Since the introduction of the GI Bill, which is officially known as the Servicemen’s Readjustment Act, many Americans have viewed real estate as a dependable way to build lasting wealth.
For a lot of people, this has translated into homeownership. Yet, for countless middle-class families, owning rental properties has actually been a more effective means of achieving financial success over generations. The appealing aspects of real estate—consistent rental income, value appreciation, and various tax perks—make it a highly sought-after asset. Yet, for the average individual, the hurdles to getting into real estate investing seem to have increased significantly.
Adding to the difficulties faced by small investors is the changing economic environment. Compelling headlines often suggest that big corporations are shutting out individual buyers. However, a closer look at the data tells a slightly different story. Institutional investors, classified as groups owning more than a hundred homes, account for only about 3.8% of the single-family rental market, while those massive investors with portfolios of over a thousand homes control less than 2.5% of the total housing stock.
The majority of rental properties are actually owned by small, “mom-and-pop” landlords with fewer than five properties. Still, corporate buyers are aggressively focusing their purchasing strategies in high-demand markets and entry-level home segments. In key metropolitan areas such as Atlanta, Phoenix, and Jacksonville, institutional investors can own as much as 25% of single-family rental homes, which heightens the competition for typical homebuyers.
Meanwhile, the residential market in the U.S. continues to grow. The sheer financial weight of this asset class is evident in household debt statistics; outstanding mortgage debt in the U.S. has surged 3.5%, hitting an extraordinary $21.6 trillion.
Despite ongoing affordability issues and mortgage rates lingering between 6% and 7%, home prices across the country have remained remarkably steady. The median cost of an existing home in the U.S. hovers around $393,895 to $417,500.
According to the Case-Shiller index, home prices have skyrocketed by 211% since 2000, averaging about 8% annually. Although appreciation rates are expected to moderate to about 1% to 4% each year through 2030, residential property is still anticipated to appreciate, even as many prospective buyers find themselves stuck renting due to affordability challenges.
In this competitive and high-valuation market, a fintech startup named Mogul is looking to change how individuals approach real estate investment. Established in 2022 by former Goldman Sachs associates Alex Blackwood and Joey Gumataotao, Mogul aims to eliminate financial obstacles for those wanting to invest in rental properties.
The platform allows typical investors to buy fractional shares in single-family homes starting at $250, similar to buying fractional shares in stocks.
Mogul recently drew attention by oversubscribing a $15.5 million Series A funding round led by Draper Associates with key participation from BlueChew CEO Stephen Sullivan. Apparently, the funding closed at an impressive 55% above its initial target of $10 million, bringing the company’s total funding to over $23.6 million and valuing the startup at $126 million.
Within a short time, Mogul has proved its profitability. The influx of funds is set to enlarge its property portfolio, expand its core team, and enhance its software capabilities. This achievement follows another major milestone—the purchase of the premium domain mogul.com for $1.3 million.
What sets Mogul apart from traditional Real Estate Investment Trusts (REITs) and older crowdfunding models is its use of AI in the investment underwriting process. While the final decisions and comprehensive evaluations remain in the hands of Mogul’s human investment committee, AI has revolutionized the backend operational processes.
By utilizing machine learning for data collection and risk management, a single analyst at Mogul can now handle tasks that previously required a team of nine. This change has led to an 89% reduction in repetitive manual labor.
On a positive note, the time taken to evaluate a property has dramatically decreased from 18 hours to just two, automating about half of the essential investment operations. This efficient workflow enables Mogul to sift through thousands of listings and pick the top 1% of promising properties for its clients.
For investors, this means they can enjoy the perks of owning property without the typical corporate tax burdens associated with REITs. Each property operates as its own LLC, taxed as a partnership, which benefits users through direct distributions shielded by real estate depreciation.
The numbers suggest that Mogul has found its niche. It has facilitated over $110 million in real estate investments across more than 150 properties, attracting upwards of 40,000 signups and maintaining a noteworthy 70% repeat investment rate among users. The company is also targeting an attractive Net Internal Rate of Return (IRR) ranging between 15% and 18%.
As the housing market evolves into a more stable, supply-limited environment, Mogul is using fintech innovations to broaden access to wealth-building through real estate, making it available not just to big institutions but also to everyday investors.
