Flipping Houses

7 Ways to Flip Houses With No Money

Expertise: Flipping Houses, Personal Development, Real Estate Investing Basics, Mortgages & Creative Financing
105 Articles Written
Home Improvement / ladder, paint can and paint roller

Newbie real estate investors often ask how to flip houses with no money. And to them, it might feel like a stupid question: There's no way you can get started flipping houses without at least a little money of your own… right?

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True—to a degree. Investing in real estate is easier with money. But you can indeed flip houses with no money. It’s not even as hard as you might think—even if you’re a new investor. You just need a little bit of hutzpah, the courage to escape your comfort zone, and an understanding of how to start.

How to Flip Houses With No Money Down

Flipping houses without funding projects yourself involves using other people's money (also called "OPM") to fully finance your deals. A lender extends a loan to you to purchase and rehab the property, and you repay them the initial loan amount plus interest.

However, traditional banks and lenders rarely extend a loan covering both the property and rehab. So where do you find OPM for flipping homes?

hard money-loan

1. Real Estate Investor Partners

One of the simplest ways to start investing with no money is to find a partner with money. Think about close friends, business associates, co-workers, relatives, business owners, or even another real estate investor or rental property owner.

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 network with a successful business
  • Your doctor or your dentist
  • Your attorney
  • Anyone who invests in the stock market

Ideally, you ask the partner for the money to finance the deal and you to do all the legwork. In this simple arrangement, the two of you will split the profits 50-50. Your partner reaps the financial rewards of the deal by chipping in the money but not the time.

When you first enter the house flipping business, it may be tempting to create a formal partnership right away. We recommend holding off for now. Many real estate investment partnerships succeed wildly, but just as many go down in flames. As an amateur home flipper or new investor, remain independent until you have a business plan and the flipping know-how needed to attract a solid partner.

Partnering with House Flipping Investors

Real estate investors of any sort can make great partners, but investors already flipping homes will likely be even better. A veteran home flipper brings both money and experience to the table.

To attract an experienced investor, figure out first what value you add to the deal. Maybe you have the deal-finding know-how or a long list of contacts. Utilize all your skills and exhaust all your options.

2. Hard Money Lenders

Another great source of funding for a rehab deal is a hard money lender. Hard money lenders lend at a very high interest rate—and usually charge points on top of that. But on the plus side, they tend to care less about whether you have good credit and instead focus on the property's potential—specifically, the after-repair value (ARV).

being-held-accountable

This source of OPM can be especially useful if the property can be rehabbed and sold quickly—requiring only a short-term loan. Like any other kind of loan, the shorter you hold the loan, the less you pay in interest. The longer you hold the property, the more you pay.

Hard money interest typically ranges between 14 and 20 percent—often with four to six points on top of that—so pay off these loans quickly. While hard money lenders can be a great starting place, there are certainly better sources of funding with better rates.

For example, if you borrow $100,000 from a hard money lender at 16 percent and it takes six months from start to finish for repayment, your interest charges would be $8,000. And if you are required to pay points on top of that, it'll be an even higher price—four points equals an additional $4,000, for a grand total of $12,000 in interest charges!

If you hold the flipped property only half that time, your interest charges would be $6K as opposed to $12K. This is why hard money is solely preferable for properties you know you can flip quickly.

3. Private Money Lenders

Private money lenders are perhaps the best source of funding for no-money deals. They're just regular people, like family members, friends, and acquaintances, who want to invest.

Sometimes, these individuals aren't actively seeking investment opportunities—they just have money sitting around that they may be open to investing if you ask. Private money lenders might have money in banks, IRAs, 401(k)s, mutual funds, or even an abundance of home equity in their home.

Because you can typically negotiate better interest rates, private money lenders are preferable to hard money lenders. With private money lenders, you can control terms and interest rates more often because you set the rules and rates… not the lender.

Offer private money lenders a high enough interest rate to entice them to invest. The rate must be lucrative enough to make it worthwhile and fair enough for you to make a profit—even in the worst-case scenario.

