- Wed Mar 02, 2016 5:37 pm
Ok guys here's the full details of funds4flips. I'll start off by saying that the funds came in handy for a fix n flip property that we purchased in South NJ. If I had to do it again, I probably would, however, I believe that I could have also raised private money with less work, management etc.The Good:
-If you have good credit, you can get funds for your flip
-These funds are typically cheaper than hard money
-Potential for double the funds thus decreasing cost of moneyThe Bad:
-The upfront cost is $9,000 for their program
-There are many credit cards opened in your name
-Some accounts can be closed
-There are transfer fees which increase the cost of the money
-Your credit will take a hit
-You will have to manage many accounts
-There are some funds that won't be usable
Let's jump right in to my experience. At the time of application (Sept of 2015), my credit was excellent (Experian: 814, TransUnion: 781, Equifax: 813). I spoke to one of the higher up reps at funds4flips in which they explained the cost of the money and how I would be guaranteed $100k. 9% cost of money for a rehab sounds good to me. I asked if there were any charges beyond the $9,000 and I was told about 3% transfer fees to "cash out". I explained that I didn't need to cash out, I just wanted to purchase a property with funds (keep in mind, I wasn't told the funds were provided by credit cards so I didn't know why cashing out was necessary). I was told that the 3% wasn't an issue then.
I proceeded with the service and shortly after signing up I received about 10 credit cards mailed to me. Surprised that this is how I was going to receive the funds but continued forward with it. Given we had a fast approaching closing, I was instructed by my account manager to make balance transfers to other credit cards and to my bank accounts (not fund and very time consuming). When doing a balance transfer you are charged 3% or 4% on the funds (thus making the cost of money 12% or 13%! UGH! less profit and a surprise cost). I talked to my account manager and was told this fee was unavoidable to obtain my funds for closing. Disappointed, but ok...still cheaper than most hard money. Now it made sense to me about the 3% talk which took place earlier. You obviously can't "charge" a house purchase so it's necessary to transfer the funds into your bank account to be wired for closing. This is probably my biggest issue with the company. It wasn't conveyed properly that I would have this many credit cards in my name and that there is no avoiding the extra fees when they knew the funds were used for a house purchase. Ok moving along...
Enough funds were transferred to purchase the property but we still needed funds for the rehab. This part was an issue because 2 of the accounts opened with Bank of America were closed. I was advised that this is a very rare occasion but luckily I was given more funds than originally guaranteed (around $150,000 based off my stellar credit). Ok fair enough...proceed ahead.
After calling the other credit card companies, I find out that most of the promotions have expired and it will cost more money to transfer funds. Not acceptable in my book. This was increasingly frustrating because I have limited time in my business from the start and now I have to manage logins for each credit card, call up to the bank representatives and explain to them how I want to get the funds into my bank account etc . Not fund whatsoever, and very time consuming (now you can see why my efforts were probably better spent raising private money?).
To add insult to injury, one of the credit card statements came back with my current credit score. It showed 670. 6 freaking 70!? I thought to myself. How could my near perfect credit have taken such a hit? I was told my credit would take a hit from the initial inquiries but should only affect my score 15-20 points. I spoke to the supervisor regarding this, and I was told that it will go right back up as long as I make my minimum monthly payments. Ok, I'll take his word, nothing I can do now (I'm in the process of finding out my latest credit score to verify).
Currently I'm working on planning for closing with the end buyer for the property we fixed (yes it was a quick fixer upper project). Unfortunately there's a strong possibility I'll need a mortgage in my name in the next few months. With all these credit cards opened in my name, it's going to have a drastic affect unfortunately. If I need to close these accounts, it obviously will effect the future funds that I was hoping to receive ($300,000 after 8 months apparently).
So what is my final feeling on this type of funding? I'm half and half. I'm not happy about the lack of clarification, prior to signing up, of what the full process entails. I'm not happy with the extra management involved nor having to juggle promotions that seem to expire. I am happy that I was able to get funds for this flip that made it possible to do the deal (my private money lenders were funding other deals). This was an avenue that allowed me to do a deal that otherwise might not have been possible, although there's a good chance I could have raised the money with the same amount of time I used to manage the accounts etc.
I would have felt better if I knew all the intricacies and then proceeded forward. The "surprises" took a damper on original "very pleased" attitude. I hope this helps everyone in making their decision, feel free to ask any questions....Time to send out checks for this months credit card statements