Fund That Flip Vs. GroundFloor
I have been jumping around going back and forth with different peer to peer (p2p) platforms and have been having some pretty good experiences with some of them. As I have written about in the past I have not always had a good experience with p2p platforms.
One thing I have learned is that not all p2p lending platforms are the same. There are some that are great and some that leave a bit to be desired. One thing that really sets the better ones apart is the level of due diligence the organization conducts.
Another thing that sets some of the better ones apart is what is backing the loan. The collateral in two different platforms I am really digging at the moment is real estate. Now I generally like to compare apples to apples but in this case I am going to compare two different sites that are similar in that they both allow lenders to loan money on loans that house flippers and rehabbers get to complete house flips.
This of course is an over-simplification of what the funds are used for but for sake of brevity we can assume that the loans being made are for rehab purposes.
One of the main differences, and this is a pretty big difference is that Fund That Flip (FTF) only allows accredited investors to invest and the minimum is $5,000.00 USD. Groundfloor (GF) is open to both accredited and non-accredited investors and allows investors to make a small start with only $10.00 USD.
You can obviously see with $5,000 you can either do one loan on FTF or 500 loans on GF. This is great for diversification but would you really want to track 500 different loans?
As an accredited investor I am able to invest with FTF and to use an analogy this is akin to going to the airport and waiting outside the gate for your flight to board or waiting in a business class lounge with extra comfy couches, free food, and free drinks. You can guess which of these two platforms comes with lounge access.
Now although there is nothing wrong with going to the airport and having to sit three gates away from your flight in order to find a seat and an open outlet to charge your phone, lounge access is just so much nicer, convenient, and well worth every penny you spend on it.
Location Location Location
The loans on GF are generally smaller and they do a pretty good job of providing a breakdown of the project. There are several different aspects to look at and I first filter for non-judicial states. I prefer to only loan in states that are non-judicial meaning that in the event of a foreclosure the process can take months in lieu of years. Not only does this allow you to regain your funds quicker, it is also often times cheaper, meaning the fees associated with the foreclosure are often times less.
GF also allows you to see what the cost breakdown is for each loan. I can view how much the borrow has invested into the loan and what the rehab estimate is and I can also see how much the borrow may potentially make. I like this because I can see how much profit there could be in a deal and invest in what I consider the meatier loans. The more potential profit the more the borrower could reduce the selling price and still make a profit, making it easier for them to sell.
FTF also has a great breakdown of the project, the costs, equity, etc. The loans I generally have invested in are larger loans (in the millions) and the funds are slowly released to the borrower as they meet deadlines and progress goals. (Remember that business class lounge?) From what I have seen both sites post regular progress reports but FTF puts “boots on the ground” they actually visit the site and see the progress or lack there of.
I have heard some investors complain that FTF has limited opportunities available on the site. Personally I am totally OK with that. Of course I would love to see new investment opportunities posted everyday so I can cherrypick the best ones but I think by not accepting every applicant that comes looking for a loan they are able to only move forward with the best options for the investors.
Another huge difference for me is that often times the loans on GF are paid at the end of the term. FTF usually has a monthly payment that goes right back to the investors. Personally I like to see the funds coming back to me so I can stash them temporarily in something like MyConstant while I am building up another 5K to throw into another loan.
Both of these platforms serve as hard money lenders, they pre-loan the money to the borrower and use investor’s money to recoup the funds from those loans. I think they do this in order to speed things along, otherwise we would be waiting for hundreds or people to fund the loans and the borrowers would be waiting to get started.
The Bottom Line
If you are an accredited investor then I would highly recommend checking out FTF. If you have not reached accredited status yet then you might want to look into GF. I will continue to use FTF as I find the loans more appealing to what I am looking for and will gradually move away from GF as I see many of the loans meeting less and less of my investment goals.
As always if you are interested in checking out GF you can use my referral code and we will both benefit from it.