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How to Start Flipping Houses with No Money


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If you're looking to become a real estate investor but you don't have any money to get started, don't give up. Aside from learning the market, cash is really the only barrier to entry to the world of real estate investing. Fortunately, there are several ways you can start flipping houses with no money so you can make money and grow your experience.

In this guide, I'll explore how to start flipping houses with no money, how house flipping works, and the costs to start flipping houses. Let's get started!

How Does House Flipping Work?

In simplest terms, house flipping works by purchasing a property, adding value to the property, and selling it for a gain. Seems easy, right? Not quite. After flipping two houses in 2020 and 2021, I quickly learned that to become a successful house flipper, you need to know the ins and outs of real estate, have some interior design skills, and be willing to put in a significant amount of work (or hire someone to do the work for you, which is what I did — outsourced to a very competent and skilled contractor.)

And even if you're an experienced house flipper, there's still a considerable amount of risk involved. After all, you can predict where the housing market will go and how interest rates will change – so you have to be willing to take on this risk when getting started.

That said, house flipping can be extremely lucrative (depending on what the real estate market is doing) and many people have turned it into their entire career and full-time income.

How to Flip Houses with No Money

Ready to get started flipping houses? Here's how you can start with as little money as possible, and in some instances, zero money down.

1. Secure an Investment Property Mortgage

The most likely way most people start flipping houses is by securing a mortgage for the property.

Now, this is going to be more challenging than getting a traditional mortgage for a home you plan to live in, but it is possible.

To be approved for a mortgage, there are a few hoops you'll have to jump through in the beginning.

  • First, you'll need to have the income to support the mortgage. This can vary slightly depending on the lender, but in most cases, banks will not approve a mortgage that's more than 40 or 50 percent of your monthly income.
  • Additionally, you'll need to have a credit score that's above 620 in most cases. Because investment properties are considered more risky by banks, you'll also pay a higher interest rate than a traditional mortgage.
  • As with any mortgage, you will need to find money/collateral for your down payment so you might need to use other methods to secure enough money to get started. But at least using an investment property mortgage, you don't have to tie up so much cash in the deal.

Pros:

  • Can be a slightly more affordable way to finance your flip
  • Pretty straightforward process that many people are familiar with

Cons:

  • Not everyone will be able to get approved
  • Will need money for the down payment
  • Will need to have the income to support the mortgage

2. Find a Hard Money Lender

Many skilled real estate investors have a hard money lender that they work with on a routine basis. While hard money lenders often get a bad rep, they have a time and place in the real estate world. These lenders make it easy to get the cash you need for your flip, but they can be more costly than other methods because of the higher interest rates.

Hard money loans often come with interest rates over 10 percent, but sometimes even more. The cost of your lending will be determined by your creditworthiness (although not always), current market rates, and your history with the lender.

In addition to the interest rate, some hard money lenders will also require an upfront fee for the money borrowed, which can range from 1 to 5 percent.

Just like with a traditional lender, hard money lenders will usually only fund a certain percentage of the home value (usually up to 70%).

This means that you might be forced to use funds from somewhere else in addition to the hard money loan.

If you do opt to use private money lenders, it's critical to run the numbers with the cost of your financing to ensure it's still a profitable venture.

One of the big benefits of using hard money lenders is that your funds can be used for anything you want. Whereas some lenders may only fund the purchase of the property, your hard money loan can be used on renovations to the property as well.

Pros:

  • Easy approval
  • Flexible terms and conditions
  • Fast funding

Cons:

  • Can be much more expensive than other financing options

3. Crowdsource Your Funding (Partnerships)

Crowdsourcing your financing can be another unique way to get money to flip houses without needing money upfront.

Crowdsourcing works by gathering money from several people together to fund the investment. You'll get a small portion from many different investors instead of a large amount from a single investor.

This can be beneficial because it allows you to avoid expensive private lenders that can eat into your profits however, it can also be more difficult to manage, and you'll need to find many different investors to join in.

With this method, it can be helpful to have a large network of people to get started otherwise it can be difficult to find investors.

Similarly, you can also work as a partner for another real estate investor. If you don't have money, but like to perform the work involved with flipping houses – you could work out a deal with investors to keep a portion of the profits from each flip you manage.

Crowdsourcing or partnering with others can be an excellent option to avoid costly house-flipping loans. Better still, these types of transactions can lead to longer-term relationships down the road. Always a win!

Pros:

  • Can be less expensive than other methods
  • Can use the experience of other investors to help make decisions

Cons:

  • Can be more difficult to manage and organize

4. Utilize Retirement Accounts

If you have a 410k or IRA with a sizable portfolio – these accounts can be great assets that can help you get started using your own money. This can be a faster, less expensive option to fund your real estate deal, but it's important to consider the potential costs as well as any taxes or penalties that could be assessed.

Pros:

  • Quick access to funds without utilizing a lender or financial institution
  • No terms and conditions on how you use the funds

Cons:

  • Might be forced to pay taxes and penalties on the money withdrawn

5. Consider a Live-In Flip

Live-in flips (also known as a house hack) can be great options for new real estate investors looking to get into house flipping without assuming a massive amount of risk.

