Renovation Funders

[William Baumann]

I came across this site Renovation Funders, has anyone here used them or know anything about them beyond what is on their website?

[Jeff S.]

Condensed, here's the example this company shows on their website, (in thousands $):

It appears that Renovation Funders are not funding anything but simply arranging a JV between you and some investor. Here, they want a $15k fee plus the $1.5k in closing costs for the privilege. The investor will get $21.9k after 5 months. Plus, from their calculations, it looks like you pay an additional $7,835 in holding costs which are not included in the JV.

Paying $38.4k for $50k over 5 months, amounts to incredibly steep terms. In fact, the rate the investor makes is tied to the sale price of the house (4.39% ???) not to the amount invested or even to the gross profit (which might not amount to much and the likely reason they want to do it like this). Annualized, you will pay a whopping 184% for this money.

These are payday loan rates. Funds like these are for the truly desperate, and please don't say that making anything on a deal is better than making nothing. If you can borrow the purchase money for a deal like this, and have the holding costs, you should either have or should be able to borrow the rehab money.

I suggest that if you are driven to this form of financing, by paying what will likely amount to a huge percent of your profit (if anything is actually left), then you are woefully undercapitalized and taking financial risks you probably shouldn't.