FinResi 2024 Comprehensive
Review and Ranking

What is FinResi?

 

To avoid the financial conflicts-of-interests that are rampant on virtually every other review site, I DON'T accept any money from any outside sponsor or platform for ANYTHING (including but not limited to affiliate ads, advertising etc.). See code of ethics  for more.

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Finresi specializes in high yield real estate residential debt investments (also called fix-and-flip loans or hard money loans), multifamily and commercial debt. 

At the time of this review they had a relatively large number of open loans for a site that's brand-new to The Review (with six)...which is a plus. Finresi says all loans are first position (which has less risk than lower position loans). Also some loans have lower loan to values than other platforms (with lower values having less risk of default than higher)...and which conversative investors may appreciate.

Additionally, FinResi's investment offering notes hint at something potentially groundbreaking in the works (and something I've wished all platforms would show but none currently do): the presentation of recession stress-tested data. More on these in the "pros and cons" section.

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What's the latest feedback on FinResi?

 

FinResi is a new-comer to the Real Estate Crowdfunding Review. So it hasn't yet accumulated a large enough number of investors to provide meaningful survey results (which are used to gauge investor satisfaction and produce rating/ratings). Now that it's been reviewed, that will presumably change in the future. And FinResi investors will be surveyed the next time the site surveys are updated.

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How does FinResi work?

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Finresi loans are purchased from a network of lenders and shown to investors on the Finresi marketplace.

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And Finresi makes its money by collecting a rate spread (the difference between the higher rate offered by the original lender and the lower rate offered to  investors on its marketplace). As of the date of this review, the spread was not being disclosed to investors on the investment pages (which in my opinion, is a minus).
 

Fenrsi says that most are short-term (6 to 24 months), with some longer ones being available from time to time. At the time of this review, there were 6 open deals ranging from 3 to 17 months.

​If the borrower on a loan stops paying, Finresi says they will attempt to work with them to bring them current. If that fails, they will manage the foreclosure process, which can get expensive. It also can take months (in nonjudicial states) to years (in judicial states). After that, it presumably over-sees the rehab and selling of the property.

If the net proceeds are more than is owed than the investor gets back their owed principal and interest, and maybe even a boost from penalty fees. On the other hand, if they're insufficient then the investor takes a loss on the investment. During the time all of this is going on, the investor usually receives no interest payments (nor obviously their principal back).

Finresi claims their historical default rate is less than 4%. However as of the date of this review they did not provide a full track record to back this up. In my opinion this is a minus point.

In addition to providing better documentation, a full-track record would provide context to FinResi's claims (and allow an investor to evaulate them). For example a 4% default rate that is mostly during a real estate expansion might not be very impressive or unusual (in comparison some other debt plaform had <2% during those times).  On the other hand, 4% through the great recession would be exceptionally good (where others had as high as 25% and more). Hopefully FinResi will choose to provide full details on this in the future.

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What are FinResi Pros and Cons?

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One huge advantage of the site (for a conversative investor) is that most loans appear to be below 65% LTV/ARV (after repair value). On the date of this review, all loans were between 50%-60%. A low LTV/ARV keeps a healthy reserve in case the loan has to go into foreclosure, and is much less riskier than high LTV/ARV loans. (See this article on "Hard Money Loan Investing Guide: Part 1.").

 

Additionally, all loans are first position. I usually won't even consider loans in a lower position, so this is a personal plus for me.

And their investment volume is impressively high for a site that's new to the Review (at six, currently). Hopefully this will continue to grow. 

At the same time, a hard money loan fund will often have 50+ loans). So an investor who's looking for diversification will probably not be able to rely solely on FinResi at this point.

Additionally, it loans in some states that do not have a nonjudicial option (such as Florida at the time of this review). This means that if things go wrong and foreclosure has to be fully invoked, it can take a long time (a year or more instead of months) to resolve before you get your money back. And it can be very expensive (which further stresses out the equity cushion and can cause losses). Investors who are concerned about a recession potentially causing a lot of foreclosures, may want to cherry pick the loans and avoid the states that don't have a nonjudicial option.

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On it's investment details page, FinResi shows hints of something that at first got me very excited. I like to do a recession stress test as part of my loan due diligence. (And if I can't live with the results, then I don't invest).

And FinResi notes mention a recession stress-tested LTVs: 
 "Data provided by Clear Capital based on property prices in the zip code as of February 2023. The worst 9-month price decline is the worst price decline in the zip code over the last 20 years according to data provided by Clear Capital as of February 2023. The Stressed LTV is the LTV that would be the result of applying the worst 9-month price decline to the subject property valuation. The Stressed After Repair LTV is the LTV that would be the result of applying the worst 9-month price decline to the subject property valuation."
 

Unfortunately, I could not find these values in the provided documents. Maybe I missed them. If not, perhaps this is a hint of what FinResi is planning to do.
 

Either way, if Finresi does provides this info, then this would be an enormous plus for this platform (in my opinion). And it's something that no other platform currently does (and something I have wished for...for a long time).
 

I could quibble with Clear Capital's methodology. Since many of the loans are longer than 9 months, I would prefer to see a longer stress test period. And since no one can predict what will happen in the next recession, I usually will apply an additional stress test % (like 10%) on top of the worst historical performance (for the uncertainty). 
 

