How to Syndicate House Flips: A Step by Step Guide

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While I write mostly about apartment building investing and syndication, I want to write today about how to structure deals when you’re raising money for house flips.

It’s a lot simpler to structure and easier to raise the money than for larger apartment building deals.

As with all real estate investing, DO NOT sit on the sidelines because you don’t have any of your own money – raise it from others instead. I’m not going to talk about HOW to that in this article, but check out How to Find Investors To Fund Your Real Estate Deals to get a better idea how to start.

How to Analyze a Real Estate Deal

Deal analysis is one of the best ways to learn real estate investing and it comes down to fundamental comfort in estimating expenses, rents, and cash flow. This guide will give you the knowledge you need to begin analyzing properties with confidence.

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How to Structure House Flip Deals with your Investors

If you know how to structure the deal and what the logistics are, you become much more confident and effective at raising as much money as you want for your house flips.

The good news is that structuring deals with investors for house flips is a lot simpler than syndicating apartment building deals. I pay my investors 12% simple interest, they receive a promissory note that is guaranteed by the property, and they receive their principal and interest when the house sells. And best of all, the title company handles all of the paper work.

RelatedHow to Structure Syndicated Investor Deals: What Investors Are Looking For

Because this is easy for people to understand, the perceived risk is low and the returns are great, I found I have no trouble raising money from friends, family and acquaintances with a minimum investment of $25,000.

The trick is that you need to work with a title company that is familiar with handling this type of transaction in the way you want it. Not every title company knows how to do it, but plenty do. You just need to describe it and see if they’ve done this before.

Here’s how the Process works when you Purchase the Property

Let’s say you’re buying a house for $65K and it requires $25K in repairs. Add in the closing and holding costs and maybe a little more for unforseen situations, and you might want to raise $100,000 from investors. If you’re minimum is $25,000 then you’ll need 4 investors.

OK, so by now you’ve found a title company that can handle this and you have verbal commitments from the investors. Now you instruct the title company to create the promissory notes for you. You might have to pay a little extra for this, but once you have one promissory note you can modify it for each investor. You then email it to each of your investors for review.

Make sure you remind the title company that they need to reference all four promissory notes in the Deed of Trust. This effectively collateralizes each note with the property. If the title company doesn’t know how to do this, find another title company.

You instruct each of your investors to send their payment to the title company for deposit into the escrow account for closing. At closing itself, you sign and notarize each of the promissory notes and the deed. The title company records the deed (this protects your investors!) and mails out the original promissory note to each of the investors.

And you then get a check that you can deposit into your bank account that is to be used for repairs and holding costs.

That’s it for the purchase!

What About When I Sell?

When you sell the property, the title company again handles the transaction. They will ask you for a payoff statement, which contains the principal and interest that is to be paid to each of the investors out of the sales proceeds. The title company may have a template for you to use or you create your own.

The payoff statement includes the name and address of the lender, the amount of principal and interest due, and instructions for sending the payment to the lender (check or wire transfer). Usually the title company will require the lender to sign the payoff statement.

Once you have the payoff statement back from each of your investors, you send them to your title company and they will take care of the rest. They will incorporate the payoff amounts on the HUD-1 and send the money to each of your investors.

While you do need to interact with the investors, you’re never touching the cash, and that puts the investors at ease and makes you look more professional.

I hope this article gives you better insight into how to structure deals with your investors so that you can more confidently raise money to fund your next flip.

Related: To Syndicate or Not – This is The Question (What Would You Do?)

Let me know what questions you have!

About Author

Michael Blank

Michael Blank is a leading authority on apartment building investing in the United States. He’s passionate about helping others become financially free in 3-5 years by investing in apartment building deals with a special focus on raising money. Through his investment company, he controls over $30MM in performing multifamily assets all over the United States and has raised over $8MM. In addition to his own investing activities, he’s helped students purchase over 2,000 units valued at over $87MM. He’s the author of the best-selling book Financial Freedom With Real Estate Investing and the host of the popular Apartment Building Investing podcast Apartment Building Investing podcast.


