Flipping houses is a lucrative business for many full-time flippers. It also provides considerable side income for part-time house flippers. If you watch HGTV on any given day, it is likely that you will come across several shows where property investors take dilapidated homes, which are eyesores, and then convert them into jaw-dropping and chic abodes. Not only that, but they also manage to make a profit after some major renovations.? This is the world of house flipping.
What Is House Flipping?
Flipping is a quick-profit strategy where an investor buys real estate at a discounted price and then improves the property to offload it at a better price. Rather than buying a property to live in, you are purchasing a home as a real estate investment. It is worth mentioning that the main goal of flipping is to purchase low and sell high.
Flipping houses can be an extremely lucrative strategy, especially if the real estate market is performing well. Note that foreclosures and old homes are popular properties to use in house flipping. This is because most real estate investors can buy these properties fairly cheaply, improving their potential profit.
Can real estate investors actually flip houses without any money down? The answer is yes. If you want to flip a property but don’t have enough money for a down payment, don’t worry. There are options that will allow you to easily enter the house-flipping market.
Here are three great options to help you flip homes with no money.
1. Hard Money Lenders
If you are not content with parting with a significant amount of money upfront to buy real estate, then a hard money loan can be the answer. Hard money lenders are people who lend money to others at a high interest rate and often charge points on top of that. Hard money lenders will usually let you borrow comparatively more than conventional banks and other financial institutions.
A hard money loan is one of the best options for individuals who are experienced investors and have one or multiple existing properties. They are also ideal for owner-occupants with substantial equity in their homes and a great credit score.
Another great thing is that you can finance all the property repairs with some hard money lenders. Unlike conventional bank loans, your ability to get hard money financing is not determined by your creditworthiness. However, the fees and rates are often higher with hard money loans. Note that the interest rates may range from 8-15%, and the points range from one to five.
You should also keep in mind that a majority of hard money lenders will typically only loan you a certain percentage of the purchase price — usually around 70%. When evaluating various hard money lenders, you should pay close attention to interest rates, fees and loan terms.
2. Private Money Lenders
If you have all the technical skills and experience to flip houses, but not the funds, then this option is best for you. Private money lenders are individuals who have the funds and would like to invest in real estate. However, they just do not have the expertise and time, or would rather be on the golf course or beach than swinging mallets. Private lenders have liquid money to spare and are willing to lend you at a predetermined interest rate. Perhaps the most suitable source of finance for no money deals is a private money lender.
The money partner or lender can sit back, relax and pay the money, while the other partner will manage the logistics of the real estate project and ensure they complete the house flip quickly and professionally. You can borrow the whole purchase amount and repairs plus some other costs if you manage to find the right private lender.
It is worth noting that the amount of money the lender will provide you will depend on the comfort level between you and the private investors, the experience and the real estate deal.
Another great option to flip real estate with no money is using real estate wholesaling. Wholesaling homes is an excellent idea for investors who already have a viable flip business. Keep in mind that for property wholesaling to work in your favor, you’ve got to have an existing and reliable network of real estate investors looking for a few fix-and-flip deals. So, you cannot simply purchase a house and hope for the best. It is vital to have a plan to succeed. Wholesalers often make money based on a specific percentage of the final sale price, which is typically between 5% and 10%.
When wholesaling fix-and-flip properties, you are selling the opportunity to buy a house without ever assuming the title. You will make an assignment fee as you are acting as an intermediary.
Flipping homes with no money down often entails being creative, working with other investors and thinking outside the traditional loan box. Your best chances of obtaining funding are private money lenders, real estate wholesaling and hard money lenders.