If you’re interested in real estate investing, you might want to check out this Fund That Flip review. Fund That Flip specializes in connecting investors with borrowers.
Investing in real estate can be a lot of work. Additionally, it can cost a lot of money. However, Fund That Flip is one of many crowdfunded real estate sites that can help you invest in passive real estate income more easily.
Fund That Flip offers investors a chance to invest in passive real estate investment. The company offers a low investment minimum, a higher average yield return and no out-of-pocket fees for accredited investors.
- Small investment minimum
- Passive investment in real estate
- No out-of-pocket fees
- Rigorous approval process
- Accredited investors only
- No early buyout available
- Higher risk investment
What is Fund That Flip?
Fund That Flip is a real estate fintech that was founded in 2014. The company’s goal is to help borrowers get money to fund their real estate projects by gathering crowdfunded real estate investors who are looking to earn attractive returns.
At the same time, Fund That Flip works to offer investment choices to investors that help bring attractive returns while also transforming communities around the United States.
When you invest in pre-vetted residential real estate loans through Fund That Flip, you can earn up to 10.5% annual yield and sometimes even more.
In addition, the fintech company works hard to balance lending wisely with providing quality service for borrowers.
In fact, Fund That Flip has a rigid application process and says that it approves less than 8% of all new borrowers.
However, the site tells us that 93%+ approved borrowers come back for additional funding.
Fund That Flip’s investment selections are affordable, although they are risky.
The minimum investment amount for a Fund That Flip investment is $1,000, but some investments may have higher minimum dollar requirements such as $5,000.
Note that you must be an accredited investor to invest with Fund That Flip.
The reason Fund That Flip only allows accredited investors to invest with them is due in part, due to the inherent risk in short-term debt investing.
Because of the types of investments Fund That Flip offers, and the filing exceptions that are allowed with these types of investments, the Securities Exchange Commission (SEC) requires that only accredited investors be allowed to participate.
In order to be considered an accredited investor, you must meet at least one of the following requirements:
- Annual gross income of at least $200,000 ($300,000 jointly with a spouse) for the last two years, with an expectation that the income level will continue
- A net worth of at least $1 million, either solely or jointly with a spouse
Note that you must provide documentation that you meet at least one of these requirements when you apply to be a lender/investor with Fund That Flip.
Is Fund That Flip Legit?
Yes, Fund That Flip is legit. The company has been in business since 2014. To date they’ve originated over $2 billion in loans.
They’ve had over 99.1% of principal investment funds returned to investors and paid out an average annual yield of 10.8%.
Truspilot gives Fund That Flip a 3.7 out of 5 rating, but it’s low primarily because there’s only one review, and it’s a 5-star review.
There is no Better Business Bureau file for Fund That Flip. Although online reviews and ratings for Fund That Flip are minimal, the company does have an 8+ year track record of business.
How to Open a Fund That Flip Account
In order to open a Fund That Flip account, you can go to the fintech’s website and click on the orange Sign Up button in the upper right-hand corner of the site’s home page.
From there, you’ll verify your accreditation status. After that, you’ll fill in personal information such as your name, email address, phone number and a created password.
As mentioned earlier, you will need to verify your position as an accredited investor with proper documentation before you can start investing money.
If you are applying to Fund That Flip as a borrower, you’ll start by filling in your personal information and then share the appropriate information regarding funds you need as a borrower.
What Does Fund That Flip Offer?
Fund That Flip offers products for both borrowers and lenders (investors). Investor products are debt investments, not equity investments.
As an investor you will earn your money from the interest paid on loans given to borrowers. There is no profit from the increased value on a property.
Investors can choose between Series Note Offerings ($1,000 minimum investment) which are pre-funding notes, and Bridge Offerings ($5,000 minimum investment) which are bridge loan notes.
If you’re interested in borrowing money from Fund That Flip, visit the site for more details on its lending parameters and process.
All investments in Fund That Flip offerings are highly illiquid with no options for early liquidation.
And although they are considered short-term investments, it’s not uncommon for these types of debt investments to exceed the original term length stated in the offering.
Keep this in mind as you consider investing with Fund That Flip. As an investor, here is some of what you’ll find if you invest with Fund That Flip.
Borrower Dependent Notes
A Borrower Dependent Note (BDN) is the name for the product you as an investor would invest in with Fund That Flip.
Fund That Flip uses the BDNs you invest in to take on another note with a redeveloper. The performance of the BDN is dependent on the note Fund That Flip takes out to fund the loan.
All Fund That Flip notes are tied to first-position mortgages.
Note that while Fund That Flip’s note is protected by the first-position mortgage on a given property, investor BDNs are not secured by those mortgages.
