Flipping Houses

3 Ways to Fund Your Very First Flip

Expertise: Real Estate Investing Basics, Personal Development, Landlording & Rental Properties, Real Estate News & Commentary, Business Management, Flipping Houses, Real Estate Deal Analysis & Advice, Personal Finance, Real Estate Marketing
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I’m a big believer in using cash to buy properties.

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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?

Please comment below.

Engelo Rumora, a.k.a.”the Real Estate Dingo,” quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He runs runs Ohio Cashflow, a turnkey real estate investment company in the country (Inc 5000 2017 & 2018) and is currently in the process of launching a real estate brokerage called List’n Sell Realty. He is also known for giving houses away to people in need and his crazy videos on YouTube. His mission in life is to be remembered as someone that gave it his all and gave it all away.

    Rob Jafek from Mesa, Arizona
    Replied 7 months ago
    Thanks for taking the time to write this article. Being involved in hard money, I’m always curious to see why more people don’t involve a lender. I’ve read that about a quarter of real estate investors pay all cash, and about half use some financing. A few also use things like a self-directed IRA, or a 1031, which someone might consider too, although I do think you hit the ‘big’ ones. As far as a ‘first-timer’s, we work with a lot of them, so a lack of experience isn’t a deal breaker. Of course, you are correct that we will be asking more questions of someone starting out. Answers we love to hear are things like the fact that they’ve really done their homework and thought this through. Perhaps they’ve been involved with someone else’s project(s), attended some of the National Real Estate Investors Association events, especially a local chapter (we’ve been very impressed with ICOR, but have seen some other great ones too -nationalreia.org/find-a-reia/), perhaps taken classes from one of the many organizations, have a very detailed plan, or can share with us specifics of their project plans. You are 100% correct when you say that people mind their own capital much more carefully than they watch someone else’s, so we still look for money down. Thanks again for the great article.
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    Thanks for your detailed comment Rob, Keep up the great work
    Darah Smallwood
    Replied 7 months ago
    I am just starting out in real estate investing and have spent hours listening to lesson after lesson about it and still have more to go. I am one of those people who want this REALLY BAD and I have also just started on getting my real estate license just so I will know more. I work full time and clean houses on the weekends just to make ends meet and I am tired of it! This is what I want, it interests me more than anything ever has. I have spent everything I had and some on this financial education and I am all in! However, being able to get someone to lend me the money to get my first few deals is the problem (although I have not asked yet, I know it will not be an easy path.) However, I am willing to tow the line to get there. I would love to know what I will need so maybe I could be a head start on it. My credit is maxed out but I have been really prompt with all my payments. My credit score is “fair” because it is maxed out and that is the only reason. I plan on doing my due diligence on all my properties, I’m just nervous, nobody likes being told no, and after I have spent everything I had on this education- a NO would be mind-numbing! Any words of wisdom would be very much appreciated! Thank you for your time~
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    Thanks for your comment Darah, Be patient, keep working hard and stay frugal. Save as much as you can and use your own cash on the first few deals. Nothing comes easy in life and neither does success in real estate. Keep the dream alive
    John Miller from Flat Rock, Michigan
    Replied 7 months ago
    > Bought & sold 4 homes during our 59 year marriage. Always loved doing projects on each one! Did 1st remod as a teen, after my dad passed away. Enabling mom & I to live upstairs so we could rent out the lower level. > Now that dear wife recently passed? Can’t think of anything more therapeutic than finding, fixing and flipping homes! Something I’ve always wanted to do… Especially good for me now at 78, to keep my mind and body active! > Joined Bigger Pockets some years ago, (a great resource!) and now back to learn house flipping. Can’t wait to help folks get into freshly remodeled homes at low cost; while offsetting my limited SS income at the same time!
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    Thanks for your comment John, I’m sorry for your loss. Glad to hear that you find solace in house flipping 🙂 I wish you much success with your endeavors
    Jason Duane Hayes from Tucson, Arizona
    Replied 7 months ago
    Bought a primary residence with cash ($84,500) small home in my home town of Tucson, AZ a few months ago. Will be moving there in a month after I heal from a surgery and after having the inside painted. I could painfully buy a fix and flip with cash (50-75K range), but is there a contract that exists which would allow me to use my home as a type of collateral to the potential seller of a vacant home? Instead of a traditional home equity loan? So I find my vacant fix and flip on say REWW.com, then I contact the owner. We agree that they will sell it to me for 50K. Is there an agreement (contract) that would allow me to go ahead and pay for the renovation without forking over the 50K until I get the house sold? Thanks! Jason
    Engelo Rumora Specialist from Toledo, OH
    Replied 5 months ago
    Hi Jason, Thanks for your comment. That’s the beauty and craft of deal making. I’m sure it’s possible as long as you can “talk well” to the seller. Have great legals on board also to structure the agreement. It will be worth the $2,000 or so grand to write it up. Much success
    William Roberts from cinnaminson nj, New Jersey
    Replied 5 months ago
    I agree. I have a private lender wanting to give me money. He is a friend. Once i saw his bank statement,and his name and i guess his money he saved, I felt like I could not chance screwing him up and his money. You can have all the confidence in the world in yourself but, but, if it goes wrong, Then what? Twenty years ago it was a different story. Theres a lot of people doing this now. and they are screwing it up . Watch out be careful. Just a recent observation by me trying to get back into the swing of things. Go for it if YOU have the money. IT will be much more gratifying. A lot of people want your money.
    Engelo Rumora Specialist from Toledo, OH
    Replied 5 months ago
    Thanks for your comment William. Only borrow when you can cover if you loose. Also, only borrow when you become so good that you almost can’t loose lol I wish you much success