How To Flip Houses With No Money: Top 10 Expert StrategiesDec 05, 2023
Are you eager to break into the exciting world of real estate flipping but think you need a fortune to invest upfront? After all, the average final sales price of a house sold in the United States is over $516,000, according to The Federal Reserve Bank of St. Louis.
Fear not, because flipping houses only sometimes requires using your own money. With strategic planning, creativity, and a keen eye for opportunity, you can learn how to flip houses with no money.
Get ready to unlock the secrets of successful house flipping with minimal financial investment. This article will guide you through 10 proven methods to help you launch your house-flipping career without breaking the bank. In doing so, we’ll teach you everything you need to know to flip houses with no money, including:
- What Is House Flipping?
- How Much Does It Cost To Flip A House?
- 10 Ways To Start Flipping Houses With No Money
- Can You Flip A House With Bad Credit History?
- Do You Need A Real Estate License To Flip Houses?
- Flipping Houses With No Money FAQs
- Final Thoughts On Flipping Houses With No Money
*Before we begin our guide, we also invite you to view our video on How To FLIP A HOUSE For Beginners (Step-by-Step). Host and CEO of Real Estate Skills, Alex Martinez, & Stan Gendlin share how to flip houses with no money from start to finish as a beginner!
Together, Alex & Stan have completed over 1,000+ house flips. What you learn in this video will give you the confidence and guidance to successfully complete your fix-and-flip project!
What Is House Flipping?
Flipping houses is a dynamic real estate investment strategy that involves purchasing distressed or undervalued properties, renovating them with strategic upgrades, and then selling them at a higher price for a worthwhile profit. In today's real estate market, aspiring investors can start a career in house flipping without needing piles of their cash. Instead, investors can unlock the potential of flipping houses and building a successful real estate portfolio by deploying innovative financing methods, creative problem-solving, and astute market analysis.
Even though investors don’t need to use the cash out of their bank accounts, house flipping has become synonymous with generous profits. According to the latest Home Flipping Report from ATTOM Data Solutions, “the gross profit on typical transactions (the difference between the median purchase price paid by investors and the median resale price) increased to $56,000.” The report also verifies the average profit translates to a 22.5% return on investment.
Ready to start your house-flipping career? Join Alex Martinez at his FREE training to learn how to get started with house-flipping and wholesaling!
How Much Does It Cost To Flip A House?
While the goal is to learn how to start flipping houses with no money, investors must be aware that capital is still required to fund a deal. That said, investors almost always turn to private money lenders and hard money lenders to secure the funds they need to flip houses.
It is worth noting, however, that lenders will want to know how much the investor needs before even considering investing in them. As a result, investors need to know how much it costs to flip a house.
Flipping a house includes many expenses that must be carefully considered. Essential costs include renovation expenses, insurance, utilities, and marketing efforts. Upon purchase, the investment property's condition will influence the scope of renovations and the need for contractors. Homeowner's insurance and utility costs must be factored in during the rehab process.
After completing the renovations, effective marketing is essential to attract potential first-time buyers, which only adds to the cost of flipping. Most investors allocate around 10% of the purchase price to cover the expenses of flipping a property.
*We also invite you to view our video on How To Get Into Real Estate With No Money! Host and CEO of Real Estate Skills, Alex Martinez, provides the perfect guide for beginners to start flipping houses and investing in real estate using no capital of their own!
10 Ways To Start Flipping Houses With No Money
If you want to learn how to buy a fixer-upper house with no money, you’ve come to the right place. Here’s a list of ten proven strategies today’s investors use for real estate flipping:
- Private Lenders
- Hard Money Lenders
- Partner With House-Flipping Investors
- Home Equity
- Option to Buy
- Seller Financing
- Live-In Flip
Learning how to flip homes with no money may be as simple as working with private lenders. These sources of capital play a pivotal role in real estate investing, providing an alternative financing option for investors who flip houses without relying on traditional banks.
This lending practice involves individuals or private organizations lending their capital to other investors or real estate funds, securing the loan with a mortgage against the property. Unlike conventional lenders, private money lenders offer faster financing, making them ideal for short-term investors looking to compete with all-cash buyers or long-term investors seeking to rehab rental properties.
While interest rates on private money loans are typically higher, these loans open up opportunities for investors to grow their assets and build a thriving real estate-flipping business.
Hard Money Lenders
Anyone who wants to learn how to buy and sell houses with no money should enlist the services of a hard money lender. A hard money loan is a short-term, non-conforming loan primarily used in real estate transactions.
Unlike traditional loans from banks, hard money loans are secured by real property, making them suitable for investors seeking quick financing or those denied by conventional loan offers.
Private individuals or companies typically act as hard money lenders, valuing the property's potential as collateral over the borrower's creditworthiness. This fast and less stringent approval process allows investors to act quickly and capitalize on profitable opportunities.
Wholesaling is a real estate exit strategy that involves gaining the rights to buy a property—only to turn around and sell those rights to another buyer (cutting out the need for a true closing, Realtors, traditional lenders, real estate agents, and any help from financial institutions). It is important to note that the wholesaler isn’t purchasing a subject property (unless they are performing a double close), but rather obtaining the rights to buy it. In doing so, the wholesaler enters into a contract agreement with the homeowner, giving the wholesaler the sole right to buy the house.
With the right to buy the house under contract, nobody else is allowed to buy the house until the agreement is terminated. While they hold the right to buy the home, wholesalers will attempt to flip the contract to another investor. The wholesaler will give them the right to buy the house for a fee, facilitating a deal between the original owner and the new buyer. As a result, learning how to flip real estate contracts with no money is a viable and lucrative exit strategy in today’s competitive marketplace.
