When talking about lucrative real estate investment strategies, flipping houses is one we must talk about. But, what if you don’t have the financial means to get started? Can flipping houses with no money be done? Yes! There are actually three ways to finance a house flip project with little money: 1) Hard money loans, 2) Private money loans (partnerships), and 3) Wholesaling real estate properties. Here are each of the methods in detail:
Related: 2019 Is the Year to Finally Start Your House Flipping Business
To learn the basics of flipping houses before deciding on the best financing strategy for you, watch our video below:
Hard Money Loans
A hard money loan is one way you can start flipping houses with no money down. Hard money lenders typically look for experience in the borrower and/or equity in an investment property. Therefore, this method is perfect for experienced real estate investors as well as people who own high equity in their own house. Why is real estate equity important here? Because that is what you will use as collateral for the loan.
One way to avoid closing costs and the down payment is by asking your lender if they could include the closing costs in the loan. As for the down payment, ask if they would agree to collateralize your home equity instead of you providing that amount in cash. Most hard money lenders require a down payment from 20-25 % of the overall amount. Therefore, you will need to contact several lenders in your area to find one who will allow you to flip houses with no money down.
Now, the advantages of this financing method include the ability to invest with bad or no credit, flexible approval requirements, fast pre-approval process, fast financing, and it is the perfect investment property financing method for short-term investments such as fix-and-flip real estate.
On the other hand, the disadvantages include the need to have equity in other properties, and the fact that it will take some effort to find a lender who will agree to collateralize equity for a down payment. In addition, hard money loans have a short-term payment policy which means the real estate investor has to have a good exit strategy in place.
You can also read A Real Estate Investor’s Guide to Hard Money Loans to learn more about this financing method.
Real Estate Partnerships
So, you have the experience and have put together a business plan. Many times, aspiring real estate investors have the education that is required to start flipping houses. But the thing that keeps them from getting started is the lack of finances. In this case, the best option for how to start flipping houses with no money is to look for private money lenders who have the financial means. These investors might not have the knowledge you have. So a partnership, in this case, would be an exchange of knowledge for money. It’s also possible that they don’t have the time for this real estate investment strategy and simply wish to be a passive investor.
How to Find a Business Partner
By now, you’re probably wondering how and where to find a business partner to start flipping houses with no money. It’s actually not that hard. You have family, friends, coworkers, your expanded social group, and we’re sure at least a few would qualify for this type of partnership. So, start with your closest circle and then expand. If this doesn’t work, you’ll have to start building upon your real estate investment network. This is the best way to connect with other real estate investors and find a partner who is willing to invest their money in your project.
Related: How to Build and Maintain a Real Estate Investment Network
Another idea is to join a real estate investment club. If you do the proper research, we are sure you can find one in your local area. These types of clubs provide educational opportunities, public speaking events, and, most importantly, the opportunity to connect with other real estate investors and professionals. By joining a real estate investing club, you can work on your network and start looking for other investors who have something to offer. In this case, you want to start flipping houses with no money. Thus, you need to target those who have the financial means to partner up with you.
Tip: Before looking for a partner for your real estate business, make sure you have a business plan in place. Your business plan must include all the profitability calculations that prove your idea is lucrative. To learn more, read: Developing a Real Estate Investing Business Plan for Beginner Investors.
Wholesaling Real Estate
One more way to start flipping houses with no money is by wholesaling real estate properties. This is one of the best ways to make money flipping houses with no money.
Here’s how it works. You find a seller who is looking to sell their distressed property at below market value. Next, you assign the investment property to a wholesale contract. This means that you never gain title or ownership and you don’t have to pay any cash for this deal to succeed. Next, you market the property for sale. The marketing may or may not cost you money as there are plenty of free ways to market a property. But, don’t worry- even the paid ones won’t cost that much. Once you find a property buyer, you assign the contract to him/her. In this way, you can start flipping houses with no money, literally. You won’t even have to renovate the property as your job is to be the mediator only.
One great option for flipping houses with no money by wholesaling is to target short sale properties. These properties are usually up for sale by their owner due to financial difficulties. Therefore, most of them are sold below market value which means it leaves enough for you to make a profit.
Another great option is foreclosed properties for sale. These are properties whose owners failed to commit to the mortgage payments, and therefore, the bank has put it up for sale. Almost every bank has a bunch of foreclosed properties they are trying to sell. So, contact local banks and see if they have any. These properties are usually sold at a below market value as well, which means it is easier to find an end buyer. In this way, flipping houses with no money won’t require much of you.
Now that you know the best ways to fix and flip real estate with no money, get started now in The Best Cities to Flip Houses and Make a Profit in 2019.