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How to Flip a House with $10k

Before and after of a house flip. Text displays How to Flip a House with $10k
Contrary to what you may think, you don’t need a bunch of money to flip a house. Read on and learn how to flip a house with $10k.

It seems like everyone is searching for ways to earn some extra money these days. Some popular side hustles of the past decade include Uber, Forex Trading, Amazon package delivery and freelancing on Fiverr or Upwork. However, if you’re looking for big profits, there’s one tried and true side hustle that consistently outperforms the rest. It’s flipping houses. With profits ranging from $20,000 to over $100,000 per flip, this side hustle is hard to beat!

One of the biggest myths of house flipping is needing a large sum of capital to get started. The truth is, most investors who start flipping houses do not have $100,000 in their bank account. In this article, we will show you exactly how house to flip a house with $10k. Before we get started, you may want to check out my earlier article outlining how you can flip a house with no money. While it is possible to flip a house with no money, it’s definitely easier to flip a house with $10k. Having some “skin in the game” will go a long ways in this business. However, if you are dead broke, there’s still hope for you! Without further ado, here is the blueprint on how to flip a house with $10k.

Finding a Deal

Let’s start out with the basics. To be successful flipping houses, you must find a deal first. There are several ways buy a fixer upper house. You can search for deals on the MLS (or hire an agent to find them for you), buy an off-market deal from a local wholesaler, or you can find a deal by doing your own marketing. It’s important to define your goals before you start hunting for a deal. Do you plan to flip 1-2 houses per year as a side gig? Or….are you trying to build a house flipping business that will ultimately replace your W-2 job? If you are only doing a few flips a year, stick with the MLS and wholesalers. However, if you want to go all in, you will eventually want to do your own marketing to find the biggest discounts on houses to flip.

Let’s say you are all-in on building a house flipping empire. I have a lot of excellent content about marketing for off market deals. I suggest starting here and building a website first. Then, you can set aside 2k of your 10k and use that for direct mail marketing. Whether you want to flip 1 house this year or quit your job asap and complete 10 flips, we will still tell you how to flip a house with $10k.

While direct marketing is a great way to find deeply discounted properties, it takes longer. I suggest finding an investor-friendly real estate agent or wholesaler that can help you find a distressed property. Identify a few houses that may be a good fit and bring your contractor to the showing. This way, you can get an accurate quote for the repairs needed which will help you determine your offer price. If you don’t have a contractor lined up (or can’t find one that will tag along), read my post and watch the video below on “Estimating Repair Costs”. Very good info here on estimating repair cost.

If you plan to flip a house with 10k, it’s important you understand how to calculate repair costs.

After Repair Value “ARV”

Once you have determined the repair costs, the next step is to figure out what your after repair value “ARV” is. If you are using a realtor, you can ask them to complete a comparative market analysis (CMA) which will give you an estimated valuation of what your property could sell for after the necessary repairs are made.

My preferred method of calculating ARV is using Zillow. Zillow works well because it shows most of the recent sales activity and you can use the map to zero in on any specific area to find solid ARV comps. First, change the property status in Zillow from “for sale” to “sold”. Look for at least 3 sold properties within the past 12 months, preferably within a half mile radius of the subject property. Make sure the properties you select have the same bedroom and bathroom count and similar square footage. Look for other similar characteristics such as foundation type: slab/basement, build style, garage, yard, etc. Your comps should be either recently flipped or in very good retail condition. Take the average of those 3 comps to determine the ARV of your house. This will set the benchmark on what the max ARV is for the neighborhood.

This article goes into lots of detail on how I arrive at my ARV. Check out the video below for more great info on how to calculate ARV accurately.

Making the Offer

You are one step close to learning how to flip a house with $10k, now we just need to make the offer and hope it’s accepted! Once you have your repair cost budget and ARV, it’s very easy to come up with the offer. Depending on the market, most house flippers aim to make at least $30,000 to $50,000 per flip. There are certainly deals out there with more meat on the bone and profits that may exceed $100,000! However, don’t expect that on every deal. If you aim for a modest profit, you’ll have a better chance of getting your offer accepted with the seller.

Offer Formula

ARV x .7 – Repair cost = Offer

You may have seen this formula before. We use the .7 multiplier to factor in acquisition cost, holding cost and desired profit.

Here is my general rule of thumb. If the house is in good condition and needs less than $20,000 of repairs, use a higher multiplier such as .75 or .8 when calculating your offer. It’s entirely up to you, but usually the better condition the house is in, the harder it is to get a really good deal.

If the house needs a lot more work, use .7 as a multiplier to build in more profit. Larger projects should net you more profit since they take longer. Make sense? Good.

If you get your offer and cross your fingers!

Funding the Deal: How to Flip a House with $10k

There are many ways you can acquire real estate without paying the entire amount in cash (and flip a house with $10k). Let’s go over them each in detail and discuss the pros and cons for each method.

Conventional/FHA Financing

Conventional financing is the most popular method of buying a house and usually works best for buyers who plan to occupy the home. It can be a lengthly process (30 days or more) and does require an appraisal. If you qualify for an FHA loan, you can put down as little as 3.5%. Most conventional loan products will require 5-20% down. This method is not the best for buying a house that needs lots of repairs because lenders may require those repairs to be made before the house is occupied.

203k Loan

A 203k loan is a specialized loan designed to help a buyer purchase a house in need of significant repairs or renovations. This loan program allows borrowers to combine the cost of purchasing the home and the renovation expenses into a single loan. Buyers can choose between two types of 203k loans: the standard 203k, which is used for major structural repairs and renovations, and the limited 203k, which is for less extensive improvements. This loan is also backed by FHA, and the minimum down payment requirement is 3.5%. This is an attractive choice for buyers seeking to invest in fixer-upper homes they want to live in, however, you cannot use this product if you intend to flip the house and re-sell it.

