He Left Goldman. Then He Built a $40 Million Real Estate Platform | Ep. 330 with Alex Blackwood Co-founder of mogul

Something that I've been signed up for recently has been mogul and a friend of mine told me you got to get this app you got to sign up for this club because it is the future of investing. So I've been signed up for a few months and that's always excited to have the co-founder and CEO Alex and Alex Blackwood. I mean you're changing the game when it comes to investing and investing in a real estate and we are in a really fascinating world right now. I mean there's so many ups, downs, it seems like everyone is searching for what is the next best thing and how to do it. So from your perspective how is AI changing real estate investing? Yeah so I mean the way that we look at real estate investing in a relation to AI and of course thank you Brad and me too is you can bifurcate it into two buckets right. The idea being that number one how is it actually helping on the real estate operations front and the investing front and then number two why in this kind of AI doom loop society are people basically exiting the market and going into these hard assets. So if we focus on number one really whenever anyone talks about AI and real estate there first the immediate thought is I'm going to use AI to help me find real estate investment opportunities. However AI models are only as good as the data you feed into it and with real estate data being fraught with error and behind massive amounts of paywalls and pay gates largely in place because of the Realtors associations the idea that you could use AI to train on that data and get you acquisition opportunities is kind of a farce at this current state. Now how you can use AI is in the agentech workflows. If you think about real estate transactions as a whole and everything that occurs after the fact after you put down purchase agreement on an operate on an asset itself you think about the fact that there are countless vendors that are coming out of the woodworks so to speak to help you with the transaction. However it becomes really at too many cooks in the kitchen situation whereby they're all trying to extract information whether it be the lender they need underwriting requirements the inspector they need the us to actually pay them us to order the inspection all these different things and so if you think about that it's really just data transfer between different vendors and so what is the best way to do that? Agentech workflows and so for us at Mogul we've really been pioneering a few different methods so that it's really low touch from purchase agreement all the way to close. The idea being that we cut down from 20 hours per property per person on a close we actually cut it down from that to about 30 minutes now and so that's the first thing is it really can help on the agentech workflows because there are a lot of manual tasks that are inherent with the arcade process of real estate I mean everything is done in PDFs everything is done over phone and over email nothing is really done in a streamlined fashion so you can create your own streamlined fashion behind the scenes using agentech workflows now the other thing is obviously as you're looking at the market you're seeing incredible volatility especially if you look at things like the Citrini research report whether or not you believe that that was incredibly farfetched and keep in mind they even said that a lot of it is hyperbole and it's meant to over exaggerate to drive home the point that AI is basically coming for the entire workforce and the idea being that basically AI enters in this kind of doom loop whereas AI startups and businesses become more profitable they then create more tools that then reduce the workforce which then makes the AI startups more profitable and it kind of enters in this cycle and so if you look at all the equities out there a few that were named in that research report whether it be the DoorDashes of the world and I believe Zillow was actually mentioned it as well a lot of these different equity stories are becoming too frothy to and very very hard to put your life savings into and so when you look at things that aren't really going to be impacted by AI it's the fact that we all need somewhere to live right it's one of the three main necessities of life right you need the actual shelter in place along with food and water and so investing in real estate has become now more than ever the single greatest way to generate wealth in you I mean so many things to touch on there but I don't see a world where real estate agents are really needed maybe if you're buying like a 30 billion dollar home and I understand like you know the 1% or 2% of homes sold maybe need a real estate agent why do most real estate agents really even exist anymore yeah so I mean real estate agents exist because they almost have a monopoly over the real estate market as a whole people don't really understand this but Zillow for instance when Zillow pulls in information it's pulling it in from something called the MLS the multiple listing service that MLS is controlled by the Realtors Association not only that if you are a realtor and you wanted to look and let's say you're situated in Arlington, Virginia you couldn't look at the MLS of say Dallas, Texas because every single local real estate organization under the National Association of Realtor owns its MLS within its specific jurisdiction and so the idea being that they're not going away right now because they honestly are the gatekeepers for a lot of this you see a lot of landmark things passing in obviously the Supreme Court whether the transparency around different fees when it comes to the buying and selling broker and actually listing that out now I do think we're moving towards more of a trend towards a free market however there still are the natural gatekeepers in place and they're going to be incredibly hard to pull away not to mention all the different vendors that I mentioned from purchase agreement to close they're not necessarily colluding but they all are working together and so if one were to kind of break then the others would kind of break and then the the chain link so to speak would almost fold in and of itself but because they all agree that they're necessary in a real estate transaction it's pretty tough to just overhaul it overnight right and so I do think realtors are necessary today because of what they hold the information they hold and ultimately it'll come down to relationship level businesses that'll separate them from like a complete AI impact because they'll have relationships with potential buyers I also think the knowledge barrier to enter not to touch too much on the data itself but the knowledge barrier to enter I mean when you're buying your first