5 Ways to Flip Houses With No Money

A lot of Real Estate investors think the hardest thing to find is money. Frankly money is easy if you are able to FIND the deal. Once you get comfortable and successful at mastering the multitude of ways to find deals, the money will come. You can flip houses with no money. You just need to courage and an understand of where to start!

Flipping houses without funding projects yourself involves using other people’s money (also called “OPM”) to fully finance your deals. A lender extends a loan to you to purchase and rehab the property, and you repay them the initial loan amount plus interest. Traditional banks will not fund 100% of a deal. Here are 5 ways to flip a house with no money.

1. Hard Money Lenders (HML's)

This should not surprise anybody reading this but the easiest and Number 1 way to fund flips with no money is to use a Hard Money Lender. Hard money lenders lend at a high interest rate and usually charge points. But on the plus side, they tend to care less about whether you have good credit and instead focus on the property itself, particularly, the after-repair value (ARV).

This source of OPM can be especially useful if the property can be rehabbed and sold quickly—requiring only a short-term loan. Like any other kind of loan, the shorter you hold the loan, the less you pay in interest. The longer you hold the property, the more you pay.

Hard money interest typically ranges between 12 and 15% often with three to five points on top of that — so pay off these loans quickly. While hard money lenders can be a great starting place, there are certainly better sources of funding with better rates.

2. Real Estate Investor Partners

One of the simplest ways to start investing with no money is to find a partner with money. Think about close friends, business associates, co-workers, relatives, business owners, or even another real estate investor.

When you first enter the house flipping business, it may be tempting to create a formal partnership right away. We recommend holding off for now. Many real estate investment partnerships succeed wildly, but just as many go down in flames. As an amateur home flipper or new investor, remain independent until you have a business plan and the flipping know-how needed to attract a solid partner.

Real estate investors of any sort can make great partners, but investors already flipping homes will likely be even better. A veteran home flipper brings both money and experience to the table. This might cost more money then a hard money lender because you might have to give more of your profit away.

3. Private Money Lenders

Private money lenders are perhaps the best source of 100% funding. They are just normal people, like family members, friends, and acquaintances, who want to invest. Sometimes, these individuals are not actively seeking investment opportunities. They just have money sitting around that they may be open to investing if you ask. Private money lenders might have money in banks, IRAs, 401(k)s, mutual funds, or even an abundance of home equity in their home.

Because you can typically negotiate better interest rates, private money lenders are preferable to hard money lenders. With private money lenders, you can control terms and interest rates more often because you set the rules and rates… not the lender. Offer private money lenders a high enough interest rate to entice them to invest. The rate must be lucrative enough to make it worthwhile and fair enough for you to make a profit—even in the worst-case scenario.

4. Seller Financing

When traditional lenders or other creative financing options are not available, consider seller financing. With this method, the property seller finances the purchase. You will not need to qualify for financing (i.e., have a good credit score) or exhaust your network of private lenders.

Note - You will need to use another source of funding for the renovation piece.

5. Subject To Financing

Subject To financing is basically where you are taking over a sellers current mortgage. This is a creative way to get control of the house. There are a few pitfalls here. The seller is still on the loan. The mortgage company can call the loan once a title changes. This is called a "due on sale" provision in the mortgage document. I have never seen this happen before provided you keep the loan current.

Note - You will need to use another source of funding for the renovation piece.