Is it possible to flip a house with no money? Believe it or not, it is. If you want to get started as a house flipper but don’t have any money saved up, don’t let that stop you from taking action. There are many ways you can get started as a real estate investor without money, and it’s even possible to flip a house with no money. Let’s take a deeper dive and learn how.
So, how do you flip a house with no money?
There are actually 2 ways to do this. The first way is to partner up with someone. The most important step in flipping a house for a good profit margin is finding a great deal. Write that down. Everything starts with a great deal. If you can help an experienced house flipper find a great deal you can partner up and both make some money.
This is also an excellent way to network and learn the business. Every newbie wants a mentor, but many rookie investors aren’t willing to go out of their comfort zone and bring something to table. If you want to stand out, start looking for off-market deals. Once you have a deal, you can go to local REIA meetings or join FB Groups and share it with experienced house flippers.
Driving for dollars is a great way to get started. You basically drive around looking for dilapidated houses and you jot down addresses. You can drop off a note and ask them to call you or create lists and send them mail.
Once you have a lead, bring in your experienced house flipper connection and see if you can negotiate a deal with the seller. If you get it under contract and it closes, most flippers will give you finders fee. Some will even cut you into the deal and give you 10-20%.
The most valuable thing you can gain from this is education. You might not make as much money on the flip as you would if you flipped it yourself, but the education is priceless.
The second way to flip a house with no money also involves partnering up. Instead of partnering up with a house flipper you’ll partner up with a money guy. Start with close friends and family. Do you know of anyone that is sitting on a bunch of cash? Reach out and let them know what you are doing. If you have a great deal and a solid plan for flipping the house and making a good profit, it should be an easy sales pitch.
I get it, not everyone has a rich uncle. So you may need to do a little more outreach. There are thousands of hard money lenders out there, but if you are a rookie flipper with no deals under your belt most of them will require you to have some skin in the game. Usually 20-25% down and up to 65% of ARV. What does that mean?
For example, you put a house under contract for 100k. The ARV (after repair value is 200k). This hard money lender will lend you up to 65% of the ARV, so 65% of 200k is $130,000. So the most money the hard money lender will give you is $130,000. They will give you 80k for the house and a max of 50k for the rehab. You need to come up with 20k in this example.
I know what you are thinking…”But I don’t have 20k!” That’s the whole point of this blog post, right? You are trying to flip a house with no money. There is hope for you. There are some private money investors out there who are willing to take risks. Again, and I can’t stress this enough, bring them a great deal and you just might get 100% funding!
How do you propose a 100% financed deal to a private investor? There must be something in it for them. Most private & hard money lenders will require you to pay for points and interest for the life of the loan (usually 6 months). If you are asking them to provide 100% funding (house + rehab) you’ll need to offer more. You will need to offer them a cut of the profits. Probably 30-40%. This is a high risk loan for them so they’ll expect a big return. Here is an example of what that deal would look like.
Contract price 100k, rehab estimate 40k. Total loan 140k. This lender is asking for 4 points and 10% interest. $5,600 in points and $1,166.67 in interest for 6 months = $7,000. Total balloon payment due with points and interest in 6 months = $152,600. Sale price of house after flip, $200,000. Profit after closing costs = 40k. Lender cut 30% of profits = $12,000. Total lender proceeds = $24,600. Your proceeds = $28,000. Not bad huh?
You might have to play with these numbers a bit and the lender may want a bigger cut of the profits for such a high risk loan, but you get the idea. The biggest takeaways here (I shouldn’t even have to repeat it!) are 1) Find a Great Deal and 2) Network with experienced investors and private / hard money lenders. When you have that great deal, put together a marketing proposal with pictures, quotes from contractors and comps to support your ARV.
Follow these steps and you’ll be well on your way to flipping your first house!