Consider finding out the returns from their other investments, then beat that number. When the stock market performs erratically, lending to a flipper with a guaranteed rate of return is attractive.

4. Wholesaling to Other Flippers

Wholesaling allows investors to make money from real estate without ever taking ownership. Sounds great for flipping houses, right?

online-partner

Real estate investors looking to wholesale properties must find properties worth flipping and get them under contract. You negotiate the terms with the seller, such as closing costs and purchase price. Next, you find a house flipping investor to actually purchase the property and complete the rehab.

Wholesalers make money based on the spread they negotiate between the deal and the amount the buyer is willing to pay. Alternatively, wholesalers can make money based on a fixed price of the final sale—i.e., when the flipper sells to the end buyer. This could range from 5 to 10 percent. You don't take ownership of the property or do any rehab yourself, making wholesaling an easy way to start flipping homes without any money.

Wholesale successfully by building up a group of investors or contacts interested in flipping houses. Then, your job is done after negotiating a deal with the seller. The investor handles the closing and rehab.

5. Crowdfunding Your Flip

Crowdfunding is when a group of individuals collectively finance a loan. These lenders—aka investors—each contribute a small amount of the needed funds. In return, they earn interest on top of repayment.

This method can be time-consuming when it comes to raising money. However, some specialty crowdfunding real estate websites may pre-fund a deal.

One downside to crowdfunding: you have a limited ability to negotiate. However, in some cases, you can avoid a down payment.

6. Seller Financing

When traditional lenders or other creative financing options aren't available, consider seller financing. With this method, the property's seller finances the purchase. You won't need to qualify for financing (i.e., have a good credit score) or exhaust your network of private lenders.

calculate-financials

Investors can search for available properties with optional seller financing or find a fix-and-flip opportunity and reach out to the owner to see if they’re interested in financing. Yes, seller financing might require a down payment but often a smaller one than conventional mortgages or traditional lenders require.

What’s even better, you may be able to avoid paying commissions to real estate agents by dealing directly with the seller.

7. Traditional Banks

Yes, banks do lend money—sometimes even to real estate investors! If you have a good relationship with a banker or your bank, they may offer a workable loan for flipping a house or funding your investment.

Don’t walk into a bank thinking, There’s no way they’ll ever give me a loan. Then you’ve already lost.

Although traditional bank loans are more time-consuming and challenging to acquire, they are an option if you have a solid business plan and you are confident in your ability to turn a nice profit.

Where to Find Investors for House Flipping

Your first task, if you want to flip houses with no money: get off the couch and get out there! Order some business cards and start networking.

Immerse yourself in the local real estate market. Surround yourself with people already doing what you want to be doing, such as fellow real estate investors and flippers.

The people you meet at networking events are usually some of the best possible partners—as well as potential new investors. Absorb as much real estate investment information from these new friends as you can.

Here’s where to find them:

Don’t wait for opportunities to come to you. Instead,  learn the house flipping business, actively acquire the know-how, and go find investors on your own.

Questions? Comments? No money strategies to add to this list? 

Please leave me a comment below! 

