Fund that Flip

34 Replies

Disclosure: Client

I have been using Fund that flip consistently for over a year now. They have been great, but in the last few months, I have seen a strong decline in the interest rates paid out to their lenders/investors.

I know the rates are not going down for the borrowers (flippers), therefore one would assume the platforms margins are increasing. 

Obviously they are able to lower their rates without loss of investors, because people (probably newer investors) are lining up to offer their (hard) money at rates as low as 8.25 percent.

I've used them for a flip. The rates are decent, but it's important to realize what you're getting. The funds are reimbursements during the project and not actual funding. If your rehab is going to be $80,000, don't expect to get any of that funding upfront. You'll have to pony up the vast majority of that at the beginning of the project and plan to get most of your "funding" when the project is wrapping up. You're still paying interest on the entire amount from the beginning of the project, even though you won't see the majority of it until you're about to list the property.

Maybe it works for some people, but I don't like it personally. By the time you get most of your "funding" the house will be just about to go on the market. Whatever you're borrowing, you'll need at least 1/2 of that amount out of your own capital to get the project done (assuming that you have things timed out perfectly).

Maybe it helps people that need to start another project while the last one is on the market, but there are plenty of hard money lender that will actually fund your project.

Justin,

Majority of lenders Reimburse rehab, no different from a bank. They ask to see interest reserve so you can begin the work.

How many deals have you done before? That’s a factor in getting rehab upfront.

Originally posted by @Sara Anne Pace :

I have 37 investments with Fund That Flip. I have spoken with both Matt and Stephen who are co-founders and they have been responsive to my questions. They seem like ambitious guys in their 30's and 40's who have flipped houses themselves and have worked in the finance market before starting FTF. They started out with about 10 people. Now they have about 20 people working for them. They are increasing that number to 30 next year. They are based in New York City and Ohio. According to them, they have raised money for their company and have access to 50 millions to use to fund loans. They fund all their loans first before crowd funding.

My apprehension with investing in crowd funded flipping platform is that A LOT of them have gone under. Therefore research is crucial to understand the risks. https://www.therealestatecrowdfundingreview.com/to....

One of the concept that was important for me to learn was DEBT VS EQUITY financing. Debt is much better since in an EQUITY financing if a company goes under investors will get crumbs after the company gets bailed out first. FTF is a DEBT financing platform. All of  their loans are first position mortgages with personal guarantee meaning if foreclosure does not meet the debt requirement, FTF can go after the borrower's personal assets.

Every loan has an appraisal report which I browse especially to eliminate properties on the flood planes. I have not found one yet. House needing flood insurance are hard to sell. Having access to the MLS, I have done comps on houses that are on the platform from CT and the appraisals are pretty close. FTF also cross checks the appraisals. You will notice that they only fund less than 70% of ARV and the borrowers have skin in the game.

I have asked the pressing question. Have you had to foreclose on any property and has the investor lost any money? Technically no on foreclosure, but one borrower handed over the property via deed in lieu. No loss on any investments. 

I also like Peer Street which is rated well. I chose to invest in both but prefer FTF for the higher interest rates. I like it that FTF know their flippers since they screened them and follow them.

A flipper I know told me that FTF appraiser literally showed up the next day after the application was approved. He was happy that everything happened quickly and efficiently. 

 Sara,

If you are willing to share, about how much capital do you/did you have invested with FtF? Would love an update to your experience with them.

A little over 2 years ago i invested in 3 properties.  All had on-time payments and were paid back in full.  One of them was 1-2 months late paying back principal, but there was a small late fee that was disbursed among investors.

Last year I invested in 7 properties over the span of about 5 months.  1 has been paid back.  2 of them appear to be on pace to be paid back on time.  2 look like they're going to be late, but based on reports, it looks like they should be paid back in full.  Then the final 2 were foreclosed on.  It'll be interesting to see how the 2 foreclosures play out.  Luckily I only invested $1000 in each of those.

You can go to the Fund that Flip blog and they will post reports of late payments as well as foreclosures.  In July, they had a 2.36% foreclosure rate.

https://learn.fundthatflip.com/july-2019-performance-report

 

Disclosure: customer

I tried them a few months ago. Funded a project just to get my money refunded after 2 months. The project no explanation of why and no interest accrued. asking their support lead to no response at all. really bad experience and i will not recommend them. 

Originally posted by @Sagiv O. :

I tried them a few months ago. Funded a project just to get my money refunded after 2 months. The project no explanation of why and no interest accrued. asking their support lead to no response at all. really bad experience and i will not recommend them. 

I dont quite follow what you are saying. 

Can you clarify?

Funded a project to get money refunded? 

Can you clarify, how did you fund a project to get refunded?

We recently used them to fund three deals in the last month, first deals with them. We  have three more in the works.

They funded two deals in Ohio for us and one in Fla in under 14 days. Testing them out see how it goes, but initial experience has been very good. Multiple FTF people involved in the process, found all of them highly responsive to getting the deals closed on time.

 

Disclosure: Investor

An update to my investment that was foreclosed on.  As it ended up, it was a deed in lieu as opposed to a foreclosure.  From what I can tell, FTF did a poor job of monitoring the progress of the project and released funds to the developer when they shouldn't have.  

With everything said and done, a $1000 investment returned $124  ($42 from interest payments and $82 from liquidating the property).  

To their credit they're being pretty transparent about how this went down and they say they've hired a lawyer to take action against the inspection company they hired.  

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