Fund That Flip is an online investment platform for residential real estate redevelopment projects. Thousands of distressed homes hit the market every day. Many of these homes are not suitable for home buyers or tenants to live in. Our network of redevelopers purchases and rehabilitates these homes, improving neighborhoods and creating value for local communities.
Traditional financing for these projects isn't always available. We source, underwrite and originate projects from experienced developers. After perfecting the loan, we offer accredited investors the opportunity to invest in BDNs related to each project. This allows you to invest as little as $5,000 per project to achieve diversity while helping restore neighborhoods around the country.
Fund That Flip is primarily a technology platform that facilitates the financing of residential redevelopment projects. We provide basic screening and due diligence of each redeveloper and their projects before they are made available on our platform to accredited investors. We raise the level of transparency and ease-of-use so investors can make educated investment decisions based on all available information about each project.
We have also created an efficient investment product called a Borrower Dependent Note which allows us to pool investors’ capital together while keeping the transaction straight-forward for both redeveloper and investor.
Crowdfinancing is when capital from several un-associated individuals is pooled together to invest in a common business venture. This practice has been around for some time in real estate and historically has been known as 'syndicating'. The JOBS Act changed things by allowing real estate operators to 'generally solicit' or 'advertise' the fact they are raising capital for their projects. This is good news for you because prior to the JOBS act, you would have had to personally know a real estate re-developer in order to gain access to their project flow. If you haven't heard of crowdfinancing before, don't feel bad, it's a relatively new way to invest.
We earn our revenue from three primary sources. First, we charge an origination fee (points) for each loan that is funded on our platform. This is charged to the redeveloper and is collected when a loan closes. This fee is fully disclosed on each note and is typically between 2 and 4 percentage points of the total amount borrowed.
The second source of revenue is from an interest rate spread. This is the difference between the interest rate we charge each borrower and the rate we pass through to investors. This amount is fully disclosed in each note and is typically between 1 and 3 percentage points.
Third, we pre-fund each loan meaning we use our balance sheet to originate each loan. This means we’re earning the full coupon of the underlying mortgage until it is fully syndicated to investors.
NO! Our offerings are 100% debt secured by a first position lien against the subject property with all costs disclosed up front. We want you to be motivated to successfully complete your project and retain the upside. We will take a first position lien against the property in order to secure the note.
Each project is underwritten separately and most of or projects are funded between 9-14% with 1-4 points charged at closing. These rates are a function of local market conditions, the loan to value ratio, and the scope of the rehab. Once you submit a project, your underwriter will be able to give you a clearer indication of expected rates.
We can get loans funded in as little as 7 days. It's best to set up your profile and get pre-approved by Fund That Flip prior to having a project ready for funding. This will allow us to move directly to underwriting the project. In most cases, once your project is approved, we will use our own capital to fund your project. We'll then go to the crowd to refinance our position so we have capital ready for the next loan. This allows for you to get the capital you need in a timely manner.
We require that you bring at least 20% of the purchase price to the closing table. Depending on the scope of the rehab and your experience, we may ask for a greater percentage. Investors on our site like to know that you are committed to each project and the best way to do this is require you to have some “skin in the game”. This also signals to investors that you are serious about seeing the project through to success.
We do have the capability to fund 100% of the construction costs. Similar to other funding mechanisms, we'll likely hold a percentage of these construction funds in escrow and release them as project milestones are met, subject to inspection.
We start with looking at your qualifications. We seek to partner with professional redevelopers who have a track record of success. You should have 3+ projects under your belt and a network of contractors, legal professionals and real estate agents who help you achieve your goals. Once you are prequalified we look at each project on a case-by-case basis. Each project is different but in general here is what we are looking for:
More is better when it comes to how much information you share. We make it easy on you by allowing you to submit all relevant information on our platform.
Maintaining and growing a network of private lenders is time consuming and inefficient. Furthermore, your network has limited capacity and may not always be able to fund your next great project. Working with Fund That Flip provides you with a number of advantages:
We hope to be the best of both. While we have formalized underwriting processes and procedures akin to a hard money lender, the capital we deploy comes from the 'crowd' which is more in-line with a group of private lenders. As you develop online relationships with our network of private lenders, it is possible that your projects start to see similar economics provided by friendly private lenders.
Fund That Flip makes significant effort to reduce the risk of default, however due to the inherent risks of real estate investing, a project may go into default, and investors may lose their entire investment.
Should a borrower default, Fund That Flip will work with the borrower and pursue action based on the particular circumstances of the default, condition of the property, general real estate market conditions, and other factors in order to most effectively mitigate any loss. Such actions may include selling or restructuring the non-performing note, selling the subject property 'as-is' to another buyer, completing any in-progress rehabilitation and then selling the subject property, or some other commercially viable option including foreclosure. During this time, investors may not receive monthly interest payments and the maturity date of the investment may be extended.
