How to Flip Houses With No Money

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The most common recipe for a successful house flip involves a blend of ingredients, typically a large portion of upfront money, a bargain-priced property, and the right amount of know-how and drive. But what if you’ve found the house, knowledge, and drive, but you’re short on investment cash?

A lack of funds doesn’t necessarily mean you can’t cook up profits in the house-flipping kitchen. In this post, we’ll share 10 strategies on how to flip houses with no money.

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What is house flipping?

House flipping involves purchasing a property, making improvements, and then selling it for a profit. Typically, this process is fairly quick. The goal is to sell the renovated property within a short time so the proceeds can be turned around and invested in another flip. Successful house flippers identify undervalued properties, make strategic renovations, and capitalize on market demand.

“Flipping houses is an investment strategy in real estate that involves acquiring a piece of real estate, typically one that is in deteriorated physical condition or just simply outdated from an aesthetic perspective,” says Ryan Zomorodi, co-founder and COO of Real Estate Skills, a comprehensive school for investors. “And then investing capital to make improvements to the property, including any sort of repairs and structural issues to the property and certainly improving it cosmetically.”

Zomorodi says many flippers set a goal to resell the property for a profit in less than 12 months.

Do you need your own money to be a house flipper?

Contrary to popular belief, you don’t need your own money to start flipping houses. Many successful house flippers have launched their careers using alternative financing methods and leveraging other people’s money.

“I started out house flipping — buying, fixing, and selling real estate — 20 years ago, and for the first five years of doing that, I was using other people’s money on every deal,” says Jeff Riber, a top Florida real estate agent and experienced house flipper. “Now I’m using my own money. But initially, that was how I got started.”

This approach allows you to enter the market without a significant initial investment, making it accessible even if your personal funds are limited.

How does house flipping typically work?

The traditional house-flipping process follows these steps:

  1. Find a property: Search for undervalued or distressed properties that have potential for improvement.
  2. Purchase the property: Secure financing and buy the property at a competitive price.
  3. Renovate: Make necessary repairs and upgrades to increase the property’s market value.
  4. Sell: List the renovated property for sale and aim to sell it quickly for a profit.

Riber says the first step is the key that unlocks the door of opportunity. You can’t move forward with a successful flip until you’ve found the right house. “The real skill set is identifying opportunities in the world of ‘buy, fix, and sell’ real estate.”

Then, you need to find the money to capture the property before someone else does. “I would beat the streets in any way possible, whether direct mail, cold calling, or networking, to try and find good deals,” Riber explains. “Once I found something, then I was beating the street to go try and find money to fund those deals for me.”

How to flip houses with no money

“If you can find a deal, the money will make its way there,” Riber says. “It’s just a matter of working to build out a network of people or companies that are willing to lend that money to you.”

Here are five ways Riber and Zomorodi say many investors are able to flip houses with no money:

1. Hard money lender

Hard money lenders are companies or individuals offering short-term loans for real estate investments. These loans are usually easier to obtain than traditional mortgages but come with higher interest rates and shorter repayment periods. Hard money loans are asset-based, meaning the property itself serves as collateral.

Riber says hard money loans are often the most obvious and simplest way to fund a house flip when you don’t have your own investment money on hand.

“Essentially, it’s a mortgage but provided by an individual or group, and the interest rates are going to be higher than if you were to go get conventional financing.”

He provides this comparison: “Let’s say you were going to go purchase a primary residence with a traditional 30-year mortgage, and the interest rate is going to be somewhere around 7%. If you’re funding your house flip via a hard money loan, the rates are probably going to be more in the 11%-13% range.”

Riber says house flippers have to be comfortable with this kind of risk. You need to ask yourself if you’re confident enough with the investment to believe you can sell the flipped home and pay back the loan quickly with minimal interest fees.

“I’m sure there are different appetites for risk in different parts of the country. You may pay a point or two, and that’s probably a little market-specific. That may make the interest rate higher or lower depending on your approach, but that’s the easiest way to do it.”

