To many, it seems like there’s no way you can get started flipping houses without at least a little money of your own.
True, whether it’s buy and hold real estate investing, flipping houses or any other kind of real estate investing, it is a lot easier to do it with money than without…no doubt.
However, flipping houses with no money is not only possible to do, but it’s not as hard as you might think. In fact, there’s no “hidden secret” to investing in real estate with no money of your own. All it takes is a little bit of hutzpah, some courage to get out of your comfort zone and a simple understanding of how to start and where to look.
How to Flip Houses With No Money Down: The True Story
If you’re not familiar with how it works, flipping houses with no money involves using other people’s money (called “OPM”) to fully finance your deals. The investor lends you money to purchase and fund the rehab of the property and you pay them interest on the money they lend.
So where do you find “OPM”?
There’s lots of places to look when you want to invest with no money down, but here’s a starter list to get you going:
1. Partners
One of the simplest ways to get started investing with no money is to get a partner who has money to invest. This partner could be a close friend, a business associate, a co-worker, a relative, a business owner or even another real estate investor.
If you can’t think of anyone off the top of your head, then start thinking about the people you see on a regular basis. This may include:
- Anyone in your neighborhood who has a successful business
- Your doctor or your dentist
- Your attorney
- Anyone who invests in the stock market
The simplest arrangement in a partnership is for you to ask the partner for the money to finance the deal and for you to do all the legwork to make it happen. In this simple arrangement, you’ll do everything related to the flip but the two of you will split the profits 50-50.
In essence, your partner reaps the financial rewards of the deal by chipping in the money, but not the time.
When you first get into flipping houses it may be tempting to form a formalized partnership with someone to start. Although this may seem like a good idea, you should probably hold off for now.
What you’ll soon find that although there are a lot of great real estate investment partnerships that have succeeded wildly, there are just as many bad ones that end up in pure misery. When you’re first starting out, it’s best to stay independent and do your partnerships one deal at a time.
2. Hard Money Lenders
Another great source of funding for a deal is the hard money lender. Hard money lenders are individuals who lend to others at a very high interest rate and usually charge points on top of that.
This source of OPM can be especially useful if the house you are flipping can be completed in a very short period of time. Like any other kind of loan, the shorter you hold the loan; the less you’ll pay in interest. The longer you hold the property, the more you pay in interest.
And when interest is typically between 14 and 20 % and often with 4 to 6 points on top of that, hard money loans are especially important to pay off quickly. Although hard money lenders are a great place to start in your real estate career, there are better sources of funding with better rates.
For example, if you borrow $100,000 from a hard money lender at 16% and it takes you 6 months from start to finish to pay it back, your interest charges would be $8,000. And if you had to pay points at say 4 points, that’s a further $4,000, adding up to grand total in $12,000 in interest charges!
If you held the flipped the property in half that time, your interest charges would be $6,000, which is why hard money is far more preferable for properties you know you can flip quickly.
3. Private Money Lenders
Perhaps the best source of funding for no money deals are private money lenders. Private money lenders are just regular people with disposable money looking to invest. In many cases, they may not be actively looking to invest, they just have it sitting around and may be open to investing with you…but only if you ask them.
Private money lenders might have money in the bank, IRAs, 401Ks, mutual funds or even an abundance of equity in their home. This money can then be leveraged for real estate investing.
Because you can typically negotiate better interest rates in my experience, private money lenders are preferable to hard money lenders. With private money lenders, you get a much higher level of control over terms and interest rates; you set the rules and rates…not the lender.
The real key to success with private money lenders is in offering them a high enough interest rate to entice them to invest with you in the first place. The rate has to be lucrative enough for them to be interested, but at the same time fair enough for you to lock in profits – even in a worst case scenario. Even better, if you can find out what they are getting for a return on some of their other investments, this is a great way to get them to invest with you. And with stock market on a roller coaster like it has been in the past few years, I’ve found this to be a very effective strategy.
A list of potential private money lenders could be the same list we used above for seeking partners.