With a live-in flip, you'll be living in the home yourself while you renovate it.

This allows you to apply for a traditional mortgage that comes with a lower interest rate, which can lead to greater profits in the future.

As with any traditional mortgage, you'll need money to fund your down payment so you might need to utilize several financing options to make this format work – but it is also one of the cheapest ways for house flippers to get started.

Pros:

  • Much less expensive than other methods
  • Slows down the rehab process and eliminates some of the time pressure involved with other financing options

Cons:

  • Must live in the home while renovating which might not be ideal

6. Look for Seller Financing

Depending on the real estate market, some sellers might be willing to offer you financing so you can avoid hard money lenders and other costly financing options.

  • This method is much more difficult to find because most house sellers have an existing plan for the proceeds they make from the home, but it's not always the case.
  • You'll want to be upfront about your goals and aspirations for the property and build trust with the seller to increase your chances of this unique financing option.
  • If you do find someone willing to self-finance your investment, it's critical to form a legal agreement for the terms of the deal to protect yourself and the seller.
  • Be sure to carefully analyze the terms and conditions of the agreement and go over them with the seller to avoid any conflict down the road.

Overall, seller financing is one of the best ways to flip houses with no money but it's also one of the most difficult to find. If you're willing to put in the time to find it, these are often well worth the time and can offer a great return.

Pros:

  • Can be more affordable than other forms of financing
  • No bank or financial institutions involved

Cons:

  • Difficult to find
  • Can sometimes come with higher interest rates

7. Use Private Lenders

Private money lenders are pretty similar to hard money lenders, except there are a few small differences.

In most instances, hard money lenders are more professional in how they deal with money. They are looking to get a good return on their money, and don't necessarily bind themselves to real estate to get it.

On the other hand, private money lenders are more personable and are more likely to work with you and form a long-term partnership. This means you'll get more flexibility in your financing that traditional hard money lenders won't offer. If you can find an investor in your area to partner with as a private lender, you can form a valuable relationship over your real estate career.

Pros:

  • Can form long-term relationships and find unique financing options
  • Potentially smaller interest rates

Cons:

  • Can be difficult to find

8. Wholesaling

Wholesaling is a less common way to become a house flipper without actually ever owning the property. With this method, instead of actually purchasing the property, you sign a contract to buy the property and then sell the contract to a buyer before the closing date. (I found this guide on wholesale real estate very helpful because tbh I'm still a bit confused.)

The huge benefit here is that you don't have to come up with a large sum of money to obtain your property.

That said, you will have to find funding to improve the property so you'll need to have an alternate plan to secure funding for the improvements.

Wholesaling properties can be extremely lucrative, but it can take a ton of work and long hours sourcing deals. If you have no money to get started, this is often one of the best routes to take because of how accessible it is.

Pros:

  • Allows you to purchase an investment property with no money down
  • Lowers your risk because you don't own the property outright

Cons:

  • Can be more difficult and time-consuming to secure
  • Will require you to source funding for improvements made on the property

How Much Does It Cost To Flip A House?

House flipping can be an extremely costly venture, but there's a significant amount of variance that you'll need to understand when starting out.

For one, the cost to flip houses is going to change depending on your location. Areas with a high cost of living like California or New York will cost much more than areas with a low cost of living like Indiana or Tennessee.

Another piece to consider is how you plan to flip houses. There are many different strategies that can determine how much it will cost. For example, some real estate investors will opt to complete premium, higher-end flips that can yield a larger profit. Whereas other real estate investors might opt for smaller, less expensive flips so that they can complete more flips each year.

When it comes to determining the cost of flipping houses, you'll want to look at these factors:

  • The initial cost of the property
  • Cost of financing
  • Cost of improvements
  • Selling costs including marketing and staging
  • Taxes

In the end, most house flips will end up costing a decent amount. Some real estate investors will spend upwards of $350,000 flipping houses between the cost of the property and the improvements.

That said, it's possible to spend under $100,000 when flipping houses depending on your situation.

If you're in the analysis stage of the house-flipping process, we highly recommend checking out this house-flipping calculator to help you determine the profitability of your potential deal. I also like the (paid) software Flipper Force for analyzing my own deals.

Where to Find Houses to Flip

One of the biggest advantages of any real estate deal is sourcing your deals correctly. You can spend hours on hours looking and analyzing deals only to come up empty.

  • In the end, finding properties to flip is ultimately a numbers game. The more deals you look at, the more likely you find your golden egg.
  • As you become a more experienced real estate investor, you'll realize off the bat which properties will and won't work based on your criteria.
  • Whenever looking for houses to flip, it's wise to analyze the area, local employment and crime numbers, and the local market forecast.

Final Thoughts

Between using hard money lenders, to completing a live-in flip, there are many great ways to start house flipping even without money down. Most house flippers will use multiple methods to obtain funding, so don't feel locked into one or another.

Just be sure to keep in mind the cost of your financing on your profit margins, as some methods can be quite expensive and make your investment less profitable.

Remember, as with any real estate investment, don't expect to become successful overnight. For most real estate investors it takes years to learn the intricate dynamics of the housing market.

Ready to start looking for a flip house? Here's my guide on how to find houses in need of work.

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