Such loss mitigation activities may require Fund That Flip to incur expenses. Upon sale of the asset, Fund That Flip will be reimbursed for any expenses with the remaining funds to be distributed to investors on a pro-rata basis. Details of how this will be handled is further outlined in the Borrower Dependent Note and Private Placement Memorandum which we encourage you to review with an investment professional.
Fund That Flip is creating the preferred residential real estate investment marketplace. We keep our investment offerings simple and straightforward so you can easily compare deals and their risk-return profiles. We are the only platform focused exclusively on the residential fix-and-flip market which helps us attract the country's top redevelopers and in turn provides you with high-quality projects from experienced real estate professionals.
When you invest in a project on Fund That Flip you are investing in a Borrower Dependent Note (BDN). The performance of the BDN correlates directly with the performance of a note that Fund That Flip invests in with the redeveloper of the project you've chosen. The underlying note is typically a first-position mortgage or similar security. While the note that you purchase is unsecured, the terms of your note gives you rights to the proceeds generated from the underlying note that is securing the real estate — hence the name 'Borrower Dependent'.
A Borrower Dependent Note (BDN) is a promissory note that entitles the investor to a fixed rate of interest and principal at maturity with payments to the holder of the BDN being dependent on payments received from the underlying loan between Fund That Flip and the property redeveloper.
Per the note terms, we use the proceeds from the BDN to invest in a mortgage note for the project you have selected. The name 'Borrower Dependent' sums it all up in the sense that the performance of the BDN is directly correlated to the performance of the underlying borrower note. Your investment will perform in accordance to how the underlying investment performs.
While BDNs are technically unsecured debt instruments, each debt offering is secured by a first position lien on the underlying property (the collateral). The reason that BDNs are not technically secured is that the collateral is not pledged directly to the holder of the BDN but, rather, is pledged to the Indenture Trustee under which the investor benefit as BDN holders.
Delaware Trust is the company serving as the Indenture Trustee. A key role of the Indenture Trustee in addition to administrative responsibilities is to protect the interests of investors in the BDNs. Delaware Trust and FTF Lending, LLC entered into an Indenture which is a contract between a debt issuer and a trustee that dictates the responsibilities of each party. In the case of an event of default by FTF Lending, LLC under the Indenture, the Indenture Trustee will exercise its rights for the benefit of the holders of the BDNs.
FTF Lending, LLC is a Delaware limited liability company and wholly-owned subsidiary of Fund that Flip, Inc. FTF Lending LLC is the entity that loans money to the borrower and issues the BDNs to investors.
Borrowers are allowed to prepay their loans subject to a minimum number of months of interest which they are required to pay. In the case of a prepayment, investors will receive at least this amount of interest in addition to their principal at the time of prepayment.
BDNs are not liquid securities. There is currently no secondary market for BDNs and no secondary market is expected to develop in the near future. Investors should be prepared to hold their investments to maturity, or longer in instances where the underlying note may be extended.
Accredited Investor is a term used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who have enough financial sophistication to have a reduced need for the protection provided by certain government filings. Accredited investors include individuals, banks, insurance companies, employee benefit plans, and trusts.
In order to qualify as an accredited investor as an individual, you must accomplish at least one of the following:
The investments on Fund That Flip are private placements that are made pursuant to SEC rule 506(c) of Regulation D. In order to qualify for certain filing exceptions, the SEC allows only Accredited Investors to participate in these types of offerings. Legislation has been passed which will allow for unaccredited investors to participate in the future and the SEC has recently finalized under what circumstances this will be allowed. Currently, these new regulations do not make it commercially possible for Fund That Flip to offer investments to unaccredited investors. We will continue to watch the development of this new law.
Under Rule 506(c) of Regulation D, the Securities and Exchange Commission now requires companies to take reasonable steps to verify their investors are accredited. We've partnered with a reputable third party to help verify your status through a non-intrusive verification process.
Signing up, browsing projects, and reviewing all other site content is 100% free. While there are no out-of-pocket fees for investors, we do collect a spread on each loan. The interest rate you see for each project is the annual interest rate you collect. We are likely charging the redeveloper 1-2% points more than that in order to service the loan. Our spread is disclosed for each BDN we offer.
Investing in real estate is inherently risky. Each project on the platform has different risk factors which are discussed on each project page. In addition to project risk, there are numerous other risk factors which you should consider prior to investing. A comprehensive list is provided in each Borrower Dependent Note and the Private Placement Memorandum. We encourage you to review and consider all risks with your financial and legal advisors.
Most notes offer interest rates between 9 -12%, however each offering is different based on the understood risks and local market conditions of the project.