Riber gives this example of a hard money loan scenario:

“An aspiring investor finds their first deal. They come to a hard money lender who’s willing to invest in that person doing the deal. They say, ‘Hey, I need to borrow money to flip a house.” The hard money lender says, ‘Okay, at 12% and a point, we’ll give you both the money to purchase it and then — as you are progressing along in the construction and renovation — we’ll give you draws to fund that as well.’ Then the [lender] gets paid back at closing through the sale of the home.”

2. Private money lender

Private money lenders are individuals who lend their own funds to real estate investors. These loans are typically more flexible than traditional bank loans and can be secured based on the property’s potential value. Building a strong relationship with a private lender can provide the capital needed to start flipping houses without using your own money.

“Typically, I always say the best source of capital for fix-and-flips is private money,” Zomorodi says. “If you can connect with high-net worth individuals or other local investors who want to put their money to work into real estate — but don’t want to actually flip the house and manage contractors — then you can raise capital from a private money lender.”

Zomorodi says that, here again, you may pay a higher annualized interest rate on the money you borrow, but you may not need to seek any additional funding.

“In some cases, you might be able to finance the entire project with a private money lender who funds 100% of the total project cost,” Zomorodi says. “The [loan agreement] is structured as a simple promissory note, where you’re paying interest on the debt, and that debt is repaid upon resale or refinance of the property.”

3. Wholesaling

Wholesaling involves finding a property, securing it under contract, and then selling that contract to another investor. This method requires little to no money upfront, as you’re not purchasing the property yourself. Instead, you earn a fee for connecting the seller with a buyer.

Riber reemphasizes that no matter the approach you pick, it all starts with the right house.

“At the end of the day, you have to find a seller with a compelling reason to walk away. It may be that they don’t want to live there, they’re out of town, they don’t want to hassle with a Realtor, prepare the house, or schedule showings, or maybe the house just needs a ton of work, and they don’t want to have to deal with any of it.”

4. Home equity loan or retirement account funds

If you already own a home with significant equity, you can use a home equity loan to finance your house-flipping venture. This loan allows you to borrow against the equity in your home, providing the funds needed to purchase and renovate a flip property.

Zomorodi says this concept can also work if you have a retirement account with a significant balance. “Then, you are your own lender, where you can take out a loan and use that to fund an investment project like a fix-and-flip. That way, you’re not using any of your own money out of pocket, you’re just leveraging the assets that you currently have that might be underutilized.”

5. Partner with an established house flipper

Teaming up with an experienced house flipper can be a great way to enter the market with minimal investment. In this arrangement, your partner provides the capital, while you contribute your time and skills to manage the project. Profits are then split according to your agreement.

Zomorodi says gaining real estate investment knowledge and experience is crucial to success. “The first thing an investor needs to do to flip houses with no money is to get educated. Flipping a house can be very difficult if you get into a challenging project, such as an older historic home, or flipping in a municipality that has very difficult permitting requirements and regulatory environments.”

He adds this caution: “Ultimately, if you’re using someone else’s money to do the deal, and if you don’t know what you’re doing, that’s a recipe for losing that money.”

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5 creative or “less money” options

1. Live-in flip

A live-in flip involves purchasing a property, living in it while making improvements, and then selling it for a profit. This method allows you to finance the property with a traditional mortgage, reducing the need for upfront cash. Additionally, living in the home as a primary residence can provide tax benefits on the profits.

2. Crowdfunding

Real estate crowdfunding platforms allow multiple investors to pool their resources to fund a property purchase and renovation. By contributing a smaller amount of money, you can participate in house flipping without needing significant capital. You can also use crowdfunding sites to attract investors and raise funds for deals you’d like to initiate.

3. Seller financing (owner financing)

With seller financing, the property’s seller acts as the lender, allowing you to purchase the property with little or no money down. You make monthly payments to the seller instead of a bank, often with more flexible terms than traditional financing. This option can be elusive.

4. Option to buy (lease option)

A lease option, or rent-to-own agreement, allows you to lease a property with the option to purchase it later. This approach gives you time to save money, improve your credit, and secure financing while living in and possibly renovating the property.