  1. Michael

    How do we do this on a double close scenario. Where i would like to use privatte investor as first close and fannie mae as second. Currently i use hard money for first close. Fannie mae also wants the rehab to be in escrow and released only after the rehab is done. Even bard money guys do that.. Private money would be cheaper due to no origination cost.

    • Michael Blank

      Sure. You give the investors a promissory note, and put their investment in the repair escrows account. The only thing is that the hard money lender would need to allow this, and the investors’ note will have to be subordinate to the hard money lender’s note, but your investors probably won’t have any trouble with this. Of course, the best thing to do is to raise a little money and not do hard money!

      • Thanks Michael!

        I primarily invest in Washington, D.C. where the cost of entry is super high. Raising 400-500k right now is tough as a new investor. I don’t have friends/family with 100k on hand.

  2. When there are multiple partners involved, how does the title company decide who gets to be on which lien position? This may make a big difference since the person in the first position will have superior rights over others if the property goes to foreclosure.

    • Michael Blank

      Coty – all investors/lenders *share* the first position – they are equals. Technically speaking, if the investors were to want to foreclose on you, they would all need to agree on things. This is not normally an issue or objection for friends, family and acquaintances who are not asking questions about when things go terribly wrong. This is only an issue for more sophisticated investors, and I don’t advise that you take their money. For example, hard money lenders are “sophisticated” investors. I’ll write more about this in my next article because the type of investors you take on makes a big difference.

  3. Douglas Dowell on

    Outstanding post!!! I think this is the superior way to fund flips versus hard money…ie cut out the middle man a get better pricing.

    The trick is to be careful with state securities law….it seems to me two or more investors puts you back into syndication land.

    Thanks for the outstanding read on private money!!

  4. How would you work this syndication approach with Sheriff Sales – where you need cash upfront for the deposit and again hard cash when picking up the sheriff’s deed afew weeks later.

    One potential way I can think of is creating an LLC for each property. An an example create an LLC with lets say 3 members (each being the investor) – take the sheriff’s deed in the name of the LLC. Repair, Sell and Close. When sold, the LLC dissolves and payment is remitted to each partner.
    Any others?

  5. This is pretty much what I’m trying to do with my first flip. Good to know what I’m doing has been done before. Only thing I hadn’t thought about was having the title company handle it. Since I only have one investor for the whole amount I thought it would be pretty easy to handle. Would you have a sample template for a promissory note and payoff statement that I could follow? The other thing my investor asked is that he be listed on the insurance policy as an additional insured. Is that something that would normally be done? Thanks for the great information!

  6. Great post, Michael! I wasn’t sure how this “reference all four promissory notes in the Deed of Trust” actually works. Are they liens or listed as co-owners with certain interest?

  7. Daniel Ryu

    Hi Michael!
    I hope all is well. I think this is a fantastic article and I’ve reread it at least a dozen times.
    One question. You mentioned:
    “You give the investors a promissory note, and put their investment in the repair escrows account.”

    How do you set up a repairs escrow account? Is that something the title company sets up?
    If so, does the rehabber directly have access to this account or do the investors get to tell the title company when to issue payments?


    • Michael Blank

      Hi Daniel – yes, the title company manages the escrow account but this may vary if you’re dealing with a hard money lender, who may only release funds for the repair in stages. If there is no hard money lender, then the title company will disburse all funds to you into your bank account that you can use to manage the project. Hope that helps!

  8. Daniel Ryu

    Awesome, Michael. Thanks again.
    So on the investor side, I could stipulate a release of funds schedule (A forward note) and the title company would adhere to that? I guess basically, could I tell the title company how and when to release funds and how much at a certain time, and they would follow?

    Always appreciate the insights! Thanks again.

    • Michael Blank

      No, you’re making it too complicated. The investors wire their funds into the title company’s escrow account, and the title company disburses the funds, including the funds due to you for renovations. In other words, all the funds are released at once, at closing, when you purchase. Make sense?

  9. Daniel Ryu

    Alright.. that makes sense. The protection for the investor is the collateralization, so that’s the focus of this transaction – not getting the title company to manage the investor.

    I understand now! Thanks so much for clarifying ^^

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