Where to Find Investors to Finance Your House Flips
The first thing is you’ll need to do is get off the couch and get out there!
Order some business cards from Vista Print and start networking. Surround yourself with people who are actually doing what you want to be doing. Immerse yourself in the local real estate market. If you are going to places where people like this hang out, then you’re in the right place.
The people you meet at networking events are usually the best places to find potential partners as well as funding for your no money house flips. And as long as you stay open to it, you’ll absorb tons of information from these people; more you could ever learn by doing a Google search.
Here are a few suggestions to get you started networking:
- Your local REIA (Real Estate Investors Association); chances are you’ll find a meeting being held right in your local area
- Real estate investor meetings at Meetup.com
- Your local Chamber of Commerce
- Your local Business Networking International chapter
- Your local community organizations like Little League Baseball and other town organizations
- Volunteer at a local charity
- Form your own local real estate investors association
If you want to flip houses with no money, don’t wait for them to come to you. Instead go find your investors on your own. So go out there and make it happen.
Thanks for reading! If you made it this far, please leave me a comment below! I’d love to hear about your no money down real estate investing strategies or questions about anything at all relating to real estate!
Photo: Darcy J
{ 35 comments… read them below or add one }
The One That Got Away: In the 1980′s, I had talked an individual into paying all closing costs and an additional $5000 to buy his house as he was being transferred to Germany. Got cold feet and backed out, but should have pulled the trigger on that one.
Dale
That one sound tought. I have far too many myself to tell…that one hurts though. What kind of deals have you done since then? Thanks for the comment! Mike.
Got into apartments for about 10 years then on to MHPs.
Nice. Single family starter flips here, but a sometime partner of mine does MHPs exclusively and is does extremely well there. So many ways to make money in this biz.
Michael how are you bro..well am new on this thank you fpr all the information real good stuff.Like i said i really have a big question is that i have always want it to be in the real estate business but due to a felonie am not sure if i can get a state licence,my question is how can i start learning and investing on property i have save about 20,000 dlls and i wanna get on the flipping business am a handy man myself know about almost everything from installing tile to electricity,drywall etc…i just dont know anybody in this business and how to go about it can you guide me?
Hello Estaban,
I would recommend you get the Ultimate Beginners Guide offered here at BP. You can also get my ebook which is good basic reading to get started. I would also recommend The book on flipping houses from a BP contributor Jay Scott right here on this site. At the end of this article I gave you ways to get out there to network and make contacts. I suggest you start right away especially at the local REIA meetings.
Welcome Mike — Lookin’ forward to more posts.
Thanks for the welcome Jeff. glad to be a part of the Bigger Pockets team here! Mike
Thanks for the welcome Jeff! Glad to be a part of the Bigger Pockets team. Mike
Hey Mike! Great article. I love the partner method. I’d like to add- one of the best benefits of using a partner is that they can often refinance the property into a fixed mortgage if the market changes or the house won’t sell. I use partners who have good credit/job/income so that I have a rock-solid Plan B no matter what happens. I’d gladly trade 50% of my profit for the peace of mind that offers.
Also,its totally possible to combine those options. For example, right now I’m about to flip a house using a partner who is going to fund the repairs but a private lender who will be funding the acquisition costs. I’ll be overseeing the project. In the end, we all win. That is the ideal business relationship.
Thanks for the great article Mike! I look forward to some good stuff from you!
Hey Brandon, great insights and ideas there. I agree, I’d gladly exchange the peace of mind for half the profits. The market here is so heated, its not something Ive had to do as of yet, but what you mention is an excellent exit strategy.
Sounds like the deal you have going right now is really interesting, you can get so creative peicing it all together which makes the business so much fun. Nice work, hope you crush it there!
Thanks for the kind words on my first post…just trying to keep up with your quality stuff!
It just seems like 50% of the profits seems a bit high these days for a standard flip deal especially with a market inundated with “investors” and “flippers”.
in your marketplace, are investors willing to give up 50% of the profits for putting up all the capital? Or do you have to offer them a preferred return?
