3 Ways to Fund Your Very First Flip

I’m a big believer in using cash to buy properties.

No matter how long it takes you to earn that money and save it, I believe that you should only use your own cash. Now, with that being said, I still want to offer you a few other solutions.

3 Ways to Fund Your Very First Flip

1. Family & Friends

So the first way that you can get money for your first flip is family and friends. Just go to mom, dad, brother, sister, uncle, cousin, friends, or anyone in your close circle of influence. These folks are the most likely to trust you when you’re a beginner and don’t know too much. And the likelihood of them loaning you some money for your first flip is fairly high, especially if you offer them a nice percentage split or profit split.

Now, here’s my word of caution. I borrowed money from a family member back in the day, and I lost it. It took me three years to pay them back, and I can tell you now, it was one of the most embarrassing and awful feelings ever. So know that if you’re borrowing money from a family member and you don’t make money on your first deal, you’re probably going to find yourself in a world of misery for a few years until you pay that money back. Another thing to keep in mind is once you start doing well after borrowing money from a few family members, before you know it, everyone is going to be your best friend.

Related: 5 Serious Questions to Ask Yourself Before Partnering With Family Members

2. Hard Money Lenders

The second way is through hard money lenders. Now, I’ve worked with hard money lenders in the past, but I don’t really have the need to work with them now because we’ve accumulated our own capital, and I prefer being the master of my fate and captain of my soul. I like it when I control the shots and make the moves when I want and how I want.

Anyway, hard money lenders typically require a track record, so it’s hard to go to one and simply ask for money for an awesome deal. Most of them want to know your historical stats with all the other transactions that you’ve done, how many properties you’ve bought, how many you have flipped, and what your margins were on all the deals you’ve done. So keep that in mind. The world does not owe you anything, as much as some of you may think it does. You really have to grind it out and have a proven track record before people will start trusting you. Nowadays, after doing a ton of deals, I go to conferences and there are so many folks that are throwing money at me that it’s absolutely crazy. Still, I’m fortunate enough where I use my cash, as I mentioned.

I want to add another thing about hard money lenders. Look, I always like to say there is nothing wrong with any piece of real estate as long as the price is right. So even if you don’t have a proven track record, but you can find the right deal, negotiate hard, and make sure you can buy it dirt cheap, you may get a hard money lender that will roll the dice on you. I’m a big believer that people buy into people. So if someone likes you, they might give you a chance. It comes down to how you present yourself and how you present that particular transaction. The first impression is every impression, so you really want to give yourself the best possible chance to secure the funds from that hard money lender.

3. Your Own Capital

Last but not least, consider using your own capital. I’ve said it before and I’ll say it again: I don’t care if you have to work day and night, eat ramen noodles, sleep on your friend’s couch, not pay rent, and catch the bus. Save every penny. Do that for two years. I did it. I worked  as a laborer for four years, saved $50,000, and got my start. Here I am today, doing hundreds of deals every single year. So I’m a big believer in working hard, being frugal, saving your own cash, and using your own cash to buy your first property. 

Keep in mind, if you call mommy or daddy and they give you $50-100K, it’s not money that you’ve worked for. If you call mister hard money lender, and you sell them on this deal and they give you the cash, it’s still not money you’ve worked for. Now, if you’re using your own money and you’ve worked for two years to save it, I can guarantee you’re going to be more cautious and diligent because it’s your capital.  

So those are my zero point zero two Australian cents for you. I hope you enjoyed it. I’d love to hear any of your strategies.

Do you agree or disagree?

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.