Flipping first home with borrowed/no money of my own. Possible?

Question

I am looking into flipping at least one home by the end of the year. The only drawback is I have no money of my own yet. Being a student in a way takes part of my time/money but, I can still find the time to do it with the help that I know I can get. The main question is how can I get money to start a new flip and of course get some profit out of it. Borrow money from a lender? Investor money? Ask a family member for money?

I would appreciate any type of help/suggestion, thanks!

Joel Thompson · Answer

Getting a HML will be difficult and, like @Ryan Dossey said, could be a big mistake.

A private individual will probably be hesitant due to your lack of experience, but if you have a close friend or family member that is in a position to fill that role you've got a shot.

I'd echo the advice you got from Ryan earlier and add that you should target a specific area, go find the projects in progress and build a list of investors/builders, go find deals based on what they're searching for. You'll quickly build your network and bring value to other investors this way in addition to putting aside cash to fund your first project.

Giovani Mobarak · Answer

Would a HML be a better option, or would a private lender would be the best one? I know that not having my own capital to put into the renovation is some sort of a big flag, but I would like to know if I do it without my money, either from a HML or a private one, would be a way to start and get some sort of capital from the profits and start knowing the angles of the flipping business.

Thank you

Rick Pozos · Answer

As your first deal, you might be able to do that, BUT and this is a big BUT, you have to have a hell of a deal.

Are you looking for deals? Do you know what a deal looks like?? How many people are you talking to everyday to find deals? Is the deal a 70% of ARV deal or better?

If you read those questions and thought, "What is this guy talking about?" Then I would say NO, you can not do that.

Personally, I borrow the purchase price and rehab and get all the rehab money at closing. I have been doing this quite a while though. People know that I have completed quite a few successful deals. To get there I borrowed at 18% and paid several points. I still made some money. I was so happy to have a hard money lender lend me the money.

I had such a hell of a deal, the lender wanted to lend me more money. I said NO. Just enough for the purchase and rehab. I ended up borrowing from my sister to make the payments and used up the credit cards until I sold the property.

You gotta know what you are doing with people's money BEFORE you get into a deal.

Ryan Dossey · Answer

@Giovani Mobarak You're going to have a pretty hard time doing a retail flip without any cash. Holding Costs. Overages. Inspection Items. Utilities. Taxes.Insruance. Even if you got approved with a HML (which would be very hard/ill advised with no track record) the deal could bankrupt you. My first flip was funded by a private lender and we ran into challenges with it. I was 20 (this was 5 years ago) and we had to bring $7,5000 to closing to make my private lender whole. This doesn't count the holding and misc. costs that we paid. You would probably be better of reverse wholesaling. Attend a local reia. Find a buyer/flipper that's looking for a deal and go pound the pavement. Find them a lead, ask what they would pay, try to get it for less, and get paid in the middle. I would also advise getting your license at the same time. Being licensed gives you the all powerful MLS and brings accoutability/credibility with it.