HI Jason,
You make a great point. Depending on your local market and what your competition is paying will some what determine where you should be. I say some what because your visibility and credibility go a long way to determine if people will do business/invest with you.
There trust in you is everything. If the other “guy” is offering a higher rate or percentage of deal but he is not that well trusted then it won’t matter what he pays! I happen to do mostly note holder’s vs equity partners because I have the ability to do that. In the beginning 50% split is a great way to get started or less if your market doesn’t support that. The way I look at it, if you have none of your own money to invest and you hooked up with an investor with a lot of money & you were only getting 30% of many deals what is wrong with that.
The bottom line is you have to start some where and make adjustments as you go. It is like what Brandon Turner says in his post there is no cookie cutter perfect system to follow. You must be willing to evolve and constantly improve. I know that is what I keep doing.
Hope to have helped clarify that for you.
Great article, Mike! And thanks for the free Ebook at http://houseflippingschool.com/
Thanks Dan! I am real excited to get this opportunity to guest blog on bigger pockets, this is an awesome site for like minded real estate investors. Hope your doing well. I did talk to my marketing team Friday and shared your comments and suggestions. Thanks again. Mike
This was very informative being that I need a private lender for a flip as we speak.
Good Luck K Smith – I hope you get that lender. There are plenty of them out there so go get them!!!
Welcome Mike!
Although your suggestions are valid my experience has taught me that you have a couple of caveats that you did not cover in this post and of course its important to cover both the good and the bad.
First your headline is deceiving because in reality it’s practically impossible to flip houses with no money. The money has to come from somewhere.
Second although 1 and 3 are realistic funding sources I don’t know any people with money that will give $20, 50, 100k + to someone that has no experience and/or has never done a flip. And if you use a hard money lender you will absolutely have to use some of your own money.
BTW, to call a hard money lender a “great source of funding” is not accurate at all, if it is please give me the contact information for your hard money lender because all of the ones in my town are not “great sources of funding”.
Your forgot family and friends as source or private money lending. It might actually be easier to get a loan from “Uncle Joe” than from a total stranger.
Hi Luis, Thanks & I look forward to contributing to this great forum.
My intentions are never to deceive. Very quickly in the article we mention OPM (other peoples money). That is why the headline is phrased as a question. It is what is asked most often & I wanted to answer a very popular question from new investors.
To your second comment you have to go find those people. They are absolutely out there.
True it is harder in the beginning but you must educate yourself relentlessly, get a mentor and just be up front and honest with who you are trying to partner or raise money with.
We have to start somewhere & if a deal is good you will find someone!!!
True about the hard money lenders that you “may” have to fund some of your own money. I say may because it is not always the case. The nice thing about Real Estate you can be creative. If you secure a hard money lender that is a start & how about finding a partner to lend you or partner with you for the required money by the HML.
They are all great sources because the bottom line if you get a deal done and make money with any of the lenders we suggest then you are on your way! There are some good hard money lenders out there. Go to some of the local REIA clubs to meet them.
We mentioned relatives in Partners but thanks for elaborating. Family and friends could be a great place to start because your credibility may be best with them in the beginning.
One of the things I teach in my coaching is all about Mind set & I have some information about it in my ebook. Its free so check it out. I hope I helped to answer some of your concerns. Best of Luck.
This is not a true “no money down” way of flipping houses.
Why put your credit at risk like that?
You don’t have to borrow money from anyone to start flipping houses.
Just take control of the home with a contract and assign it to an investor OR a lease option buyer if there’s not enough equity in it.
Zayne – It is most certainly, read on in the article right in the beginning the no money means OPM. I am very clear about that.
If you are serious & have a solid financial plan for your projections the idea is to minimize risk as much as possible. Life is a risk and it is how you manage it to minimize the risk.
