How to Flip A House With No Money in 20216 min read
Is it possible to flip a house with no money? If I say it is, you wouldn’t believe it. But, from purchasing a home to rehabbing it, flipping in real estate needs cash.
But where do you get this cash? You can take a loan. No, not from traditional banks! Traditional banks look for stellar credit scores and take too long to disburse money.
We have a few options to help you flip a house without putting any money of your own. All you have to do is wear your thinking cap, look around, and utilize every opportunity that comes your way.
But before we move on to find out about those golden ways that can change the direction of your flipping career, let’s first understand what flipping means in real estate.
What is House Flipping?
In the most simple terms, flipping is an investment strategy in which a real estate investor purchases a discounted property to sell it for profit after refurbishing it quickly.
The goal of a real estate flipper is simple – to make a profit. But how does he make a profit? By purchasing low and then selling high.
The strategy is to find motivated sellers or sellers desperate to dispose of their properties and buy them below the market price.
Tip: When choosing a property to flip, keep in mind factors such as location, price, and the structural value of the property too.
A good flipper should also be astute and well-informed. These are crucial qualities that you should develop when flipping a house or even wholesaling.
Flipping vs. Wholesaling
Those new to real estate often get confused between wholesaling and flipping. It is good to know the difference so that you can decide what to choose. You can even use one business to fund the other.
The difference, however, between flipping and wholesaling lies mainly in the exit strategy of the deals.
Wholesaling is for anyone willing to go through the hustle and bustle of real estate without really putting in any money. All you have to do is find a motivated seller and a good buyer within the stipulated period.
The one big difference: You don’t purchase while wholesaling in real estate.
Flipping, on the other hand, is for the experienced investors, but then, if you can get hold of the right people, at the right time, in the right way, it can be pretty lucrative even if you are a newbie.
Flipping is all about speculation, so learn to speculate right first and then try and leverage the right kind of people if you want your profits to be a bomb.
There are many variables to study before you rehab and sell. If you are a newbie, make up for the knowledge you lack by taking help from the right kind of people. There’s plenty of room for failure in flipping; however, the key lies in learning the tricks of the trade.
Tip: Use money wisely while rehabbing. Adding value doesn’t mean going overboard.
How to Flip A House With No Money and Bad Credit Score
We all know of wholesaling as a business that needs no capital to begin, but hardly anyone talks of flipping in that light.
But it is possible. Let’s see how?
The 8-step guide to fix and flip like a pro
- Do your research well:- Every market is different, so before taking the plunge, study it well.
Remember, it’s good to start with a lower-priced property if you are a newbie planning to get it fully financed by an investor.
- Fix a budget and create a business plan:-A business plan should specify what the timeline would be and the project scope.
Avoid houses with structural and mechanical problems. You don’t want a lot of hassles in the first deal itself.
- Find a partner with money:-It could be anyone, close associates, relatives, business owners, colleagues. Can’t think of anyone specific, then make a list of people regularly.
You could also get in touch with hard money lenders, private money lenders, and even investors interested in making money.
Hard money lenders can give you all the funds for the repairs as they are not bothered about your creditworthiness. However, unlike traditional banks, their rates and points are higher.
Private money lenders are perfect if you are looking for a suitable source of finance without much headache. However, it depends on the comfort level between you and your lender how much money he will lend you.
- Touch base with contractors:-You need contractors if you are going to rehab the property before you sell it.
Learning to network with contractors is a crucial step when flipping houses
From general contractors, electricians, plumbers, handymen, you’ll need to get in touch with all of them
- Identify the property you want to flip:-It’s important to find a good deal when flipping houses in real estate. In addition to buying below market value, consider bigger margins that will cover all your other costs.
Try to shortlist a house that needs just basic cosmetic repairs if this is your first time.
Work with realtors to find on-market deals. Work with wholesalers to find off-market or build a direct mail campaign.
- Purchase the house:-Things move much faster if you are working with an investment property lender than a traditional bank.
Hire a home inspector. Home inspections take a long time and are pretty comprehensive.
Once you’re sure the house will give you any unpleasant surprises, then hire a contractor. Get multiple quotes.
Choose a contractor and start work on the same day you purchase the property.
- It’s time to start fixing:-The faster the work progresses, the closer you can pay off the loan and the faster you can get to your paycheck.
Choose your contractor prudently. Work with those who have a reputation for sticking to their word.
Beware of contractors who increase the price mid-way. Instead, take references from experienced investors. They can recommend some good people.
- Finally, sell it:-Get the help of an experienced realtor. Not everyone is as diligent as they show. Connect with ones who know the market well.
It is better to always think of a price, keeping in mind your profit. Make sure you understand the fundamentals of real estate pricing.
Research and preparation will help you avoid mistakes, but it is the only action that will get you good profits.
Insider’s Tips on Flipping Houses
- Keep the fire burning: This is not really about real estate, but it is an essential thing to imbibe: Desire and passion. If you want to be a successful flipper, don’t let the desire and passion in you ever die out. Keep it alive and burning even during bad times.
Don’t give up too easily!
- Look for techniques that don’t cost money: Flipping like all businesses requires strategies, techniques and money. Learn what the variables are and calculate how much you can invest to add value to the property so that your profit margins don’t get slimmer.
A good trick can save you many mistakes and boost your profit.
- Feel the pulse of the market: Research well! For example, you should know about the kind of areas where people like to live now and what kind of houses they prefer.
Keep educating yourself because you can never really know too much!
- Follow the 70% rule: Rules are made to follow. Most expert flippers swear by the 70% rule when assessing how they are willing to pay for a house. The rule says that investors should not pay more than 70% of the after repair value of a property minus the cost of repairs needed. It’s a good rule to follow if you don’t want to end up paying more.
Be consistent and follow the rules if you want to hit the jackpot.
- Networking always works: The best way to ensure that your property sells like hot cakes as soon as it is rehabbed is by lining up buyers before the house is up for sale. How do you do that? Through networking! Start talking to buyers even before you finish work.
- Find good contractors: If you have some DIY skills, make use of them. They can help you save significant money. However, be prudent as to when you can DIY and when you will need professional help. For projects you can’t handle on your own, seek help from a professional contractor.
- Assess terms and conditions well when taking loans: When taking loans from lenders, pay attention to interest rates, fees, and loan terms. Hard money lenders charge quite a high-interest rate. Weigh your options well.
- Finding the right lender: Finding the right private lender who trusts you with your flipping skills is very important when starting with no money to invest. Find the right partner, and you are good to go.
Finding good deals is the bottom line in real estate flipping. You could try many ways to flip a house. Give Batch Leads a try which is a paid service.
Batch Leads has the most comprehensive and homeowner database nationwide. The ease of finding motivated sellers is what makes it the most lucrative. Besides, you can also validate addresses and identify properties flagged as vacant by USPS.
To conclude, there are far too many opportunities to back out from starting in real estate. If you think you can only use your own money to invest, then you are wrong. There are many options. You only have to explore and give yourself some time before you can start cracking big deals.