home right it was near impossible to gather any sort of information I actually got my realtors and license because I was like I want the kickback as being my own buying broker but also I want to understand the full transaction lifecycle from this perspective now it was crazy hard to get any sort of information to actually feel comfortable and confident throughout the entire lifecycle luckily I got through it and it went incredibly well and the asset appreciate tremendous amount yielded a tremendous amount however at the end of the day it's really the fact that we don't need to do it every single day that you need someone almost as like a I don't want to say guru leading you through but you need someone leading you through the transaction if you're comfortable I've seen some countries that do flat fees like low flat fees where it's like $500 versus a 1% to whatever the percentage is I had an agent one time I didn't know he couldn't smell like legit this is a true story I bought a home I only went in at one time I like the home I didn't really like pay too much attention it was pretty quick I bought the home because the agent he had gone back many times because it was kind of far away from where I lived at that time and I couldn't go back there again when I moved into the home it smelled so bad it was disgusting because they had dogs and they were urinating everywhere but because my agent couldn't smell like he legit couldn't smell so you didn't know so like I it kind of got me thinking at that moment like how much value are these agents when I was the one actually found the home and then he's the one that did like some of the processes but I lost so much money on that house because I had to like take everything I had to do so much work which they should have done not me but anyways you said before about investing when I talk to someone in their 20s 30s they're like look price of homes I can't even afford to buy a home in many in many states I'm in California prices are you know a million dollars is like an average home uh do you think that what you're doing where it's these fractionalized investments do you think this is going to be even more popular with these age demographics because it gives them a chance to invest versus like like how many of them can buy a one or two million dollar home yeah I mean I think it's exactly right we are the solution for that right our fractional investing platform is really think of it as almost buying shares in a home almost like a Robin hook for real estate the idea being that you can come in and we've done all the diligence work leading up to it meaning if an asset's on our platform we fully believe in it hell I'm usually the first check in and it's either myself or my co-founder we kind of jockey for pole position on that one and so the idea being that you can pick and choose assets that we've already offered on our platform you go over and mogul.club and then you can buy into an asset you choose the assets you want to invest in and as a result you'll get monthly dividends appreciation and tax benefits at your end so 10 yield might stay 10 percent might be passive loss for income reporting purposes now I say all that and I do think that the younger demographics are very attracted to our product however due to our when we started out and we were going after that kind of Robin hood for real estate nomenclature we thought that we would cater more towards the mass public where people would come in and invest a couple thousand if that however as our returns have really increased over time people are coming in and we've attracted an older audience that invest 15 25k per property so they might be investing hundreds of thousands of dollars with us across multiple properties because we've been generating that incredible risk adjusted return so people go to our website at mogul.club and and come in and basically can actually experience the generational wealth building that real estate afforded ability to do well I've heard there's like it's like somewhere around like 30 trillion dollars of real estate is about to be moved over from the older from people you know 70 80s and above as they're passing away to younger generations and I had somebody from ahead of Raymond James on and she says they're looking at 80 trillion dollars of wealth transfer that's going to happen within the next 10 years just in the U.S. and a lot of that obviously is real estate how do you think this will what do you think this will do to markets and changes have you thought about this yet oh yeah I mean it's it's what we think about on a daily basis and not to mention we typically look at things when you're looking at a 40 trillion dollar marketplace you've got to understand that each individual micro location is what you've got to concern yourself with especially in the five to seven years you go look at the macro economy to say okay is the economy heading towards more profitable times but on top of that is a micro location going to sustain any sort of volatility in the next five to seven years as a real estate investor and so I do think there is going to be a tremendous amount of volatility one of the things that we've kind of explored is there's this guy Henry George he was a political philosopher or economist in 1800s and basically he came up with a theory that said as supply becomes more constrained due to regulation on the government front then basically because real estate's an inelastic good meaning the demand basically stays constant regardless of the price shift because it is a utility necessary for living then the idea being that let's say supply constraints mean that supply is not growing if demand even increases by a percentage point it'll lead to price increases of 20 plus but with wage gaps and or with wage increases only increasing the same pace of inflation around two to three percent then the idea being that a large majority of the population will not be able to afford homes in the future and so wealth will be concentrated in a select few of landlords and the wealth gap would widen to an inexacerable margin and so the idea being our platform is combating that offering up ways to for anyone to invest in this incredibly high quality high risk adjusted return is there a wild that's something from the 1800s because could it's almost more true now than ever that always fast when I read a book for like 200 years ago I'm like or whatever it is like wow how is it that this humans don't change that's that's my first technology changes and things change but I do hope that the people that are receiving this money they will be investing it like you said generational wealth because I guess there's a what is the law of two or law of three it's like the second generation will normally squander whatever wealth has been transferred down