flip houses with no money

8 Ways to Flip Houses with No Money

According to Bloomberg, the US real estate market in 2021 is booming. House flipping profits have increased. A flipper can make up to $66,000 per flip. The number of firms financing house flips has also risen by almost 50%.

This is the best time to roll up your sleeves and flip houses. House flipping, though full of risks, is a rewarding venture. Like any investment, to flip a house you need money.

What if you can’t get hold of the capital required to invest in house flipping? Worry not. There are a plethora of investors willing to fund your first flip. You only need to prove you are worthy of their funds. How do you go about it? Let us find out.

What is House Flipping?

This is buying a dilapidated home below its market value, renovating it, and selling it at a profit. Foreclosures and homes in poor conditions are the common properties traded in house flipping.

To excel in your fix and flip business, you must know your real estate market values. Also, have analysis skills to estimate renovation and holding costs. Flip quickly when the market is smiling to increase your returns.

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How to Flip Houses with No Money

Financial constraints should not hinder you from getting into house flipping. Try any of these means to fund your flip.

#1: Real Estate Partnerships

It is simple. Just get a partner with money. If you land on an experienced house flipper as a partner it is even better. They will not only finance your deal but also bring their expertise to the partnership.

For a partnership to thrive, you must contribute significantly. Prove that you have house flipping knowledge, marketing, selling, and renovation skills. History of making money through house flipping will boost your chances of winning a partner.

In the partnership, have a memorandum of understanding. Highlight your roles whether you will be both full-time house flippers and split the profits or your partner will only provide funds for a share of profits. Agree on your exit strategy. To either resale the property at a high value or keep it as a rental property to gain rental monthly income.

But where do you get a partner? A partner can be a family member, friend, business associate, real estate professional, or another investor. Start by joining a real estate investment club to have a network you can tap into. Have a business plan to show how lucrative your idea is and you will get an investing partner.

#2: Hard Money Lenders

These are companies that specialize in offering short-term loans. Use them when you can refurbish the property and sell quickly. This is because they charge high-interest rates, ranging from 11% to 20% with four to six points on top. The shorter you hold the loan, the lower the interest paid.

Hard money lenders care less about your credit score, they concentrate on your equity and the potential of the property (The after repair value). There are no specific guidelines that hard money lenders follow in issuing loans. Be aware; they mostly finance a percentage of the purchase price, approximately 70%. Search for those that will allow you to flip with no down payment.

Conduct a Google search to find hard money lenders in your area. Alternatively, attend real estate investor meetings to talk to hard money lenders looking to work with potential borrowers.

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#3: Private Money Lenders

There are many people with investing interest and financial ability to fund your flip. They are not associated with any financial institution. These are regular individuals like family members and friends. They scrutinize the potential of investment property and your ability to work on the project before giving you money.

They are flexible and offer better terms than hard money lenders. When using private money lenders, you set the terms and interest rates. They, therefore, give you the money at a predetermined interest rate or act as a partner for a share of profits without charging you interest.

Entice them by offering high interest rates. The rates should be fair for both of you. Enough for the lender to feel it was worthy investing and adequate for you to realize a profit. The advantage of private money lenders is that you receive your money within a few days or even hours.

#4: Wholesaling

Wholesaling in real estate can give you attractive returns within a brief time span. Without money, it is the best approach to flip houses. Here is how it works. Hunt for motivated sellers. These are owners with distressed properties. Find the right property, negotiate with the seller and get it under contract. Search for a buyer and assign them the contract at an assignment fee of about 5% to 10%.

You don’t need capital when wholesaling homes. Why not? You are not buying or rehabbing the property; you are the middleman. To fully benefit from wholesaling, understand the real estate market, have a good network, and have top-notch deal analysis skills.

#5: Seller Financing

Choosing seller financing means the seller finances the purchase for you. You own the property and make payments to the seller as per the terms and conditions.

The terms in seller financing are favorable and negotiable. You can get financing with a small down payment, simpler approval terms, and a flexible payment schedule.

To get a property using seller financing, have a business plan, share your goals with the seller. Give the prospective seller a reason to finance you. As much as the seller will need information on your income, employment, and credit history, it is not a requirement to qualify for financing.

To use this method look for properties with an option of seller financing. Or, find a home and talk with the owner to know if they are interested in financing the sale.

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#6: Home Equity Loan

You can use the equity built in one property to buy another property. Interesting right? There are two ways you can do it. The first is through a cash-out refinance. This involves redoing your current mortgage and getting the difference between the two loans. Use the capital as a down payment to purchase a fix and flip property.

The other option is buying a property to flip using a home equity line of credit (HELOC). A HELOC allows you to borrow against your equity and make monthly payments and it’s tax-deductible. However, if you don’t make your monthly loan payments, you might lose the property to the lender.

To use the options, you must build an amount of equity (preferably 20%) on your property. This rate varies depending on your lender.

#7: Option to Buy

In this lease option, you rent the property and agree to buy it after elapse of the lease agreement. The buying price is determined when signing the original agreement. The monthly rent payments act as credit to the final purchase price. You don’t need to make any upfront payment.

At the time of contract signing, negotiate on repairs and renovations for both parties to be aware of any work being carried out on the property. The agreement on the lease option varies depending on the circumstance therefore, be prepared and detail-oriented.

#8: Crowdfunding

This is the use of social media and other websites to attract investors into house flipping projects. The investors collectively finance your loan and earn interest. The crowdfund investors check on the profitability of the project before funding it. However, it requires experienced house flippers because it is high risk and expensive.

Bottom Line

You don’t need to use your money to flip houses. There are plenty of strategies to use and get into house flipping with no money. Research and know your options, select one that can work for you, and know where to find it. A private money lender, hard money lender, crowdfunding platforms among other creative strategies can help you achieve your house flipping dreams.

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