The flipping your referring to is flipping contracts not houses which is clear in the article as well Even tying up contracts you still need to put money down on offers & more once it is accepted on REO’s. Of course there are situations on privately owned properties with equity where you can get it under contract with little or no money but it is more difficult especially if you have competition. Most are upside down these days so there are not as many of those around like they use to be.
Thanks for your comments but it looks like they are different investment strategies.
Please share yours & let me know where you are flipping contracts as I am an active investor and may be interested in what you have to assign.
this is why Bigger Pockets is a great place!!!
Mike I know of three homes right now that could be flipped for 40 to 60 I just need funding??
The Market hear is not that good. as far as sales goes.
Not sure on the comment Tommy. You say you can flip right now 3 houses for 40-60K but then say the market is not good for sales? You may be thinking something else but it appears to be written differently.
Also that is a big spread for the same property sales of 50%. Carefully get a qualified CMA & find an aggressive sell price and don’t count on a range like that.
Funding is available in many, many ways to get deals done.
Partnership, hard money, private money, contractor’s…..to name a few.
You must present an opportunity for anyone investing in YOU! Never ask for money.
Hi Mike, thank you for share your knowledge, it is helpful. I live in Portland, OR and the market is improving. I just got my real estate liecense and my dream is to get into fixer upper business. I am passionate about starting the business and I would love to talk to you about INVESTING.
Hi Mel
Congrats on getting your license
Sure we can talk
Send me an email and I will schedule a time
Happy New Year
Hi Mike, I hope you had great new year. If you can email me at meleshiw@netscape.net we can set time to talk.
Thank you so much for writting this article. I am very interested in house flipping and I feel like this article helped with what resources I can reach out to. Thanks!!
Your welcome Ashley. BP is a great resource so make sure you check out all the other great content provided for free.
I am finding that using OPM is not that easy. If I have a friend or family member for example with case they are subjected to the SAFE and not a maybe a new JOBs act….Legal red tape, lending laws, that keeps them from lending money.
Hi Mike,
I am such a newbie to all of this. But, I am grateful for the wealth of free information found here. Thanks for a great article. I’ll keep reading them if you keep writing them.
All the best,
Deana
Your welcome Deana. Glad the information is helpful to you.
I appreciate you reading and commenting. Check out all the other articles as well in BP as you will find there is a wealth of information here.
Ty
Hey Mike, I recently attended an Armando Montelongo Real Estate Investment Seminar. It was pretty pricey and left way too many wholes in understanding the process of house flipping. I really need some more help in learning how this really works. The seminar lasted 3 days but the course structure was sloppy and bounced around to way too many topics at once without making sure everything was understood. At the end of the course they were asking for 29k to be part of a house flipping tour in orlando, which at that point was a little ridiculous. If you have any info on where I can be educated on house flipping at an affordable rate, please tell me, lol. Thanks.
Hey Raymond – That is a lot of money to spend for a weekend bus tour. You can get so much information here at BP from me and other bloggers. Check out the forums also. Check out Jay Scott’s new book being promoted here and get the Ultimate Guide here from BP for free. You can also get my free ebook. After you read all these and checked out articles and so on…….here at BP.
You will have started to make progress. You can also try to find a local mentor and take him or her out to lunch & let them know you want to find them deals and you will bring them to them if they help you learn. So many ways to learn for free & so many ways to learn for a small investment into your education. If you were to pay a large sum I would suggest you find a local real estate investment coach that does this full time and will teach every step of what to do and what not to do & maybe even partner with you. I believe you would be much better served in this capacity. Best of luck and keep us posted on your progress.
Thanks for the info mike. I’d love to find myself a mentor so I can really get started. Just wouldn’t even know how to find one. I’m going to definitely google some after this. Where can I find your free ebook? I’m trying to soak up as much information and knowledge as possible. I need to find my first deal so I can continue from there and at least introduce it to investors. I have little to no connections in this field since I’ve been a retail manager for so long. I definitely need to network.
Hey Raymond just go to my website & you can get it there. good luck & don’t’ forget to get those other Items found here on BP as I know they will help you as well.