#3 (out of 100+) Last year ranking: #9
#1 for lowest LTV loans (least equity cushion risk). #1 hard money loan safety award. #2 in residential debt. Shooting Star award for increase in ranking since last year (#9 to #3).
Fund That Flip: Comprehensive Review and Ranking
What is Fund That Flip?
Fund That Flip specializes in residential debt investments (also called fix-and-flip loans or hard money loans), along with a smaller amount of multifamily and commercial debt. They have the lowest loan to values of any platform (lower values have less risk than higher). They also have excellent transparency and a best-of-breed low default rate. (More on these in the "pros and cons" section).
How does Fund That Flip work?
Fund That Flip loans money to borrowers and then sells pieces of those loans to investors who share in the profit (or loss). Typically the borrower is themselves an investor who wants to flip a home. (Purchase a home that is run down, fix it up, and hopefully sell for a profit).
They make their money by charging the investor a service fee that ranges from 1 to 2% per year (the average is 1%). They also charge the borrower 2 to 4 points as well as some nominal legal and appraisal fees.
If the borrower on a loan stops paying, Fund that Flip will attempt to negotiate. If that fails, they will manage the foreclosure process, which can get expensive. It also can take months (in nonjudicial states) to years (in judicial states). After that, it over-sees the rehab and selling of the property.
If the net proceeds are more than is owed than the investor gets back their owed principal and interest, and maybe even a boost from penalty fees. On the other hand, if they're insufficient then the investor takes a loss on the investment. During the time all of this is going on, the investor usually receives no interest nor their principal back.
What are Fund That Flip Pros and Cons?
One huge advantage of the site is that most if not all loans at or below 65% LTV/ARV (after repair value). This keeps a healthy reserve in case the loan has to go into foreclosure, and is much less riskier than high LTV/ARV loans. (See this article on "Hard Money Loan Investing Guide: Part 1.").
They also pre-fund all of their investments.
And in June 2017 they became just the 3rd site in the industry to publish the past performance of all investments (and committed to doing so every month in an ongoing basis).
(As of today, they have an impressively small number of loans on the site are more than 30 days overdue (2.39% in the current loan book). In the entire history of the site,1.8% of loans (4 out of 215) had foreclosure initiated, making it one of the top performers. All of these repaid investors in full before judicial proceedings were required. They have currently lost $0 principal and $0 earned interest since founding. )
On the minus side, their investment volume is low (especially when compared to hard money loan funds). We hope to see the company improve this in the future.
Additionally, it loans in some states that do not have a nonjudicial option. This means that if things go wrong and foreclosure has to be fully invoked, it can take years (instead of months) to resolve before you get your money back. And it can be very expensive (which further stresses out the equity cushion and can cause losses). Investors who are concerned about a recession potentially causing a lot of foreclosures, may want to cherry pick the loans and avoid the states that don't have a nonjudicial option.
For more raw data on the site (including investor and sponsor fees, legal structure etc.), or to easily compare it with the data of competitors, see the feature by feature comparison matrix.
Fund That Flip Quick Pro & Con Summary
Advantages: Low LTV/ARV (after repair value), currently all at or below 65%, excellent transparency, low uncured default rate and solid track record,$2M in venture capital funding, pre-funding of all investments.
Disadvantages: Low investment volume.
Accolades: #2 in residential debt. #1 for lowest LTV loans. #1 hard money loan safety award, Shooting Star award for increase in ranking since last year (#9 to #3)
Investor feedback 2017-09-22:
"I think you need to upgrade FundThatFlip. Specifically, they have a problem credit (Matthews, North Carolina rehab loan). The property has been developed to about a LTV of ~50%. The developer is having problems and needs more funding. FTF has stepped in and provided the additional subordinated $50k in funding required to make sure the property is finished and us lenders continue to get serviced and return of principal upon sale. This is clearly going over and above in terms of service!!! Note that this is not pre-funding and then having investors take them out, this is FTF assuming risk so that the investors have an excellent seamless experience. They're #1..."
Is Investing In Fund That Flip Legal?
Fund That Flip arkets to investors under 506C, meaning that it's only available to accredited investors. Since it is not using 506B, new investors are able to view investments immediately and there's no 30-day waiting period. Since it is 506c, it also requires investors to prove their accredited status (and update it periodically).
What does a Fund That Flip deal look like?
Here is my step-by-step due-diligence on a random Fund That Flip investment. So it may or may not be a typical investment. Also I'm a very conservative investor, so something that's way too risky for me might be the perfect fit for someone else who is more aggressive. Finally, I'm not a financial advisor, attorney or accountant. So this is just my personal opinion and always consult your own financial professionals before making any financial decisions.
This investment is located in Chicago Illinois. It's a 9 month loan on a loan on a single family home for 9% annual return.
The first step is to make sure that the asset class and strategy even make sense for my portfolio. (If you don't know how to do this, please see The Conservative Investor's Guide to Due Diligence). Let's say it makes sense for my portfolio and jump in.
Like all Fund That Flip loans, it is first position, meaning that if there is a foreclosure, the investor will get paid first from the proceeds before anyone else. I personally like to see this.
The loan-to-value is 57.1% which is below the 65% maximum that many experienced hard money lenders will not exceed. So this means it has a very healthy equity cushion if something goes wrong, which reduces the chance of the investor losing money. In my opinion this is great to see.
The loan is being made in Chicago Illinois. This is state that is judicial only, meaning that a full foreclosure needs to go through the courts. It will be much more expensive and time-consuming (perhaps taking a year or more), then if it was loaned in a nonjudicial state. For me, this is a dealbreaker and I would move on to the next loan. However, someone more aggressive might not have an issue with it.
Had the investment passed those initial check, I would have dived in further to check out the sponsor, the property itself, the projections, etc. To learn how I do those things, check out The Conservative Investors Guide to Due Diligence.
Where can I discuss other Fund That Flip deals?
You can do this with thousands of other investors in the private investor club. While the club is free, membership is restricted to investors who have no business connections to sponsors or platforms. Also, all members must agree to keep all club info confidential by signing a nondisclosure agreement. Click here to join or get more info.
Who are Fund That Flip Competitors?
Here are the reviews and rankings for other residential debt sites:
To compare this site directly with competitors, see the
feature by feature comparison matrix.
OR...if you're looking for more volume and/or more conservative LTV's than most crowdfunding sites provide, then a fund might be a better choice for you. If so, here is our Guide to the Top 15 Hard Money Loan Funds (and honors).
How do I invest in debt?
Looking to learn more about investing in debt (hard money loan investing)? Here's our 4-part step-by-step series.
How to pick? Check out our step-by-step guide.
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This site has been ranked and reviewed as part of our in-depth, 100+ site industry review. All data is believed to be correct, but may have mistakes. Please contact us if you notice one. All non-data (including rankings, investor comment summaries, etc.) are my opinion only. I'm just an investor and not an attorney, accountant, or certified financial advisor. To maintain neutrality: I do not own a portion of any of the companies reviewed.