Home flip-financing platform Fund That Flip announced this week in a press release that it has received $11 million in funding from Edison Partners of Princeton, New Jersey.
Fund That Flip is a private lender for residential investors launched in 2014. It is based in New York.
According to the release, the company will use the money to expand its market share of the trillion-dollar residential real estate investment industry. Edison Partners’s Vice President Jennifer Lee will join the company’s board.
The release states that after origination, the company offers accredited and institutional investors fractional shares of the loan. The company claims that to date annualized yields have averaged 8-9 percent.
The company was funded by Fintech Venture Fund of Atlanta in 2014 and has since doubled revenue. It was also named No. 42 on the 2019 Inc. 5000 list of fastest-growing private companies in America. It aims to offer customers a streamlined, web-based loan application process.
The company states its financing programs help investors and rehabbers renovate older properties that can enter the market at more competitive price points and thus ease a market’s inventory strain.
Although it would take a significant number of Fund That Flip-backed properties to impact a market’s supply, all it takes is one home at a good price to satisfy below-market buyers and earn an agent a commission.
Nevertheless, most renovated properties will enter a market at the median list price, and most investors try to buy a flip at 70 percent of it’s after-repair price.
Fund That Flip doesn’t state if it has any control over how the renovation is handled, as construction delays and over-spending are very common problems in home flip projects and in-turn impact how hard-money loans are paid back.
It states that its product is for “experienced home investors” who might consider rehab and flipping a full-time job and who might balk at the steep rates of traditional hard-money lenders.
Fund That Flip sees its funding platform as an alternative source to new construction. New-home construction costs vary greatly based on location and type. HomeAdvisor.com reports the average cost is $296,522.
Private housing starts for July 2019 were adjusted to 1.19 million, according to census.gov, 4 percent below the June estimate of 1.24 million.
The company hopes to make its clients money while improving housing availability.
“As affordability continues to concern many homebuyers, the renovation and recycling of existing homes offers an attractive, sustainable solution,” said Lee in the press release.
Groundfloor.us, a similar web-based platform, also facilitates the process of investing in loans for residential rehab and development projects. It recently raised $3 million.
Fund That Flip’s CEO said it’s also about helping clients make money.
“Our mission is to enable our clients create wealth and improve communities by investing in real estate,” said Matt Rodak, CEO and founder of Fund That Flip.
The money will help Fund That Flip expand in existing and enter new markets. Rodak also plans to develop additional residential loan products and provide new ways for institutional and accredited investors to fund their offerings.
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