I guess that's what that's what I was told so let's go back to when you're at Goldman Sachs and you're sitting in this chair or wherever you were and then you you think about this idea of mogul or I don't know if it was there or whenever the beginning ideas phase came and then it obviously launched can you take me through that that time yeah of course and so are you familiar with the term garden leave by any chance I like gardens no and I like to leave so garden leave is a pretty unique opportunity where it's throughout the entire financial industry but especially from investment banking when you go from the quote unquote sell side with more private level knowledge you take a month off in between that and go into the buy side in real estate private equity as I did and so I actually had a unique opportunity and it was meant as a period to rest relax or recuperate but also to let MMP I basically fade away however I use that as a time to form a thesis behind the fractional investing platform as a means to scale up in a completely capital efficient manner you flip on liquidity in a secondary exchange and the idea being that once an asset enters your platform it'll scale up incredibly fast and you won't actually have to have it exit because you'll have secondary liquidity on the market or you could technically outside the platform and then once that happens you start deploying products up and down the supply chain of real estate now this came about because as I mentioned earlier I got my realtor's license I did my first real estate transaction and I realized just how manual or cake the process was I grew incredibly frustrated with it and when I moved out to Dallas my role was I want to invest in properties outside of my day job but I really couldn't find a way to do that in a completely headache-free manner meaning everything would take 40 hours plus in a week and I just couldn't do that with a job that demanded 70, 80, 90 hours per week and so when I crafted the thesis I thought okay great that's something I'll come back to way later on in life however when I met my co-founder out of Dallas I was just blown away by his background I joke used the residential Boondurkind so to speak having grown Goldman single family rental platform from zero to a billion in under 12 months with three to four individuals and I basically said listen any chance you can meet me in a diner and I pitched him on this idea and thank god he did not call me crazy because here we are let and so it's been about four or five years since that diner meet-up and it's been a crazy journey ever since I hope you get the breakfast but not at breakfast because that's my favorite thing about diners breakfast all day long like it should just be called something else other than breakfast because eggs and bacon for dinner is incredible so you start this I you start the company you found your you have your co-founder who's obviously done a tremendous amount now how did you go about getting your first 100 500,000 people what what did you have to do and did you continue as a side was this like a side hustle or side company while you were still working so it was kind of outside of uh Goldman entirely and the idea being that we we actually quit our jobs in August of 2022 to jump into it full time saying all right we're going to just raise some capital and it'll be incredibly easy to raise capital however it was definitely not at all and it was a very hard time especially given their tremendous amounts of plaques one events especially in the blockchain space because we are based on blockchain and so we struggled quite a bit we were fortunate enough to have backing by Tim Draper Draper associates legendary vc who is the first check into Robinhood first one of the first checks into Coinbase as well and he backed us initially and we weren't taking a salary or anything like that and we really launched the platform I would say beginning of 2023 we sold out our first asset when that happens we were able to raise a seed round and then it kind of snowballed from there but I would say while on the surface it looks entirely successful it couldn't have been a rockier journey right the idea being that you're like a swan you've always got to present yourself incredibly well but below the surface you're churning the entire time and so in the initial few years you're constantly constantly grinding at this opportunity and you're basically I would get on calls with people uh for like six hours on a Saturday just to walk them through an underwriting for an asset we had on our platform hoping they'd invest maybe like 2k now since we've gotten on this call we've had multiple 20k checks because we're launching a property this morning and so it has and I haven't talked to that person at all we just present the analysis it's a crazy uh things just keep snowballing right you just got to keep pulling at the thread and we first started out as just let's just reach out to anyone that would listen and now we've gotten to a point where we actually have a growth engine in place and things are constantly moving and we're growing at almost hockey stick like momentum adding at least three to four assets per week uh we've nearly doubled in size since November of this past year and this quarter for instance we've done this quarters are technically our best quarter yet it's not even done yet and we surpassed last quarter's revenue uh in the first five weeks of this quarter so it's just a crazy journey that we're on right now it's it's really just pulling the thread along I can go more in depth on how we got that first customer but it was a lot of willing to talk to whoever about whatever hopping on phone calls with them on Saturdays to go through a model only to have them back out at the last second because they didn't like it and so yeah it was a it was a trying time for sure yeah let's go to the the switch that flipped recently because I think this is always a big thing right like you have a product or service and you've got to go to anybody I mean like you're saying if I look at my price sheet of what I charged six years ago I would laugh like I can't even believe that I even charged that low for me I'm like oh my gosh like I was looking at something from 2022 yesterday and I was like oh I can't believe I sent this to somebody first it was ugly as heck and then two the pricing was horrible like I don't think I made any money on that sale but like you're saying I just needed to get customers I needed to get clients I need to prove the model what was the switch though that happened the last maybe year or less than a year where it just like catapulted yeah I mean I think it comes down to almost two prong right the first prong being on the supply side our assets are actually three prong I would break it down to on the