Many folks reach a decision point of: should I pursue the deal or pursue the money to fund the deal?
Unfortunately there really is no absolutely correct answer to this question. The fact of the matter is that if you want to flip houses with no money, you need to be working both sides of the house flipping equation all the time.
Let’s say you discover a good deal but you don’t have the money then you must be confident in your ability to find creative ways of raising the necessary funds.
Of course, if you get the money first then of course you must search out a deal as soon as you can.
I understand if it is hard for you to believe me…but the bottom line on all of this is: money is everywhere – you must just figure out ways of acquiring it!
House flipping without money requires that you use other people’s money – referred to as OPMfor short. There are numerous ways of getting people to invest with you, many of which are rather simple.
1. Find a Partner
When you are just starting out in the real estate business, becoming partners with someone is a fantastic way to fund a house flip deal. This partner could be a business partner, a friend, a co-worker, a relative, a business owner or another house flipping or real estate investor.
The simplest way to go about it is to just ask your partner for the money needed to fund the deal. Fill them in on your investment and house flip plan and of course be sure to set the terms of the deal – usually a 50/50 split. It is common that the partner funds the deal but you do all the work. You both then split the profit after the sale. This is a pretty typical partner arrangement in the house flipping industry.
2. Flipping Houses Using Hard Money Lenders
A hard money lender will loan you money at a very high interest rate and they commonly charge points in addition to the interest.
These house flips work well when the house can be flipped quickly.
3. How to Flip Houses with No Money Using Private Money Lenders
A private money lender is a person with money to invest. It is common that they do not even know they want to invest their money; they just have it sitting around and may be open to investing with you if they are asked.
Private money lenders are usually better to deal with than hard money lenders, mostly due to the face that, the house flipper establishes control.
4. Flipping Houses Using Traditional Banking Methods
If you have a good relationship with your bank, traditional banking is another way to fund a deal. Of course working with a bank can be challenging at times, yet with a solid plan in place traditional banking can become a great source of house flipping funds. You may not be able to get a loan for your first flip; it may eventually and could be another source for getting money to fund your deals.
5. Other Sources of Funding
I would definitely also recommend that you considering talking with certain people in your network about finding people to finance your deals:
- Chat with your dentist and doctor
- Speak with your attorney
- Locate successful business owners
- Definitely talk to anyone who you know is already investing actively
Once you learn how to flip houses using other people’s money, you may never again have to worry about investing your own funds due to the fact that once you flip a house successfully, you’ll find other people to lend you money as well. Once you start to gain momentum, it will be easier to continue to raise cash for your next deal.