Vancouver startup aims to open real estate investing to the masses

Online crowd-sharing platform IMBY aims to open the property market to people who don't have the big bucks typically required to enter it in cities like Vancouver.

IMBY founder and CEO Michael Stephenson

Online platform IMBY lets members buy shares in properties for as little as $1

Tech entrepreneur Michael Stephenson’s latest venture sprang from a chat with an employee at one of his companies. Asked about his financial plan, Stephenson explained that he invests in real estate developments as a limited partner. When the employee learned that such investments can yield an 18- to 23-percent internal rate of return (IRR), he wanted in. Stephenson told him that the minimum cheque most general partners will take is $250,000.

“And he goes, ‘Why is that?'” Stephenson recalls. “‘Why am I stuck investing in a GIC at 1 percent?’ It really galled me. I felt really guilty about that.”

Vancouver-based Stephenson and his business partner, Stephen Jagger, have been through seven companies over the past 18 years, he says. In 2013 the pair sold Ubertor, now Canada’s top provider of real estate websites. Their newest business, IMBY, aims to open the property market to people who don’t have the hundreds of thousands of dollars typically required to enter it in cities like Vancouver.

“What’s wrong with real estate is it hasn’t changed,” Stephenson says. “Current real estate is established to be binary: either you’re all in or you’re all out.”

That leaves the average person missing out on a key asset class, Stephenson notes, pointing to a 2018 paper by five economists at institutions including the University of California–Davis and Germany’s central bank. The authors found that from 1870 to 2015 in 16 now-wealthy countries, housing posted an average annual return of 7.05 percent, adjusted for inflation, versus 6.89 percent for equities.

“Bar none, real estate has been the world’s best investment over the last 150 years,” Stephenson says. “It’s an amazing investment class that most of the public doesn’t have access to because the barriers to entry are so high.”

Stephenson and Jagger’s answer to this problem is IMBY, a crowd-sharing platform whose name stands for In My Backyard. Users can sign up for an account on their mobile phone, search for a home to invest in and buy shares alongside other members for as little as $1.

“Traditionally when you buy or invest in real estate, it’s a very cumbersome process,” IMBY chief executive Stephenson says. “We digitized all of it, and what it allows us to do is keep everything on your phone and keep it simple, but it also allows us to share the costs, because they’re generally extremely high, and it allows everyone to participate.”

As far as Stephenson knows, IMBY is the first such online enterprise to have purchased property. Its first home is a real estate development in Vancouver’s Trout Lake neighbourhood. The company is taking a 2,000-square-foot house and turning it into three homes with a total area of 6,000 square feet, Stephenson explains.

Usually, a small group of people would invest in such a project, he adds. “But long story short, there’s now over 200 owners participating in the returns,” Stephenson says. “There’s an anticipated 35-percent return on this Trout Lake development, which is really great considering that if you look at the underlying asset, it’s a $1.6-million house, of which $1.5 million is land value.”

Although densification is one way to combat the Vancouver housing crisis, only a minority group has been benefiting financially from it, Stephenson says. IMBY “allows the 99 percent to truly participate in these densification opportunities,” he maintains.

IMBY is looking at properties in high-growth regions of B.C. as well as the Seattle and Bellingham, Washington, areas, Stephenson says. For its second project, the platform is working with a local family that has done well in real estate. The father, who grew up with a single mother in Kamloops, wants to create opportunities for single moms to own property.

“With IMBY, a single mom can rent an apartment in Vernon at the market rate, and by acting as a great tenant, paying the rent on time, taking care of the minor issues on their own, they can be awarded shares in the property they live in,” Stephenson says. “What it’s allowing to do for the first time is change the typical angst between landlord and tenant, allowing the tenant to be investors in the real estate they’re consuming.”