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Fund that Flip: The Ultimate Marketplace for Connecting Lenders and Real Estate Flippers

  • 15 December 2017
  • Expert Insights

This post is part of our new Future of Real Estate series which interviews the leading founders and executives who are on the front lines of the industry to get a better understanding of what problems the industry is facing, what trends are taking place, and what the future looks like.

The following is an interview we recently had with Matt Rodak, CEO and Founder of Fund That Flip, Inc.

1. What’s the history of Fund That Flip? Where and how did you begin?

MR: The idea for Fund That Flip occurred to me nearly 5 years ago as I was beginning my transition from corporate America to the world of real estate investing. I had recently secured a contract on a property I intended to “flip” and found it incredibly difficult to secure financing in a timeframe needed to purchase the property. I eventually learned about the hard money lending (HML) industry and found a local lender that funded me – at an 18% interest rate!

Not only was the rate really high, the customer experience was awful. Everything was done analog with paper application, phone, and email. Sometimes it’d be days before I heard back from the lender, leading to a lot of stress about whether or not the lender was actually going to show up at closing.

I began doing more research on the HML industry and found that, generally, I was not alone in my dissatisfaction with how most lenders operated. Very little transparency. No use of technology to improve the process. And seemingly higher rates than what I believed was the real risk.

At the same time, I was also starting to do some small investments on peer-to-peer lending sites like Lending Club and Prosper. I was earning around a 10% annualized return on these unsecured consumer loans. It didn’t take me long to put two and two together and realize that there might also be an appetite from investors to passively invest in hard money loans similar to how they were investing in peer-to-peer consumer loans.

Further research led me to the JOBS Act, which was still a bill on the floor of Congress at the time. I spent a weekend reading the bill and came to the realization that 1. It was likely to pass and 2. When it passed it would fundamentally change the private capital markets. I quickly pivoted from starting a real estate investment business and began working on creating an online lending marketplace specifically focused on the needs of experienced residential real estate investors, and Fund That Flip was born!

2. What specific problem does Fund That Flip solve? How do you solve it?

MR: We have two very distinct customers that we serve. On one side of the marketplace are real estate investors (flippers) who need a reliable source of capital to grow their business. We call these our “borrowers”. On the other side of our marketplace, there are individual and institutional investors who are looking for access to high-quality real estate loans whereby they can earn a fair risk-adjusted return. We call these “lenders”.

For borrowers, we’ve created a seamless experience from loan application to closing and throughout the life of the loan until it is paid off. A borrower can apply and get a funding indication within 5 minutes. We offer a lending commitment within 24 hours and have even closed loans in as few as 3 days. The entire process is completely transparent so the borrower is assured that we will deliver on our promise to both close the loan and then continue to provide a high level of service while the loan is outstanding.

For lenders, our platform allows them to invest in high quality, secured real estate loans that they would otherwise not have access to. They can invest as little as $5,000 per loan, allowing them to diversify across many different loans in various geographies. Our loans also have a short timeframe, typically paying back in 6-12 months, which provides reasonable liquidity. Returns ranges from 8.5% to 11.5%. One of our biggest differentiators is the due diligence we perform on each loan. Less than 8% of applications receive funding, and this high-level of curation has resulted in $0 loss of principal or earned interest since we started.

3. What’s the future of real estate?

Prediction #1: One thing we know for certain about the real estate market is that it moves in cycles. We’re certainly in an upturn now, meaning that eventually, we will see a down-cycle. Predicting the “when” is nearly impossible, but we can be certain it will happen. Knowing this, we’re always prepared for this to happen and actually believe this is where most of the best real estate investment opportunities are created.

Prediction #2: More than 90% of the HML volume is still controlled by thousands of analog, “offline” lenders. If the HML industry is like nearly every other industry, this business will eventually move online as more customers expect to have an online experience with their lender. We believe this will lead to consolidation around the hard money lenders who are investing now in better online experiences for their borrowers.

Prediction #3: Demographic shifts and more transient lifestyles are two reasons fewer people own a home. Nearly 1 in 8 single family homes is occupied by renters. Homeownership is at a record low. We believe this trend is likely to continue, creating huge opportunities for investors and entrepreneurs to create new, wonderful living experiences for tenants who need the space of a single-family home but value the flexibility of renting.

4. What are the top 3 technology trends you’re seeing in real estate?

Trend #1: Virtual and augmented reality are beginning to change the way buyers and tenants choose their next home. I can envision a future where an owner/tenant makes a buying decision without ever stepping foot into the property.

Trend #2: Access to data and analytics in real estate is at unprecedented levels. Companies that are able to harness the power of this data and turn it into actionable insights are able to make faster and smarter business decisions. This is giving many cutting-edge companies big advantages in creating better experiences and high-value services to consumers.

Trend #3: While still very nascent, blockchain technology has huge potential to upend the real estate market. Tracking “chain of title,” for example, is a huge problem that costs the industry and consumers thousands of dollars on each transaction. Smart contracts built on a blockchain network will eventually upend the legal and title insurance aspects of real estate.

5. Why is the real estate industry ripe for disruption?

MR: The real estate industry is one of the oldest industries in the world and has evolved with some quirky nuances. It is also an inherently “high-ticket” industry, with most transactions in the hundreds-of-thousands to millions of dollars. This means change is difficult because the status quo is proven and much “safer” when dealing with such big numbers.  

That said, consumers expect more. Closing a bank loan can take up to several months. In a rapidly-changing world where consumers can order anything their heart desires – and have it delivered within 24 hours! – people are looking for better solutions.

With the advent of cloud computing, access to new data sources and savvy entrepreneurs willing to challenge the status quo, the real estate industry is one of the last frontiers for online innovation. It may move slower than some other industries, but the real estate industry is becoming modernized. It’s simply too big of a market – and there are too many smart people working on these challenges to think otherwise.

About Matt Rodak

Matt Rodak is the Founder and CEO of Fund That Flip, Inc. Matt graduated from John Carroll University with a degree in Finance. Prior to founding Fund That Flip, Matt held leadership positions in sales, marketing, and technology innovation with one of the largest commercial property risk management firms.

Matt is originally from Cleveland, OH and is a big fan of the Indians, Cavs and (regrettably) Browns. He now resides in New York City with his wife. They enjoy traveling to exciting places and just recently returned from a safari in Tanzania.

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