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Fund That Flip (FTF) - 87% LOSS - be careful
Folks,
Just wanted to give everybody a heads up on what can happen with online crowdfunding real estate sites.
I have invested with Fund That Flip (FTF) for the past 2 years. I invested in 11 of their projects, each with the same dollar amount as a way to diversify my real estate holdings. 8 of the projects paid off completely with an average annual return around 8.5-9%. Not bad considering it's completely passive.
Then disaster strikes. I get an email informing me that one of the investments went bad, the company had to foreclose on the property and that I can expect an 87% loss of my total capital on that investment. Effectively, this wipes out every penny I made from ALL of the investments on their platforms over the past 2 years.
Of course there is risk. It's real estate. But please don't tell me that you have systems in place to help mitigate this risk. Why would anybody invest in this type of platform knowing full well that 1 investment can wipe out all of the rest?
Hope this helps,
Glen
Below are the emails and details of the project for other to see and get a better understanding of the potential downsides.
https://www.fundthatflip.com/d...
Fund That Flip will provide updates as available regarding our legal action against the inspection company. While the outcome is uncertain, to the extent our effort is successful, it is our intent to distribute any recovered proceeds to all affected.
Once again, we believe this is an atypical
result caused by the failure of a professional services firm. We have
since terminated the relationship with this firm and have reinforced our
standard operating procedures to lessen the likelihood of a similar
occurrence.
We thank you for your patience and hope you know we are committed to doing all in our power to deliver a better final outcome. Please let us know if you’d like to discuss this matter further.
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How come FTF did not sue the inspection company to recover the loss ?
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Not sure why 87% loss. I have had to foreclose but still got the house back which I sold to recoup my capital invested. The only reason this would happen is if the loan to value (LTV) was way too high or if the funds were given to repair the property and not given out in draws based upon completion of work. Typically you are lending at low LTV which gives you some cushion in case things like this occur.
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@Glen Friedman
Hello Glen,
I found this thread on beware of FTF by googling bc I was thinking of investing some $$$ via Fund that Flip.
From your links to FTF’s comms, it appears that they misrepresented the borrower’s reliability. The project info on their site says they were a repeat borrower, but the FTF comms that you include in your post describe their knowledge of the borrower’s liability to have been 2nd hand at best.
Are you still investing with them? I don’t think I will unless there is a granular history borrower of borrower reliability.
Thx,
Carolyn
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Gosh! That's terrible man. Sorry for your loss!
Appreciate you getting the word out
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@Carolyn Babiarz I am NO longer investing with Fund that Flip. It turns out a 2nd of my 11 investments in FTF has stopped paying and they are trying to foreclose on the property. I can't believe that it's only bad luck.
I'm sure there are many people who have had a good experience with FTF but it's made out to be an easy, passive investment with good returns. It's NOT. One bad investment can ruin most or all of a diversified portfolio and you have no control over how things will go.
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Thank you for this post
You probably just saved me some money
Hi Glen,
Thanks for the heads up and sorry for your loss. That is terrible. I know this post is old but but did FTF ever do right by you regarding this investment? Did they sue the inspection company for negligence? I was so close to investing but did some Googling and found your review. You possibly saved all of us who have replied.
Thanks again and hope all is well.
-Amit
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Thanks for the comment. In fact, nothing was ever done.
To make matters worse, I have another Fund That Flip deal that has gone south with little hope to recoup that investment as well.
The loan was made in June 2018 and they stopped paying a year before Covid started and this is their latest comments:
The developer remains non-responsive to Fund That Flip’s communication attempts to discuss foreclosure alternatives.
Foreclosure counsel is waiting on the court to schedule a hearing date for the judge to rule on our motion for default judgment.
Fund That Flip continues to work towards re-establishing contact with the developer and their known colleagues to discuss a successful exit.
Investors will be updated as further developments occur.
I would strongly encourage people to stay away from FTF. When 2 out of 11 investments go completely bad, it can't be a sustainable model for investors.
Good luck,
Glen
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Hello alll,
I met Matt personally few years ago. He seemed very personable and available to talk to me as "possible investor".
I made 2 investment with FTF. The fist one for $ 5,000 to "test the waters". My principal and interest were returned 3 months later as per agreement. After that experience, I invested $ 20,000. Note matured a year ago in September 2020 and still has not been paid back. Over the past year they were paying interest, sometimes late, but paid. However the interests stopped in August. I called this week and communication has not been very good. When finally the Customer Relationships person answered, he could not give me information about the status of the investment! I gave him until the end of the week (as per this writing: Tomorrow) to give me an update. I'll keep people updated about the outcome of this investment.
Regardless of the outcome: I won't invest with FTF again and can't recommend it!
Vania,
What is the specific investment (location and investment number) you invested in that you had issue with?
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I think the best way to invest in companies like fund that flip is to diversify away the risk by being invested in 50 or more investments. If one of the investments go south, you will still be okay. I had close to 80 investments and did not have any foreclosures so far. it will eventually happen, but it will not be an issue as long as foreclosure rate stays low. I think right now it is 2%. I also stay away from judicial states since the foreclosure process can take a long time. Luckily, non judicial states are usually the fast growing southern states so it is not a problem.
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Thanks for sharing your story. I've been investing with FTF and no problems so far. I like Serdar's recommendation above to have at least 50 investments with them. I would take it a bit further and say, you should set a goal to have no less than 100 investments with them. That way any failure would only equate to 1% of your portfolio. If you don't see you could do that - you may want to invest in their PFNF FUNDS. These are pooled investments (like a mutual fund) for the purpose of reducing risk of investing in a single project.
Quote from @Carol D.:
Thanks for sharing your story. I've been investing with FTF and no problems so far. I like Serdar's recommendation above to have at least 50 investments with them. I would take it a bit further and say, you should set a goal to have no less than 100 investments with them. That way any failure would only equate to 1% of your portfolio. If you don't see you could do that - you may want to invest in their PFNF FUNDS. These are pooled investments (like a mutual fund) for the purpose of reducing risk of investing in a single project.
Carol,
I totally agree with you, but I don't have more money to diversify more. $5,000 is quite high. By the way, I have a question for everybody. Why is FTF offering so many investments in judicial states? It would be really hard to earn money from your investments if the investment goes into foreclosure. Judicial foreclosures usually take years to be finalized and expenses pile up during those years.
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Quote from @Glen Friedman:
At least they're still working on recovering the funds for the Newark one and looks like investors won't be suffering a complete loss of principal.