Michael LaCava is a full time real estate investor, house flipping...
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    Ray Sample Investor from Chehalis, Washington
    Replied almost 4 years ago
    I loved the article Mike, I especially like how you mentioned to just get out there and make it happen when seeking out private financing. I often am hesitant to approach people I know at church for private funding. We have many professionals and Dr.s in our church and I know that if I approached them that many could be interested in lending money. I need to just bite the bullet and approach them. I’ve used the following canvass in the past on some people I know, but haven’t got the nerve up to ask the big fish yet. Do you have a different suggestion than the following script from “Are you Dumb Enough to Be Rich?” “I know this isn’t for you, but do you know anyone who might like to make 6-8% on their money with 1st lean of real estate, Short term, 6-9 months?”
    Alani Tangitau from Antioch, California
    Replied over 3 years ago
    Just started reading and learning about real estate and i really enjoy it specially the idea of passive income and freedom. ineed help i dont know where to start or hi=ow to look for deals.any suggestions?
    Rick Winton
    Replied over 3 years ago
    Your info is a lot of the same I’ve seen elsewhere and it was very helpful to learn where the best place for funding was. I’m confident with your info that I’m heading down the right road in pursuing my flipping career?
    Rick Winton
    Replied over 3 years ago
    Your info is a lot of the same I’ve seen elsewhere and it was very helpful to learn where the best place for funding was. I’m confident with your info that I’m heading down the right road in pursuing my flipping career?
    Rick Winton
    Replied over 3 years ago
    Your info is a lot of the same I’ve seen elsewhere and it was very helpful to learn where the best place for funding was. I’m confident with your info that I’m heading down the right road in pursuing my flipping career?
    Rick Winton
    Replied over 3 years ago
    Your info is a lot of the same I’ve seen elsewhere and it was very helpful to learn where the best place for funding was. I’m confident with your info that I’m heading down the right road in pursuing my flipping career?
    Rick Winton
    Replied over 3 years ago
    Your info is a lot of the same I’ve seen elsewhere and it was very helpful to learn where the best place for funding was. I’m confident with your info that I’m heading down the right road in pursuing my flipping career?
    Rick
    Replied about 3 years ago
    How much money do I need if I want to do it without an investor?
    Jennifer Leonard
    Replied almost 3 years ago
    Mike, I really liked your article… Thank you for sharing. I would like to know how much money I would need if I want to do it without an investor? My fiance and I have been interested in getting into house flipping for a while now. We don’t have the greatest credit but my fiance is a contractor, not licensed but he can remodel, fix up just about anything. He can do anything when it comes to fixing up a house and he works fairly quickly. He has also taught me a lot along the way including electrical, drywall and such so together we make a great team. He has done a lot of remodeled kitchens, bathrooms , tiled floors , and more. We don’t have a whole lot of money but we do have a lot of time and experience to invest. Where and how can we start? Thanks! ? Jennifer
    Reginaldo Santos
    Replied over 2 years ago
    Thanks for all the information. I just got the click that I was missing. I bought a property and it is the first one. I thought I was luck but I found out I prepared myself really good, I saw a lot of videos and I found a great property. It is a nice piece of land, I’m going to convert a 2 family building to a 6 condominium units. It is already approved by the city. I’m going to make $1.5 million dollars profit. But the problem is that I know more of this properties and I don’t have more money available to get another project at the same time. I”m looking for investor to do more projects at the same time. I’m a contractor with license in MA. Most of my jobs are roofings and sidings, I know people for all other trades, very good people to work with. Seeing your article I got the click and tomorrow morning I’m going to do the right thing to find the investors that I need. Thanks.
    Angela Douglas
    Replied almost 2 years ago
    I Mike, I have been feasting on the great information you have provide here, brand new to investing, I am interested in rental property just registered Bornformore Housing Rental LLC with Legal-zoom, looking for 100% investors to make it happen, Working as a full time RN would like to invest in one property before the year runs out . Thanks for all the information on BP.
    Francine Johnson from Bronx
    Replied almost 2 years ago
    Hey Michael, Great article! I am fairly new to this, and wanted to know what are some of the things you should be putting on your business card?
    Romeo Gjergji Real Estate Investor from Philadelphia, Pennsylvania
    Replied over 1 year ago
    Hi Mike, You mentioned that if you fund the deal through a partner, you split the profit 50-50. Does the 50-50 split only apply if the partner funds the deal and I put the deal together(find the deal, hire contractors, etc.)? This assumes that the partner does no physical work and I do no physical work except for manage the project correct? What percentage split would we do in the case of when the partner funds the deal and does no work, then I manage the project along with doing most of the renovation myself. How would the profit be split if I do everything except for drywall, electrical, and plumbing? In addition, if the partner is funding the deal whose name goe son the property and how do you make sure that when you sell it each party gets their agreed percentage of the profit. Thank you, Romeo
    Richie Newbill from Memphis, TN
    Replied 25 days ago
    Very nice read. Good article man!