Transformative Lending
Matt Rodak’s perfect timing creates wealth and opportunities while enhancing communities.
Matt Rodak, founder and CEO of Fund That Flip, decided to be a real estate investor before he was old enough to drive. Even as a young teen, the appeal of generating wealth while building up a local community was compelling.
“I started a landscaping company in high school and ended up doing a lot of work for real estate investors who were buying houses and fixing them up to flip or keep as rental properties,” Rodak said. “It gave me a very early exposure to the idea that you could take really distressed, unattractive properties in neighborhoods, fix them up to be some of the some of the nicest houses on the block and ultimately create nice homes for people to live in.”
Less than a decade later, Rodak’s company would be at the forefront of supporting the growth of the entire flipping sector.
Around the age of 16, Rodak became enamored with the idea that individual property transformations could improve and uplift an entire community. Nearly as quickly, he realized this type of transformation required a special type of vision.
“I admired real estate investors’ ability to see something no one else could see in that distressed asset and then turn the asset into something that created value for both themselves and the community,” he said. “I thought to myself, ‘That’s what I want to do when I grow up.’”
The young man sold his landscaping business when he graduated from high school and used the proceeds to pay for college, planning to use a degree in finance to get into real estate development. Fortunately for real estate investors today, the housing crash of the mid-2000s derailed those plans. Rodak went into commercial property insurance instead.
That first job allowed him to “cut his teeth” on risk assessment, pricing for risk and complex deals. It also ultimately gave him his own vision for the real estate investing industry and led him to found Fund That Flip. The technology, real estate and financial services firm is dedicated to creating new opportunities for investors seeking to deploy their capital in real estate and investors seeking to access capital to fund renovations of their own.
Transforming the Lending Experience
Rodak first realized there was a need for change in the real estate lending space when he bought his first investment property.
“In 2011 and 2012, banks were originating very few, if any, loans on investment properties,” he said. “Credit was pretty tight because of the Great Recession, and if you wanted to borrow money, you had to go to private or hard-money lenders. That process was very long and frustrating, with extensive application paperwork. That meant faxing [paperwork] to the underwriter and long wait times while they evaluated your deal. After days or even weeks, you would hear back in many cases that your application had been rejected because the company did not like the street where your house was located, for example. Often, the deal would collapse simply due to the length of time between application and response. It was incredibly exasperating. After experiencing that frustration firsthand, I felt that there had to be a better way.”
Rodak expedited development for the Fund That Flip platform after learning that the 2012 JOBS (Jumpstart Our Business Startups) Act was going to pass into law.
“I’m a big believer that you have to be a little bit lucky with your timing when you are starting a business,” he said.
“I realized the JOBS Act would be transformative for the industry because it made it possible to lend on real estate deals in a way that would lift all boats, so to speak. Our core mission was and has always been to help clients create wealth and improve communities, with our vehicle being real estate. We just had to have the technology, the platform and the legal framework to do it. By the time the legislation passed, we had those pieces of the puzzle, so we were ready to get busy building Fund That Flip from the ground up.”
Opportunity on All Sides
Fund That Flip quickly emerged as one of the best portals for investment opportunities in the real estate sector. Officially launched in 2014, by 2019 the company appeared on the Inc. 5000 list of fastest-growing companies in America at No. 42 nationwide, No. 4. in the category “real estate companies” and No. 5 in New York.
Thanks to Rodak’s deep empathy for investors on both sides of the real estate-lending equation, his platform was and remains dedicated to expediency, affordability, transparency and diversification.
Rodak said that Fund That Flip serves accredited and institutional investors by providing them access to investing in short-term loans and potential to make 9-10 percent annualized returns.
“On the flip side, we serve our active investors who borrow for rehab projects as their reliable source of funding, a partner who is transparent, easy to use and allows them to scale their businesses profitably. On the borrower side, they can buy more properties and restore more communities. On the lender side, they are able to invest in communities around the country without necessarily having to lift a hammer or be physically present in those communities,” Rodak added.
Fund That Flip’s investment platform is structured to make the entire process of making capital available as welcoming as possible. Investors considering lending capital can use the platform to review opportunities for their capital all over the country.
“There is no such thing as a national real estate market. This is a hyper- localized business,” Rodak said. “From a pure diversification standpoint, it just makes sense to have exposure to multiple markets. For example, investors with capital in Cleveland might also want to invest in Jacksonville rather than overweighting their portfolio with loans only in one market. With our platform, they can easily diversify by geographic region, or any of the other data points. It is a simple process of limiting your exposure to market factors in any single market.”
Fund That Flip’s structure aims to make the financing process as simple as possible for all parties involved in financing real estate flips. Borrowers can access the platform for a single source of funding in order to get their deals done quickly and efficiently. Lenders, who may wish to spread their capital across multiple deals and markets in order to limit risk, can do so using Fund That Flip’s technology to review deals and distribute capital accordingly.
“While it would be very difficult as a flipper to ask 30 different lenders for $5,000 each, for a lender, spreading $50,000 or $100,000 over multiple deals and markets may be a very attractive option,” Rodak said. “Our technology does all the paperwork and manages the capital, distribution, etc., so that both sides of the equation experience optimal access to opportunities to build wealth. In the process, we build up communities and expand the positive effects of real estate investing across economies.”
