Embark on a journey to Cleveland, Ohio, where we meet Brendan Bennett, the VP of Revenue for Fund That Flip (opens in new tab) . Brendan boasts an impressive personal portfolio of 19 units, consisting of 17 long-term rentals and 2 mid-term rentals. Discover actionable strategies from Brendan on how to grow your portfolio, even in the absence of substantial funds.
In Brendan's words, Fund That Flip is run by investors, for investors. Its founder was a short-term rental investor who was struggling to obtain the necessary financing through conventional lending. He came to the conclusion that he wasn't the only one who needed easier, more scalable, and more dependable access to capital, and so Fund That Flip was born.
The goal of Fund That Flip is to establish itself as a complete platform for real estate investors. Adding value at every stage of the real estate flipping process, from finding the initial property to making an offer to project management and construction management. With the acquisition of Flipper Force (opens in new tab), a software company that analyzes house flips, estimates rehab costs, creates project schedules, and tracks project expenses, they are already fulfilling that vision.
In 2019, Brendan began his career with Fund That Flip, initially working as an underwriter. He was then in charge of figuring out how much a property was worth, how extensive renovations would be, and whether they were paying the right price for it. He eventually switched to Capital Markets and Investor Relations after Covid started taking off, where he decided how to raise money, who to raise it from, and why they should raise it in the first place. Soon after, he transferred to the sales department of the business, where he assisted investors in leveraging capital to scale their businesses as large as they desired. He transitioned from sales to customer service and account management before landing in his current role as vice president of revenue.
Fund That Flip offers a variety of hard money lending services to real estate investors and is currently primarily focused on serving the east coast, though it is rapidly growing in the west. Their platform links borrowers with dependable and effective sources of capital, enabling them to quickly and easily fund their projects. Fund That Flip provides fix-and-flip loans, loans for new construction, and loans for rental properties, with a focus on residential properties. By providing competitive rates, adaptable terms, and a streamlined application and approval process, they work to make the lending process as simple as possible.
Speed Bumps When Scaling:
Many real estate investors face difficulties when attempting to scale their business with traditional loans. These traditional loan options frequently rely heavily on personal income, tax returns, and strict lending criteria, making it difficult for investors to quickly and efficiently expand their portfolios. The time-consuming paperwork and lengthy process involved in obtaining traditional loans can be a significant barrier for investors looking to capitalize on opportunities and expand their real estate ventures.
The strict scrutiny placed on personal financial factors is one of the primary issues with traditional loans. Lenders frequently require detailed documentation of personal income, credit history, and debt-to-income ratios, which can be difficult for investors with unusual income streams or multiple investment properties. These stringent requirements can limit real estate investors' borrowing capacity and slow their businesses' growth.
Furthermore, traditional loans may have restrictions on the number of properties an investor can finance at the same time. Many lenders limit the maximum number of loans they will make, which can prevent investors from expanding their portfolios beyond a certain point. This limitation can be especially difficult for investors who want to take advantage of multiple investment opportunities or diversify their holdings.
DSCR Loans:
Fund That Flip excels with a specialized type of loan known as a DSCR loan. A "debt service coverage ratio" (DSCR) compares your monthly debt service to your expected property earnings each month. DSCR loans provide a straightforward and streamlined process in contrast to conventional loans, which take personal income, tax returns, and other factors into account. They are made to be more practical and effective, easing the burden of copious paperwork and drawn-out processes.
With DSCR loans, the property's income potential rather than the borrower's individual financial situation is the main focus. Lenders can assess a borrower's capacity to pay off debt by evaluating the anticipated monthly income the property will produce. This method streamlines and expedites the loan application and approval process by doing away with the need for intricate documentation and financial analysis related to personal income and tax returns.
The advantage of DSCR loans lies in their simplicity and efficiency. They provide an alternative lending option for individuals and businesses looking to finance their property investments without the extensive paperwork and time requirements associated with traditional loans. By shifting the focus to the property's income potential, borrowers can access the funds they need with a simplified application process, allowing them to expedite their investment plans and seize opportunities in a more timely manner.
Brendan notes that there often is a negative stigma associated with other lenders in this field for being out to get the investor with exorbitant fees, penalties, and attempts to seize the investor's property if a loan payment is missed. The difference between Fund That Flip and other companies is that they don't own properties. They just want to support investors. They are willing to work with their investors to come up with a plan to keep them afloat if something unforeseen occurs and payments start to get missed. Again, they're in the business of helping those they lend to, not owning their properties.
Additional Opportunities for Investment:
An intriguing feature of Fund That Flip is the ability for passive investors to directly invest in the loans. While Fund That Flip does receive funding from traditional sources such as large institutional Real Estate Investment Trusts (REIT), insurance companies, and others, they also receive funding from accredited individuals looking to invest a small sum, say $5,000, to support an individual loan and profit from the interest on that loan.
Real Estate Investing: Unscripted:
Real Estate Investing: Unscripted, the podcast that Brendan also runs, has a wide range of guests, including real estate data analysts, economists, and other market influencers. The conversations are through the lens of Fund That Flip's customers: wholesalers, flippers, builders and passive investors. The podcast will soon feature an episode with Brian Payne, Board Member and Advisor at Furnished Finder.
Brendan's Personal Portfolio:
Brendan currently owns 19 properties, 17 of which are long-term rentals and two of which are short term / mid term rentals. He started his real estate investing journey as many do, by house hacking duplexes.
House hacking is a real estate investment strategy in which individuals buy a property and live in one section while renting out the remaining units or rooms to tenants. This strategy allows investors to generate rental income while also lowering their own housing costs. House hacking, which typically involves properties with multiple units, such as duplexes or triplexes, uses the rental income from the additional units to cover a significant portion, if not all, of the property expenses, such as the mortgage and taxes.
House hacking provides several advantages to real estate investors. For starters, it allows you to begin building wealth through real estate without making a large initial investment. Tenant rental income can be used to offset mortgage payments, reduce housing costs, or even allow the investor to live rent-free, increasing the investor's cash flow and potentially allowing them to save for future investments.
Having only recently entered the mid-term rental market, his first impression is that it is far more low-key in terms of tenant interaction and turnovers than short-term rentals, which he has dabbled with in the past.
Getting His Start:
His family assisted him in his first foray into real estate investment. His uncle knew he was interested in real estate and was willing to provide private lending as long as he put in the sweat equity of finding, remodeling, and eventually doing a cash-out refinance to pay off the initial loan. Brendan and his uncle did this on his first four properties before moving on to more traditional loans.
Capping Utility Expenses:
One way to feel more secure about your rental's expenses is to set a limit on what you, the owner, will pay for utilities such as electricity and water. By informing the tenant that there is a limit to what will be paid for and that anything above that will be the tenant's responsibility, you plant the seed in their mind that they must be responsible and not wasteful. Essentially, they must treat your rental as if it were their own home rather than a hotel or short-term vacation rental where caution and responsible use of resources may get thrown to the wind.
Advice for Investors Just Starting Out:
Brendan emphasizes the advantages of owning a duplex. He keeps a long-term tenant in one unit who essentially pays the mortgage. The second unit he rents out mid-term and earns a higher profit. While he could rent both units out mid-term and maximize his profit, he prefers the security of a mix of short- and long-term rentals.