5. Sale-leaseback agreement

In a sale-leaseback agreement, you sell your existing property to an investor and then lease it back from them. This provides you with immediate capital, which you can use to purchase and flip another property while continuing to live in your current home.

“At some point, saying you’re doing this with no money is probably a touch misleading,” Riber says. “You’re going to need some money somewhere. You can’t just be homeless on the streets, and all of a sudden be flipping houses. You can’t do it with absolutely zero money, but let’s call it very little money. How about that?”

What are the risks or potholes of house flipping?

House flipping can be profitable, but it comes with risks. Let’s take a look at some potential potholes you should know about before diving into your first project.

  1. Unexpected costs: Renovation projects often exceed their initial budgets due to unforeseen issues like structural damage, code violations, or rising material costs.
  2. Market fluctuations: Real estate markets can be volatile. A downturn can reduce your profit margins or delay the sale of your flipped property.
  3. Financing difficulties: Securing funding can be challenging, especially for first-time flippers. High-interest loans and strict repayment terms can strain your finances.
  4. Time constraints: Flipping houses requires a significant time investment. Managing renovations, coordinating with contractors, and marketing the property can be time-consuming.
  5. Legal issues: Navigating zoning laws, building codes, and permits can be complex. Failure to comply with regulations can lead to fines or project delays.

Zomorodi says the caution he gives new investors is to avoid a project that requires more money going into it than you can get out of it. “Overestimating the after-repair value of a property and underestimating the total investments required to actually achieve that value. In other words, getting underwater on your properties is arguably the biggest risk. That’s how people will lose part or all of their capital.”

Related to this, Riber says mismanaging your project can also damage your reputation with lenders. “If you end up making mistakes that become frustrating for the person [or investor group] loaning you the money, that would be another challenge. In any market, that’s a small circle,” he warns. “Once you start burning bridges with those who own the money, you could very quickly go from having money to fund your deals to nobody being willing to lend you money.”

FAQs and tips to flip houses with no money

How much does it cost to flip a house?

The cost of flipping a house varies widely depending on the property’s purchase price, renovation expenses, holding costs, and selling fees. On average, you might expect to spend anywhere from $45,000 to $80,000 on a flip. It’s important to create a detailed budget and factor in a contingency fund for unexpected expenses.

What’s a good profit on a house flip?

A good profit on a house flip typically ranges from 10% to 20% of the property’s final sale price. For example, if you sell a flipped house for $200,000, a profit of $20,000 to $40,000 is considered a good return on investment. Profit margins can vary based on market conditions, renovation quality, and the initial purchase price.

Can you flip a house with bad credit?

Flipping a house with bad credit is possible, but it may require alternative financing options. Consider partnering with investors, using hard money or private money lenders, or exploring seller financing. Improving your credit score over time can also open up more traditional financing options.

Do you need a real estate license to flip houses?

You do not need a real estate license to flip houses. However, having a license can provide advantages such as access to the MLS, networking opportunities with other real estate professionals, and potential savings on commission fees. Many successful house flippers work closely with licensed real estate agents to navigate the buying and selling process.

Is house flipping right for you? Consult with an expert

House flipping can be a rewarding venture, but the investment kitchen can be crowded and hot, so it’s not suitable for everyone. Assess your financial situation, risk tolerance, and available time before deciding to pursue this path.

Zomorodi’s parting advice: “Knowing how to execute the business model of flipping a house is key. Finding, vetting, and managing contractors and having the right paperwork to hire them and protect yourself as an investor are extremely important. These are all things that you want to get educated on before flipping houses with no money.”

Riber’s closing thoughts: “One of the most important things in house flipping is the ability to move quickly — to find and lock in good deals. You can move quickly when it’s your own money because you don’t have to ask for anyone else’s approval. If you’re borrowing money (like a hard money loan), that can slow you down a bit. But if you find a good deal, and be honest and forthcoming to whoever’s lending you the money, things should go fine.”

Consulting with an experienced house flipper or real estate expert can provide valuable insights and help you make an informed decision. A seasoned local agent can help you decide if flipping is a smart investment and offer strategies to maximize your success.

HomeLight can connect you with a top-performing, trusted agent in your market. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your goals.

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