A Talent for Fine-Tuning and Focus
It might seem at first as if Fund That Flip does everything for everybody, but Rodak says the key to the company’s exponential growth and success actually hinges on its dedication to “going deep” into its market and focusing on a specific, highly specialized asset class: one- to four-unit residential properties.
“We are able to lean into a borrower’s experience and their market when we evaluate a potential deal because of this specialization,” Rodak said. “It helps us avoid the rigid ‘underwriting box’ which leads to those long wait times and unreasonable or opaque rejections that remain so common in our industry.”
Because Fund That Flip loans exclusively on these smaller residential properties, its underwriters are deeply familiar with both the target markets for those properties and the requirements associated with a successful project in that asset class.
Do not think that this relatively narrow focus precludes evolution and growth, however. In fact, Rodak says, it does just the opposite. When it becomes clear a shift in the marketplace is coming, Fund That Flip moves into the new opportunity ahead of the curve and the competition.
For example, over the past few years flips have begun to look very different than they did in 2012.
“Today, you need new kitchens, new flooring, new bathrooms. It’s a very different type of project than it used to be,” Rodak said. “As we listened to our customers, we found that more and more investors on both sides were interested in infill development and new construction loans. We were able to apply that information to our asset class and start making loans that were priced and structured to protect the interests of both borrowers and lenders doing these types of projects in our asset class.”
Rodak noted that new construction and infill loans are now nearly a quarter of Fund That Flip’s business.
“It all came from listening to our customers, understanding where the market was going and watching trends that told us where we should be building based on our understanding of the smaller residential asset class,” he said.
Rodak credits much of Fund That Flip’s growth and success to his company’s dedication to understanding the “end customer” in the one- to four-unit residential asset class.
“Up or down market, if you have the right end product for that customer in a place they want to be, then you will create value for yourself, your operators, the end customer and the community,” he said.
Rodak’s final word on Fund That Flip’s philosophy?
“We are extremely bullish on renovating existing homes that allow people to live in places that are desirable and create situations for highest and best use of land,” he said. “Follow the jobs, follow the people, serve the evolving needs of the market, and the business will grow accordingly.” n
Sidebar:
Still Growing Strong: Fund That Flip Raises $11 Million in Growth Financing in 2019
Matt Rodak takes a great deal of pride in the hard work he and his employees have put into the cultivation and growth of Fund That Flip.
“We have always felt it was very important to be extremely sustainable and treat our business as a high-functioning growth engine instead of a cash-burning growth machine,” he said.
For that reason, Fund That Flip has engaged in only two capital raises in its lifetime. The first raise took place in 2016, two years after Rodak founded the business. Only when the results of that raise clearly demonstrated the company was poised for more growth did Rodak consider a second financing round through a small-business accelerator program based in New York City. The process could not have provided better proof of concept, as Fund That Flip recently closed an $11 million series A financing with Edison Partners in Princeton, New Jersey.
“We will use that additional capital to reach our next round of goals even faster, creating new product offerings, longer-term loan products for borrowers and lenders, and expanded opportunities for everyone involved in the funding and flipping process,” Rodak said. “We are always seeking new ways for our customers to invest in our target asset class, to create additional liquidity when it is needed and to establish certainty around that liquidity. Of course, we simultaneously will be fueling our technology investments to improve our customers’ experience across the board.”
Jennifer Lee, vice president at Edison Partners, said her company found the timing of the project and partnership to be ideal.
“Fund That Flip’s offering is well-timed with the growth of the residential real estate industry’s addressable market. As affordability continues to concern many homebuyers, the renovation and recycling of existing homes offers an attractive, sustainable solution,” she said.
Sidebar:
Flipping and Funding on the
Fund That Flip Platform
Fund That Flip brings
accredited investors and real estate investors together on a platform tailored
to the needs of both parties in highly specialized ways.
On the Lending Side
Accredited investors can place capital in pre-vetted real estate projects in increments as small as $5,000, although Matt Rodak noted most investors prefer allocating larger amounts. The Fund That Flip underwriting team performs rigorous due diligence on each loan before it appears in the offerings on the website, and the company invests along with its lending clients in order to ensure incentives remain aligned. Repeat borrowers are identified, and project details are available for perusal on the offerings pages of the website.
“Only 6-8% of all projects submitted meet our underwriting criteria, and each project is managed by a team that has completed at least four projects in the last 12 months,” Rodak said. “We believe that is why, to date, we have paid investors millions in interest payments and returned principal, all with zero losses.”
On the Borrower Side
If you are a borrower seeking funding for your project, then Fund That Flip may provide answers in the form of fast funding delivered as described.
“We won’t waste an investor’s time. If a project is not for us, or if the project isn’t profitable for them, we tell them quickly and provide a reason why,” Rodak said. “We are committed to closing deals, and we can fund in as few as seven days if the project is right. Even more importantly for many flippers, we fund up to 90% of purchase and 100% of rehab, depending on the discount of the purchase price and an investor’s experience. We are quick, we underwrite based on the characteristics of the real estate, and we take first lien position, but we also partner with borrowers to build online credibility and lower rates over time.”