Man standing on roof replacing shingles.
203k loans are great for homeowners that want to buy a fixer upper house and renovate it.

These next four funding options will be your best bet for “how to flip a house with $10k”

Land Contract or Seller Financing

Here in Michigan, land contracts are a popular method of acquiring real estate through seller financing. This is an attractive option because you don’t have to go to a bank for a loan. Instead, the seller will finance the deal (and act as the bank) and many times you put down less money, even 10k! Here is an example:

  • Purchase Price of Property: $100,000
  • Down Payment: $10,000
  • Amount Financed: $90,000
  • Interest Rate: 10%
  • Monthly Payments to Seller: $789.81 (30-year amortization)

Typically, you would agree to pay back the loan balance (balloon payment) within 5-10 years. However, if you are flipping the property, you will want to make sure you don’t have a pre-payment penalty. That way, you can pay off the loan in it’s entirety at any time. The seller may ask for a higher interest payment if he knows you are paying the loan off early.

Hard Money Loan

Hard money and private money loans are going to be your best bet to flip a house with $10k. These are short term loans, usually 3-12 months, with higher interest rates. For experienced house flippers, some lenders will provide funding on 100% of the purchase price plus the rehab!

The biggest difference between hard money and private money loans is hard money lenders are institutions and usually have higher qualification standards. They may require a credit check, personal financial statement, proof of income and flip history. After getting approved, some hard money lenders will need to see the house and even do a soft appraisal. This additional step may complicate the purchase, especially if you are purchasing an off-market deal or working with a wholesaler.

Additionally, hard money lenders prefer to work with someone that has experience. In other words, if this is your first rodeo, it might be challenging to find a hard money lender if you only have 10k to work with. With no experience, it’s common to see HML’s lend at 75-80% LTV (loan to value). If the acquisition cost of your project is 100k, you would only qualify for funding at 75-80k and would need to come up with the rest out of pocket. Unless the acquisitions cost of your project is 40k or less, it might be difficult to use a hard money lender to flip a house with $10k.

Private Money Loan

A private money loan might be your best bet for “how to flip a house with $10k”. Especially if you have no house flipping experience. Like hard money lenders, private money lenders offer short term loans with high interest rates and some upfront origination fees. Since private money lenders are not part of a bank or lending firm, there is usually a lot less red tape when applying for a loan. A private money lender can be anyone with money. In fact, you might find a private money lender within your own circle (parent, uncle, wealthy friend, etc).

Private money lenders come in all shapes and sizes, some have stricter requirements and others might be easier to work with. The biggest benefit of private money lenders is the terms can be negotiable and as long as you have a good deal under contract, many will lend 90-100% LTV and some will even fund a portion of the rehab. The following is an example of how to flip a house with $10k with a private money lender:

  • Acquisition Cost $100,000 + Closing Costs $3,000 = $103,000
  • Loan Origination: 3 points ($3,000)
  • Loan amount @ 100% LTV $100,000
  • Interest Rate 10% with balloon payment due in 6 months

In this example, the private money lender charges you 3 points upfront ($3,000) and 10% interest over 6 months. You pay the closing costs and points at closing ($6,000). You can also defer the points and pay when the loan is due so then you are only $3,000 out of pocket.

With the remaining $7,000, you can fund a portion of the rehab. Although harder to find, there are some lenders who will fund some or all of the rehab. A lender is more likely to lend on the rehab if you have some skin in the game. If you have a great deal, $10k might be enough to get 100% funding on the purchase and rehab. Be prepared to make a good pitch to your lender and have plenty of comps to back up your ARV!

Partnering with Someone Who Has Money

Man holding multiple one hundred dollar bills.
Do you have a rich uncle? Partnering with someone and offering a 50-50 profit share can get you in the flipping game.

Similar to using a private money lender to fund a deal, you can use someone else’s money to fund the purchase + rehab and offer to split profits with them. If you offer someone a 50-50 split of profits, they may be more likely to partner with you on the project. Your partner would provide all of the capital, and you would do the rest (acquisitions, hire contractors, manage the project, list the house for sale, etc). Again, if you have at least some money ($10k) to contribute to the deal, this will improve your chances of finding a funding partner.

The 50-50 profit share isn’t sustainable long term if you are trying to build a flipping business. However, this is a great way to get valuable experience and build up capital for future projects.

The Bottom Line

Now that we have showed you how to flip a house with $10k, get out there and take action! Here are some actionable things you can start doing today.

  • Look up fixer upper properties on Zillow and start running numbers
  • Make connections with local agents who have experience finding fixer upper properties
  • Make connections with local wholesalers selling off-market deals
  • Make connections with hard money / private money lenders
  • Interview contractors who would make great partners (some contractors make great 50-50 partners)
  • Investor groups on Facebook is a great place to start making these connections and introductions

If you don’t have $10k and want to build up some more capital before getting started, we highly suggest you wholesale a few deals to build up some more capital. Wholesaling is an excellent way to learn acquisitions, get comfortable running numbers and build connections with other house flippers/contractors.

The Step-By-Step Guide to Getting Your First Wholesale Deal in 30 Days or Less (Without Spending Money!)

The Step-by-Step Guide to Getting Your First Wholesale Deal in 30 Days or Less

About the author: Ryan hovers around a 10-20 handicap any given day. But the talent is there, no question.