At the same time, simply having any recession stress test as part of the investment offering would be an enormous, industry-shaking step forward.​​​

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 FinResi Quick Pro & Con Summary

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• Advantages: Low LTV/ARV (after repair value) and currently all at or below 65%, high # of loans for a new platform to the Review (currently six) and all first-position loans. Perhaps a hint of recession stress test data shown on investment offerings.
   

• Disadvantages: Does not disclose full track record behind claimed default rates, does not disclose spread, lends in non-judicial states.
   

• Accolades: none

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Is Investing In FinResi Legal?

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FinResi is only available to accredited investors. When investors sign up they are requested to prove their accredited status.

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What does a FinResi deal look like?

Here is my step-by-step due-diligence on a random FinResi  investment. So it may or may not be a typical investment.

I'm not an attorney, accountant nor your financial advisor. So always consult your own financial professionals before making any financial decisions. This is just my personal opinion and could contain errors, so use at your own risk.

Every investor has a different risk tolerance, comes from a different financial situation and has different financial goals. So an investment that looks great to one investor will look terrible to another (and vice versa). And by the same token, there is also many ways to due-diligence (and no one "right" or "wrong" way"). This is my method, and others will do it differently. Also I'm a very conservative investor, so something that's I feel is too risky could be a perfect fit for someone else who is coming from a different place.
 

This investment is located in Wichita, Kansas (Wichita, KS #90).  It's a 9 month loan on a loan on a single family home for 9% annual return.

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My first step is to make sure that the asset class and strategy even make sense for my portfolio. (If you don't know how to do this, you can see how I do this in The Conservative Investor's Guide to Due Diligence). Let's say it makes sense for my portfolio and jump in.

 

Like all Finresi loans, it is first position, meaning that if there is a foreclosure, the investor will get paid first from the proceeds before anyone else. I personally like to see this.
 

The loan-to-value is 55% which is below the 65% maximum that many experienced hard money lenders will not exceed. So this means it has a very healthy equity cushion if something goes wrong, and reduces the chance of the investor losing money. In my opinion this is great to see.
 

The loan is being made in Witchita Kansas. This is state that is judicial only, meaning that a full foreclosure needs to go through the courts. It will be much more expensive and time-consuming (perhaps taking a year or more), then if it was loaned in a nonjudicial state. For me, this is a dealbreaker and I would move on to the next loan. However, someone more aggressive might not have an issue with it.

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To be able to continue looking at this investment, I'll ignore the above and keep going.
 

Wichita Kansas is a tertiary market (versus being a primary or secondary market). Primary markets (major cities) generally have highly diversified economies. These tend to sustain strong demand in good times and provide maximum protection in a downturn. These are also generally very dense areas. And this can provide some protection against competitors (which can sometimes blow up a pro forma in less dense markets). In addition, some of these also have onerous building restrictions. Again this provides protection against competitors.
 

On the other hand, secondary and tertiary markets have less diversified economies, are usually less dense areas and generally have less onerous building restrictions. And so in general this increases the risk.

At the same time, this increased risk usually also comes with an increased projected return. So a more aggressive investor may prefer markets like these over primary ones.
 

Six months ago I would never have even considered such a market (with interest rates rising and a high risk of a downturn). Now that the Federal Reserve has potentially engineered a soft landing and has initiated its first rate cut in years, I would be more open to something like this. However, I would would need to wait several months (to make sure that inflation has truly been contained and there truly will be no recession) before jumping in. On the other hand a different investor who is not as concerned about cycle risk will be fine with investing much sooner than I am. 

 

Had the investment all my initial checks, I would have dived in further to check out the sponsor, the property itself, the projections, etc. To learn how I do those things, check out The Comprehensive Guide to Hard Money Loan Investing and   The Conservative Investors Guide to Due Diligence.

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Where can I discuss other FinResi deals?

You can do this with thousands of other investors in the private investor club. While the club is free, membership is restricted to investors who have no business connections to sponsors or platforms. Also, all members must agree to keep all club info confidential by signing a nondisclosure agreement. Click here to join or get more info.

Who are FinResi Competitors?

 

Here are the reviews and rankings for other residential debt sites:
 

• Upright (formerly Fund That Flip)

• Peer Street

• ShareStates

• Zeus Crowdfunding

• AlphaFlow

• LendingHome

• InstaLend

• YieldStreet

• Patch of Land

• GroundFloor
   

• All other sites (ranked)

OR...if you're looking for more volume and/or more conservative LTV's than many crowdfunding debt platforms provide, then a fund might be a better choice for you. If so, here is our Guide to the Top 15 Hard Money Loan Funds (and honors). 
 

How do I invest in debt?

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Looking to learn more about investing in debt (hard money loan investing)? Here's our 4-part step-by-step series (The Comprehensive Guide to Hard Money Loan Investing).

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• Hard Money Loan Investing Guide: Part 1 - What is it?

• Hard Money Loan Investing Guide: Part 2 - How to protect from loss

• Hard Money Loan Investing Guide: Part 3 - The Due Diligence Check List 

• Hard Money Loan Investing Guide: Part 4 - Top 15 hard money loan funds

Related:
 

How to pick? Check out our step-by-step guide.
 

• The quick guide to picking conservative real-estate deals
   

• Top 25+ accredited investor sites (ranked and reviewed)