How to Easily Invest in Fix and Flip Loans with Fund That Flip

How to Easily Invest in High Yield Mortgage Notes

Hey, Brecht Palombo here. Today, I want to talk about one of the easiest investments in notes that I’ve ever made and why I intend to invest a lot more with this company. 

I’ll show you how those investments are going, and I’ll take you inside why I’m making these investments. Now, this service is only for accredited investors. If you’re not an accredited investor, you cannot make these investments. 

What’s an Accredited Investor?

An accredited investor has certain income or asset levels that are determined based on whether or not you’re single or married. Rather than educate you fully on what an accredited investor is, you can find a little bit of information here

How to Easily Become a Hard Money Lender

I’m investing in first position fix and flip and rehab loans, and I’m doing it through Fund That Flip. I’m investing here for two reasons. The first one is that as an auctioneer, I have sold a lot for and worked for a lot of hard money guys. We’ve sold a lot of assets for folks with exactly this type of loan.

So, you say, “Why would you do that if you know that they get foreclosed on, and it’s risky?” Well, the reason is the way these investments are made; it sounds like it’s risky, with bridge loans and fix and flip loans, and how do we know what’s going to happen. 

But here’s the deal. The LTV – the loan to value, the loan to after-repaired value is so low that even with all of those foreclosures that I’ve done, we’re going around taking back projects. The losers in those projects were not the lender. The losers in those projects were the equity. It was the contractor; it was the borrower. So the borrower takes the money to flip the property. They pay a couple of points up front, and then, depending on their background and everything else, they’re only maybe paying 10% at Fund That Flip.

Others I’ve foreclosed upon were deep in the teens. But the deal is that the position is so low in the stack that when you’re a first position, and you’re only at 60 or 70%, even if mistakes are made, even if you have to foreclose, even if you have to correct that, there’s still meat on the bone.

On the one hand, during the last financial crisis (we’ll see what happens in this next one), my hard money lenders who made these types of loans are going out and foreclosing all over the place. They were actually a terrible client for me as an auctioneer because I would only get the service fee; there was never a success fee because we never sold to third parties.

And the reason we never sold to third parties is that they knew that if they just bought it back, they’d finish it up. They’d sell it, and they’d still get a net positive return in the end – most of the time. 

Now that isn’t to say there’s no risk here. If you are looking for high returns and no risk, I don’t know what to tell you. Check another planet because it’s not happening here. But if you are reasonable about your risk and you’re an accredited investor, you should be able to afford to do this.

Invest in Rehab Loans from Fund That Flip

Let me just walk you through why I’m doing this. So there are really two types of notes Fund That Flip is doing. And I have invested in both, and you can see my very small portfolio with them in the video above. 

The first are RBNF series note funds. Basically, this is a pool of money that gets loaned out first. Your investment is spread across a bigger number of properties, as opposed to going in and picking individual properties, which I have also done.

For example, one’s offering an annual return of 8.5%. The term is eight months, so it’s pretty short-term money. The funds that they’re doing are pretty small – one’s a million and a quarter. One is for $750,000 and says, “now invest in a line of credit used to pre-fund first position mortgages originated by FTF (Fund That Flip) lending.” They show that they’re paying 8%, and they’ve got $550,000 out of $750,000 so far. Pretty regularly, I’m getting emails from them for these.

We’ll talk about these bridge note or flipping note properties next. There’s one listed in South Boston, MA, – bridge loan two single-family homes, two two-family homes, one three-family home, each two to four bedrooms. The offering total debt is $4.2 million, and the APR is 9.25%. The after-repair value that they’re in for is just 75%.

There’s one in Columbus, Ohio, $1.6 million, Boston, MA, for $4.7 million, but there are also much smaller ones, like $419,000, $161,000, and so forth. Then you can go in and see the loan to after-repair value, which is 70%, its $161,000 total offering, with a minimum investment of $5,000. And it’s only a six-month term, which is pretty nice.

What happens (I actually had this happen on one of my notes) if they don’t get out in that time, then there are fees, and you share in those fees. This one shows that the underlying asset is single-family, with a two times personal guarantee, and the underlying security is a first position. It has $120,000 funded out of $161,000. 

The other thing that I really like is the sort of due diligence that Fund That Flip does. They’ll show you the cost, the use of proceeds, and the percent of the loan. They’ll give you the loan to costs. By the way, if you’re brokering notes, if you’re selling investments to other people, you should think about how you’re presenting your offerings because the more clear you can make it, the better. The fact that I can just login here, see everything that I need to do and I’m like, yes, take my money without even talking to a human – it’s pretty good. It means they’re doing a pretty good job. So you should really think about that if you’re somebody who’s raising money – how well you can lay out these options for someone.

So we’ve got the purchase price and then the Fund That Flip valuation. That’s what they calculate, and they’ve got a narrative to go along with this. They show you about the property and all of the specs you need, the market overview, project strategy, and how this person plans to make money. There’s a statement of work. They talk about the developer. You’ll have a whole dossier on the developer with previous projects by the redeveloper. You can see if a borrower comes back again and again, which makes me feel pretty good. We’re loaning to him over and over and over again. That’s probably a pretty good shot. 

Using Fund That Flip

So to invest in these, you connect a bank account, and you just type in your amount, and you click “Invest in Deal.” I’m going to go over my own investments so that you can learn about what I am doing.  

I just have a little bit with them right now – $20,000. And I’ve only been there for a couple of months, but I really like them. I listened to a call about a workout with them, and they walked through the whole strategy on what they did when they had a loan that went bad. And I said these guys know exactly what they’re doing. I should give them more money. And I plan to do that very soon. 

I’ve got $20,000 invested so far. In May, I’ve earned $119. Total earned has been $318 against just over a couple of months. Right now, I have four active investments. I started in February, then I did another one in March, and I did another one in May. I’ve actually had my first one pay off. I invested $5,000, and I got a 9.43% return. I think that’s pretty good for being guaranteed in the first position. There’s nothing on top of you. If they have to go collect, you’re in a really good place. The APR on it was only 7.75%, but the annualized return ended up being 9.43% because, with this particular loan, they had to pay fees to go late because they didn’t close it out in time. So the developer makes a little less money but as the debt investor, you make more, so it’s a win there.

Right now, I’m in two of the funds that they have, two of the warehouse lines and two individual properties. I’m really going to go pretty long here. It’s easy because all I have to do is connect my bank account. I go in, and I look at the different options that they have. I find one that’s got a rate that I like. I actually like the smaller dollar ones a bit more. When you’re talking about things that are hundreds of thousands, low hundreds of thousands of dollars, those are easy cures. People are always going to be buying properties in that range.

While I’m really a huge fan of these guys, and I think they’re doing a great job, that doesn’t mean that when you make these investments that you’re not doing it without risk. There’s always risk in order for you to get a return. So don’t think otherwise. If you have any questions about this, you want to chat about this, leave a comment below. Otherwise, click here to check out Fund That Flip.

If you’re an accredited investor, get signed up with them and make some investments because it’s easy and that return – let’s face it, folks. If you’re close to 10%, you’re almost at 10% – it’s this easy. You don’t have to do any work for it. I think you should do it. So that’s it. Make it a great day.


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