors in that market. It got us wondering, though, if there was a way for us to invest in the next up-and-coming markets.

After researching various available platforms and options, we realized that there were still several hurdles and friction points that both novice and experienced investors faced when wanting to invest in real estate. These hurdles were keeping millions of potential investors on the sidelines. It was at that moment that we decided we needed to build a solution that served as a bridge to bring on the millions of new users who have always wanted to invest in real estate but are sidelined due to capital constraints, complex processes, and liquidity restrictions.

There are two main phases of real estate investing: acquisition and management. You have to navigate through financing, sourcing, underwriting, and management. Each of these stages is filled with its own complexities and nuances.

Not to mention the complexity and cost for an investor to access their money after they put it into an investment property. MORE FOR YOU Patrick Byrne Of Overstock Fame Says He Was Involved In Monthslong Effort To Overturn 2020 Election Six Ways To Be A Sustainable Leader 9 Ways Flexible Workplaces Can Encourage Collaboration We have all been amazed by the incredible online communities formed around investing in crypto and the stock market in recent years and wondered why it doesn’t exist for the real estate space. This void of community sparked the idea for our team to create social features for Fintor where users can follow their friends and influencers and have the ability to chat with others to share insights and discuss industry trends.

We ultimately want to make real estate approachable, engaging and fun by integrating a dynamic social component. Similar to how in recent years, equity trading has become attractive to the next generation, we are taking the same approach with real estate. Daso : How complicated is the process to securitize the real estate that Fintor purchases and also turn into an LLC that can issue shares? Yousefi : The hardest part was building out the initial infrastructure and establishing the necessary partnerships.

During our initial months of pitching the vision, setting the groundwork and trying to secure our initial partners, my co-founder and I were rejected by 50+ law firms and 20+ banks. Another challenging part was receiving the SEC’s qualification. This complex process alone took us more than a year of dedicated effort.

Despite this mountain of rejection, we persisted, believing deep down that the vision we had in mind had to become a reality. Looking back, I’m so grateful that we made those additional inquiries, which landed us some amazing partners who still support us today. Given the complexity of the product, naturally, there are quite a few moving parts and parties involved who need to be in lockstep for everything to function properly.

For example, we have to coordinate with FINRA, the SEC, a custodian, and a broker-dealer, among others. Now that our partners are secured, the technology has been built, and the process has been mapped out, moving forward to bring new properties onto the app is fairly streamlined at this point. With our infrastructure in place, we can quickly securitize the asset and release the property onto the app through our IRO process, which is an Initial Realty Offering™.

I should also mention that before being able to start the regulatory process, we got rejected by over 80 VCs. I want to remind other entrepreneurs who are starting a company: be visionary and keep going. All you need is one “yes,” and it’ll click.

Daso : In some sense, would it be accurate to say that Fintor is creating a novel real estate-based stock market? Yousefi : That’s a great way to think about what we’re building! For the longest time, real estate has been treated as an illiquid and archaic asset class that is predominantly only accessible to the affluent, making it unappealing and inaccessible to most Millenials and Gen Zers. We’re talking about the largest asset class in the world. There’s approximately $40+ trillion dollars worth of only residential real estate in the U.

S. We asked ourselves why should this asset class be treated and structured so differently than the stock market or the crypto markets. Our conclusion was that it didn’t have to be, and through our concerted efforts, it would be forever revolutionized.

We’re building the future of real estate investing. Real estate doesn’t have to be known as an illiquid asset class anymore. We’re truly operating at the cross-section between the stock market and real estate — finally making the largest asset class accessible and liquid.

A critical part of creating this cross section is building the secondary market where investors can buy and sell their shares to and from other investors. Without this feature, investors will lack investment liquidity. We are grateful that we can work with regulators at the federal level, like the U.

S. Securities and Exchange Commission (SEC), to bring our vision to reality. Both my co-founder and I are proud Iranian American immigrants.

We immigrated to the U. S. for freedom and to be able to go after the unlimited opportunities that this country offers.

We are closely following the current events in Iran and rallying with the people around their slogan of “Woman, Life, and Freedom. ” My heart and mind is with the people of Iran; they deserve prosperity, liberty and freedom. I’m hopeful that the situation for the people of Iran will change, opening opportunities for talented entrepreneurs in Iran to reintegrate the financial system of the country with the rest of the world.

Daso : What properties does Fintor look for in its Initial Reality Offerings to offer to the investors on the platform? Yousefi : Currently, we focus on acquiring residential properties starting with single-family residences (SFR). Generally speaking, our team is looking for houses that are fairly turnkey and located in strong rental growth markets. In future acquisition phases, we will expand to other types of real estate assets.

When we aggregate all types of real estate assets in the future, we will enable any investor with any experience and net worth to learn and invest in this asset class. Daso : Why can users only own up to 10% of the total property value in each asset? Yousefi : Our company mission is to democratize real estate investing for everyone. If just a couple of people snatch up the available shares every time, then it doesn’t advance our cause of creating an asset class for every class.

We see this as an opportunity to empower Gen Z and Millenials with the most accessible way to become educated about and invest in real estate. Daso : What drove the development of the in-app newsfeed, “The Hub,” and how will it serve as a moat against other competitors in the space? Yousefi : As news and learning enthusiasts, we painfully had to piecemeal news and education together on our own. Digging further into this problem, it became clear that real estate news is more nuanced than other typical news verticals.

The dominant reason is that the investor typically only cares about the regionalized news where they have investments. For example, if you don’t own any investment property in Huntsville, Alabama, you likely won’t follow the breaking business and real estate news for that region. However, if you do, you’ll likely want to keep a pulse on the local Huntsville news.

The Hub aggregates national, regional, and hyper-local news across several types of media platforms for our specific investments and featuring influencers. This spectrum of curated news helps our users stay informed about the latest industry movements in a few minutes. We also showcase digestible learning stacks that guide users through various investment-related topics.

We fully realize that a lack of education is a contributor that keeps millions on the sidelines from investing, which is why we are allocating resources to build out financial literacy initiatives from day one. Fintor is the next-gen platform for real estate investing. We are not only solving the financial and operational barriers of entry, but we are also building dynamic communities, educating our users about the industry and keeping them up to date with curated market news.

Fintor is the future of real estate investing, which is why we are building the necessary tools that future generations need to re-imagine investing in this asset class. Written by Xodas. Frederick Daso Editorial Standards Print Reprints & Permissions.