However, as an investor, your BDN gives you rights to the proceeds from the correlating note that Fund That Flip holds on the investment property you’ve chosen to invest in.
Fund That Flip has an intense focus on due diligence when it comes to its loan approval process.
As mentioned earlier, less than 8% of loan applicants get approved for funding through Fund That Flip.
Requirements for borrowers are strict, which only serves to help minimize risk to investors even more.
Some of the requirements that need to be met in order for borrowers to get approved for loan funds through Fund That Flip include:
- A preferred minimum of 3 completed real estate development products under their belt
- A trustworthy team of contractors, legal professionals and real estate professionals at their service
- Minimum of 10% borrower equity into the project
- After Repair Value (ARV) loan-to-value ratio of less than 70%
ARV’s must be supported with comparable sales data and broker price opinion paperwork.
Detailed line item spreadsheets outlining all costs are required. Borrowers also need to send detailed pictures of a property in its current state.
They need to include a written, detailed exit strategy as well. Fund That Flip’s detailed due diligence requirements for borrowers help to hedge investors against the potential for investment loss through default on a loan.
Note that loan prepayment is an option that borrowers who use Fund That Flip have. If a borrower chooses to prepay a loan, that means that your invested funds will be available for use earlier than the original term you signed up for.
However, any prepayment on a loan is subject to a minimum number of months of interest that must be paid even if the loan is paid off before the number of months passes.
If a loan is prepaid, that will reduce the profit you get as an investor. Instead of getting the proposed rate of return stated on your investment, you will get at least the minimum interest rate based on the number of months of interest paid by the borrower.
How Much Does Fund That Flip Cost?
Fund That Flip doesn’t charge any out-of-pocket fees for investors. However, there are fees to be paid.
Fund That Flip states that the interest rate you see as you browse an offering is the interest rate you will collect.
There will be additional interest collected from the redeveloper, usually in the amount of 1% to 2%.
That money comes directly from the redeveloper and doesn’t affect the interest rate you’re offered when you invest in an offer.
Fund That Flip does disclose the spread for each of their offerings in the offering disclosure.
Is Fund That Flip Worth It?
The answer to this question depends on a lot of factors. Fund That Flip offers passive income investing in real estate.
Many investors like passive income ideas to help fund their investments because it means little to no work outside of the initial investing process.
Investing in passive income investments can be a great way to earn money with very little effort, provided you choose the right type of investments.
Also, potential returns on Fund That Flip Investments start at 8.75% annually and the company currently boasts an average return of 10.8% annually.
Attractive interest rates such as the ones offered by Fund That Flip can go a long way in helping you grow your wealth.
However, investing in short-term debt loans can be quite risky. And although Fund That Flip takes steps to reduce that risk, you should only consider investing money you’re comfortable losing due to the inherent risk.
Also, consider your portfolio asset allocation as a whole to be sure you’ve got a healthy risk balance in the type of investments you hold.
Only you can decide if the risk vs. reward ratio offered by Fund That Flip is worth it to you as you determine what you will hold in your investment portfolio.
Is Fund That Flip Safe?
Almost all investment choices hold some inherent risk. Fund That Flip shares potential risk factors for each project on the project’s investment page.
Along with that, there are additional risk factors when investing in real estate. Real estate markets can have downswings. Weather could damage an investment property. Borrowers could default.
In short, investing in real estate can be more risky than other types of investments such as mutual funds, especially when you’re dealing with short-term debt investments..
If you have a low risk tolerance level and it’s important to you not to take chances on losing any of your money, then you may want to consider a super safe investment choice such as a high yield savings account.
However, if you’re up for taking some risk in hopes of earning a much higher yield, then real estate investing through Fund That Flip might be for you.
You may want to talk with your investment advisor about investing in a company such as Fund That Flip as well.
Fund That Flip Alternatives
Fund That Flip isn’t the only crowdfunded real estate investment company available. Check out these Fund That Flip alternatives for more options.
If you want to learn more about each option, you can visit each firm’s website via the link in the chart.
|Fund That Flip||PeerStreet||RealtyMogul|
|Fees||No out-of-pocket fees||1% asset mgmt fee||Varies|
|Open to Non-Accredited Investors||No||No||Yes|
To learn more about other Fund That Flip alternatives, see our article on the best crowdfunded real estate sites.
Investing in a passive real estate investment like the ones that Fund That Flip offers can be risky.
However, it can also produce higher returns. With the $1,000 investment minimum and no out-of-pocket fees, investing with Fund That Flip is affordable.
That being said, only accredited investors can invest with Fund That Flip. This fact may put Fund That Flip out of reach for the average citizen looking to invest.