All you need to know about Fund That Flip

Welcome to Real Estate Insider for May 13th, 2022.

Over the past few weeks, we’ve all seen the importance of a diversified portfolio. The NASDAQ has been battered, and the less said about crypto’s performance, the better.

Real estate is the original alternative investment and typically has a low correlation to stocks and bonds. So in times of uncertainty, property investment is often a popular choice.

Today’s issue is all about Fund That Flipa low-risk way for accredited investors to diversify their portfolio into real estate without the leverage and loans required to buy an investment property. The company combines fintech and property, opening avenues to investors they otherwise wouldn’t have.

Let’s go!

It all began in high school…

Fund That Flip was founded in 2014 as an alternative to the slow, inaccessible investment options for real estate, but the story of how the idea for it was born goes way back when the founder, Matt Rodak, was running a side-hustle during his high school days.

It was a small landscaping gig, where they performed labor for businesses flipping houses. They cleaned up gardens, moved furniture around, and of course, got to destroy a few things along the way.

Matt took note of how fulfilling it was helping renovate dilapidated residences into new, exciting properties – and just how much profit the flippers were raking in.

This experience cemented Matt’s dream to work in real estate, and after a small detour working for an insurance company to save up some money, he was ready to begin his Real Estate journey…

Only it quickly became apparent that house-flipping was not as simple as it had once seemed. Finding capital to perform these flips was a constant struggle. Banks were slow, and private lenders unreliable.

There were a lot of time-consuming and fund-draining complications in the way.

Then in 2012, Obama’s JOBS Act came into law. This legislation loosened regulations on small businesses, making it easier for these companies to raise funds through crowdfunding or proxy-IPOs.

Matt saw a market opening – providing flippers with access to fast, transparent capital for purchasing and rejigging run-down properties. Not only was it an exciting investment opportunity, but Matt saw the potential for transforming houses, neighborhoods, and lives.

Since their official launch in 2014, Fund That Flip has grown into an end-to-end financial technology platform that helps real estate entrepreneurs and investors transform their neighborhoods and communities.

Today, Fund That Flip has offices in New York, NY and Cleveland, OH, and has territory managers throughout the U.S. who support the local real estate entrepreneurs.

They’ve managed more than $1 billion in investments, with 99.1% of principal returned to investors.

93% of their borrowers come back to fund their flips.

An “end-to-end” solution for real estate flippers

There are two key elements to the business – servicing borrowers and lenders. Here’s a video on how it works:

What services are provided for borrowers?

For borrowers, Fund That Flip provides up to $25 million in capital for a range of properties. The company finances all sorts of projects. They take on basic renovations and flips, upscaling rental properties, demolition jobs, and even refinancing existing equity.

The drawing point of Fund That Flip’s lending service is its speed. (One of the biggest issues Matt encountered earlier in his career was waiting for loans to be financed. In the months it sometimes took to be approved, deals would often fall through.)

By ensuring pre-approval of up to $5 million, Fund That Flip borrowers don’t have to worry about this issue.

How can lenders/potential investors get involved?

On the “flip” side (sorry about that), lenders can get involved by investing increments of as little as $1,000.

Fund That Flip approves less than 8% of their applicants, and potential lenders can sift through their offerings to invest in a loan that suits their investment profile. The company aims for an annual yield of 9.5%, and its average profit has so far exceeded this goal.

Numbers are looking good.

Each real estate offering comes alongside a number of details: term length, target APR and overall funding, as well as basic info about the actual property. What’s quite compelling for investors is the liquidity on offer.

Real estate flipping projects are notorious for being a lengthy process. In a volatile market, investors are often wary of having their money tangled up and inaccessible.

Fund That Flip has a “Series Note Offerings” category for loans shorter than 12 months. Some opportunities are as short as 8 weeks.

Investors can still invest in longer-term loans to receive greater passive yield – ranging from 12–24 months.

It’s all about the options.

What separates them from the competitors?

Fund That Flip hangs their hat on being transparent. The platform releases monthly reports to give investors frequent performance updates. You can read them here.

Fund That Flip also uses a concept known as “dogfooding”. Weird name, right?

Basically, dogfooding is like a fintech company’s way of quality control. The businesses will use their own products in a constructive, productive way. This is both as a means for testing performance, and in Fund That Flip’s case, demonstrating confidence in their own product.

What’s more, the team comprises a number of real estate experts. This ensures they only take on the best-quality loans and that everyone in the company is aware of exactly what property they are approving.

What can investors do with this info?

The CEO, Matt, openly reports his investments on a monthly basis. This includes which listings from Fund That Flip he’s investing in, as well as any other additions to his portfolio.

In fact, Matt went as far as to invest his entire 401k into the Fund That Flip platform in 2016 and has been adding capital ever since. As of April 30, he has about $500k locked up in Fund That Flip loans. You can learn more about this in the monthly blog posts here.

Data as of May 12th 2022

As far as raising investors’ confidence goes, this is a pretty good strategy. If the CEO of the company has money invested in their own products, it’s normally a pretty good indicator that any shady conduct is unlikely.

Wrapping up

Most new-era investors believe that diversification across asset classes is the key to a strong-performing portfolio. This has become even more important as the market has swung from bull to bear over the past month, with experts recommending a weighting of between 5–20% in real estate for most portfolios.

However, private real estate opportunities are often only made available to those who are part of an exclusive clique. Paired with soaring property prices, it can be a difficult market to gain exposure to…

But in their 8-year-career, Fund That Flip has found success in filling this space. They’ve funded over $1.5 billion in loans and returned 99.6% of principal. What’s particularly interesting to note about their customer base is they are extremely loyal. The average number of investments per client is 24.

Of course, no investment is 100% risk-free. There are some pundits out there who think the American real estate market is a bubble just waiting to burst. But because investors are accruing loans, not actual property, this is unlikely to be as devastating for Fund That Flip compared to alternatives like REITs.

So far, Fund That Flip offers a great opportunity for accredited investors to get involved in the property market with relatively little capital.

What’s next for the team? Here’s what Matt Rodak has to say:

We plan to create even more innovative solutions for real estate entrepreneurs, bring them additional value through optimizing the real estate investing ecosystem with data and technology, and continue to provide unparalleled customer service to help real estate professionals drive their businesses forward.

That’s it for today’s Real Estate Issue, we hope you enjoyed it.

Is there anything you’d like us to look at? Any topics within Real Estate that you’d like us to go over, or a particular opportunity you want us to analyze? Just get in touch – we read every single email.

Cheers,

Stefan

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Author

Stefan Von Imhof

Stefan Von Imhof

Stefan lives and breathes asset analysis and valuations. Before founding Alts, he was the Head of Product at Flippa, he created and ran Flippa's Due Diligence Program, and has bought & sold dozens of websites & newsletters. Prior to Flippa he was the first product manager at HG Insights, a market intelligence company which sold to Riverwood Capital Partners. Originally from Boston and later Santa Barbara, CA, he now lives in Australia with his wife & Boston Terrier, Charlie.

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