asset front we've only listed assets that we firmly believe in which has led to product that are actually achieving the returns similar to what we were getting at Goldman and so we're the highest performing single-family rental investing platform out there right now we're nearly double if not triple of our next best competitor in terms of average return our yields are strong our appreciation dynamic is strong and so when it comes to the product itself our team is the New York Yankees and I'm a New York Yankee span so this is a compliment to our team our team is the New York Yankees of single-family rental investing right and so the quality is incredibly strong as a power user myself having invested in every single asset I can speak exactly to that quality which has led to the next part which is on the demand front customer attention is incredibly strong people typically invest if they're going to invest with us they in they invest once they typically invest at least like 80 to 90 percent again with us and typically it's about 3x their first investment they try it out and then they come back for a tremendous amount more not to mention too we've been incredibly transparent in our operations meaning we have onboarding calls with all of our investors they get chances to ask us any questions we present them the entire risks that are associated with real estate investing as well as how we kind of mitigate any risks how we look at assets we never we obviously just kind of walk them through what real estate investing is how they can actually experience it themselves and then I would say the third thing is obviously on the development front our UI UX is second to none in my opinion it's very streamlined very unique we give more information in a more digestible format than we would have needed to make decisions in Goldman Sachs's investment committee and so the idea being that you can come onto our platform completely transparent see all the underwriting on an asset every single assumption you can play around with your own assumptions you can play around with the investment thesis behind an asset on top of that on a monthly basis not only will you get dividends but you'll also get memos with the performance of the asset that month what happened why did it happen how did it happen so it's complete transparency to end users so I would say in those three problem is how we've really seen a complete 180 so I love the transparency trust I didn't even realize that you have something that you're powered by blockchain or you're doing things with blockchain so that's I almost feel like that's like the best use of blockchain is that nobody knows that there's it's really involved otherwise it just gets confusing I did a I did a blockchain event a large-scale one a few years ago and I realized like like it was better that people didn't know anything about it versus like when they do that it just complicates things and it makes it very hard for people to make decisions when they want to know everything about blockchain when it doesn't really matter you obviously are great at picking things and you're picking like these houses to invest in and such is there something that you look for or something that that you when you see it you're like okay I think this is the one yeah I mean the the way that we built out our system is really we partner up with infants infrastructure uh partners so inventory partners throughout the entire life cycle of an asset right so the idea being that we if I take a step back right the idea being that we look at a market and we say okay uh is there an investment thesis to invest in this market we look at kind of target markets if so what are the operational strategies that can work here when we look at the actual market itself we look at the met new supply on the horizon versus the demand that we think would absorb up that supply and if it's in our favor then we look harder at the market itself in addition to it we look at markets that have higher rent-to-price dislocation especially in the operating models that we look after and then from there we start to craft the initial thesis around the market and further downstream the initial assumptions that are necessary in an asset to be believable for us as well as the kind of pencil and so when that happens we craft our quote-unquote buy box yet even it needs to meet this sort of yield it needs to meet this sort of appreciation given the market dynamics that we see in our research and then outside of that what leverage terms can we achieve what environmental hazards are in place what insurance hazards are in place for that specific what is the licensing in place we dd that fully and then when our buy box is crafted we basically send it out to our inventory partners the idea being that a lot of times we'll partner with property managers that are also investor brokers we say listen on the buy side you'll get your fee as our buying broker you'll get paid at this closing table by the seller and then on the other end of it you're going to manage our property and of course because we're negotiating across whole swaths of assets we're able to negotiate wholesale discounts from both a property management fee we get discounted fees there 50 below market and then if you think about on the lending front we're getting 5.99 percent interest only loans right now 10 year fixed interest rate and so from that is how we kind of craft our initial thesis and then it moves through the entire closing transaction and that's when we start to list it on platform is after it's met our criteria after it's met the inspection criteria after it's been negotiated any closing cost credits we offer now on platform people can go to mugwadak club and invest man future billionaire alex blackwood i'm gonna look back at this i'm very impressed by your your processes your procedures you guys have really crafted something amazing it's something i've been using but definitely one day i'm gonna look back and say i remember alex blackwood he is now the fifth richest person in the world and i knew him at some point and so i appreciate your time alex incredible like i i i am always excited for how technology is enabling people which what you said in the beginning generational wealth investing getting different people of different age groups to be able to get access to things uh i think it's incredible it's it's a wild time to be alive and and i think it's a great time to be an entrepreneur it's also like a really hard time to be an entrepreneur all at the same time which is fascinating but alex great conversation and thank you so much for joining us today thanks so much for having me really appreciate it if you like the show please take a moment to rate review and subscribe it really does help the show to grow thank you for listening