Would You Do Your First Flip With No Money Down?

Question

Imagine you found a solid fix-and-flip deal and a lender offered to cover 100% of the costs. Would you jump in, or wait until you had more cash saved? Why?

Michael Hernandez · Answer

Hey Drago,

I’d look at it less as “100% financing = free money” and more as “what’s the true cost of capital and risk?”

On paper, 100% funding sounds great, but most lenders who offer it charge higher rates, points, and often want profit splits or very strict terms. That can eat into your margin quickly. On top of that, going in with zero of your own cash means you’ve got no cushion if the rehab runs over budget, the ARV comes in low, or the market shifts while you’re holding.

Personally, I’d only take a 100% deal if:

The numbers leave room even after the lender’s premium costs.

I’ve got reserves outside the deal to handle surprises.

The scope of work is in my wheelhouse (no first-time full guts with borrowed money).

Otherwise, waiting until you’ve got some of your own capital in play is safer. Leverage is a tool, not a crutch—if the deal is strong enough, you don’t need to stretch thin to make it work.

Andy Sabisch · Answer

As the saying goes . . . there is no free lunch and that applies in real estate for sure.  As Michael said, 100% financing usually means higher interest rates, more points and less profit in the end especially if the deal takes longer to complete and then to sell.  Carrying costs can kill a deal quicker than anything and high upfront costs to get 100% financing is a big factor.

Andy Sabisch · Answer

Drago, You are right but unfortunately many new investors see the TV shows that make flips look easy and then listen to the myriad of Facebook gurus that swear you will be rich in no time with no risk and find reality to be totally different.  We have picked up flips half done where the investor ran out of money due to unexpected issues, permit delays and carrying costs . . . and they swear they are done with real estate.  If someone has little or no experience in flips and a lender offers 100%, I would be very wary about using that lender as they are not doing either party a service and failure is often the end result.  Financing is a tool . . used responsibly it can allow for faster scaling but used as a way to get into the business with no $$ out of pocket and not sure of what lies ahead (as any deal will have) is asking for problems and costly ones at that.

Sultan Ali · Answer

Totally makes sense, if the numbers truly work and there’s experience or support behind the scenes, 100% financing can definitely help scale fast. For a first flip, I’d still be careful to make sure contingencies and holding costs are covered, but I agree that treating it like a real business rather than a one-off deal changes the risk/reward significantly.

Peter Mckernan · Answer

I would save some cash, after the change in the market the last couple of years with rates going up and inventory, keep some cash in reserves to so you can sleep okay at night (even if you are not a stressor when you have 0 in the bank). You want to be able to pay people back in full and not be siting in debt for months or years to pay loans back because you did not get the return you wanted.

Andy Sabisch · Answer

Drago, the issue is the question asked about your first flip . . . have seen too many first time flips go in the ditch and having the higher interest rate and points can kill a first timer.  There have been times when I weighed options and if the deal makes sense at the higher rates, then I would go with it.  Most lenders see a first time flip risky and offering 100% financing would require skin of some sort in the game.

Sultan Ali · Answer

Honestly, I’d be cautious. 100% financing sounds great, but if you don’t have reserves for surprises (and there will always be surprises), you’re putting yourself in a risky spot. First flips almost always go over budget and take longer than planned. I’d rather have some skin in the game and a cushion before jumping in — peace of mind is worth more than rushing into the first deal.

Drago Stanimirovic · Answer

@Andy Sabisch @Sultan Ali Totally get the caution, but from what I’ve seen, 100% financing can actually work well, even on a first flip, if it’s treated like a real business. When the numbers pencil out and there’s some experience or support behind the scenes, it’s not about risk, it’s about momentum. A lot of savvy investors use it to scale fast without locking up their own cash.

Drago Stanimirovic · Answer

@Michael Hernandez, @Andy Sabisch you’re right that 100% financing comes with a cost, but from a lender’s side I see it as a powerful tool when the deal is strong enough. If the spread is there, the points and rates are just the price of speed and leverage.

Where it really shines is when an investor uses it not just to flip, but to convert into a long-term hold with a DSCR take-out. That way the short-term leverage builds the asset, and the refinance locks in the cash flow.

For the right operator, no-money-down isn’t a risk crutch, it’s an accelerator.

Would You Do Your First Flip With No Money Down?

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