Partner With House-Flipping Investors
Investors don’t need to learn how to flip foreclosed houses with no money if they enter the right partnerships. At the very least, inventors from all walks of life will partner with someone who complements their investment style.
Partnering with an investor willing to fund the whole flipping project is possible if their counterpart brings something else valuable to the deal. Whether it's useful contacts or the ability to restore the house themselves, plenty of partners will fund a deal as long as someone else brings something of equal value to the table.
Those who can partner with a house-flipping investor who will fund the entire deal will find that they don’t need any money to flip houses. That said, partnering with someone supporting the agreement will require them to make valuable contributions.
Attend our FREE training at Real Estate Skills. Gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way.
*For in-depth training on flipping houses with no money, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!
If you want to learn how to start house flipping with no money, you must think outside the box, starting with your definition of “no money.” In this example, no money refers to the liquid capital in your bank account or the cash you have on hand. Instead of using their liquid capital, investors can theoretically tap into their home’s equity.
Those who have accumulated equity in their home can leverage it to finance a rehab. Home equity loans and home equity lines of credit (HELOCs) allow homeowners to tap into the value of their property by using it as collateral.
A home equity loan operates like a second mortgage with fixed terms and a fixed interest rate (offering a way around today’s high-interest rates), while a HELOC provides a revolving credit line with a variable rate. While these options can provide quick access to funds for a deal, it's essential to be cautious. Using an existing home as collateral carries the risk of foreclosure if there’s a default, so be careful.
Option To Buy
There are plenty of ways to learn how to flip a house with no money, not the least of which include options to buy, otherwise known as lease options. The opportunity to buy offers an innovative approach to house flipping with minimal upfront costs. To be clear, this isn’t a “no money” option, but it does significantly lower the barrier to entry.
In this arrangement, investors lease the property initially and agree to purchase it at the end of the lease term. The purchase price is determined upfront, and the rent payments often act as credits toward the final price. This strategy allows aspiring flippers to enter the real estate market without a significant initial investment.
When using a lease option for flipping houses, investors must negotiate potential renovations and repairs at the contract signing, ensuring both parties are aligned on property improvements. While the terms of the agreement may vary, careful attention to detail and preparation are essential for a successful lease option flip.
Seller financing, also known as owner financing, offers an attractive solution for flipping houses with limited capital. In this arrangement, the seller acts as the lender, and investors make payments, including interest, based on a negotiated schedule.
The loan terms can be flexible, and some sellers may allow interest-only payments until a specified date, followed by a balloon payment. To ensure clarity and protection, it's crucial to draft a comprehensive loan agreement with the help of a lawyer.
Seller financing can be ideal if you need help qualifying for traditional fix-and-flip loans or fast funding. While it may be more expensive, this creative financing option opens opportunities to acquire properties with little or no money down.
Finding sellers open to this arrangement may require proactive searching and practical negotiation skills. Be transparent about your plans for the property and instill confidence in potential sellers, showcasing why they should finance the deal with you.
Real estate crowdfunding has revolutionized house flipping by offering a viable alternative for investors unable to secure traditional mortgages. Through crowdfunding sites, individual accredited investors can contribute towards a loan, streamlining the borrowing process for flippers.
This arrangement simplifies financing in multiple ways, providing house flippers with a faster, more accessible means of securing funds. By tapping into a network of experienced real estate investors and attending local events, clubs, and meetups, aspiring flippers can build valuable connections and find mentors and funding for their projects.
A live-in flip offers an enticing option for those eager to venture into real estate flipping. Investors can access favorable loan terms and lower down payments by purchasing a property as their primary residence and renovating while living there.
Utilizing programs like VA or USDA loans can be advantageous if requirements are met. Renovating in sections allows for an extended timeline without impacting profits since the investor resides in the property.
When executed strategically, the live-in flip presents an excellent opportunity to start flipping houses successfully. However, be aware of residency and rental property restrictions some homebuyer programs impose.
A sale-leaseback arrangement offers an appealing option for aspiring house flippers. In this scenario, you sell your home and receive cash in return.
Subsequently, you continue to live in the home as a renter while utilizing other people’s money to finance other ventures, such as buying and flipping houses for profit.
Can You Flip A House With Bad Credit?
You can flip a house with bad credit. Compared to traditional bank loans, the most common flip loans investors turn to do not prioritize credit scores and background checks. Instead, the private and hard money lenders investors prefer working with the practice of what’s known as asset-based lending.
As its name suggests, asset-based lending prioritizes the fundamentals and potential of the asset over anything else. If the property appears to be a good investment, and the investor is convincing enough, the lender may approve the necessary funds. That’s not to say private and hard money lenders don’t consider the borrower’s experience or track record, but rather that credit scores aren’t typically even a consideration.
What matters most to lenders is that they get enough money back, plus interest. Therefore, the only credentials that matter for investors are those that convince lenders to part ways with their cash. If the investor can prove they have a deal worth investing in and that the lender’s money is in good hands, the loan will be more likely to be approved.
Do You Need A Real Estate License To Flip Houses?
No, a real estate license is not required by law to start flipping houses. Typically, a real estate license becomes necessary when you're selling a property you don't own, such as selling a house for someone else, like a friend or family member.
For more on this topic, view our video below where Alex Martinez & Stan Gendlin delve into one of the real estate industry's top questions!
Flipping Houses With No Money FAQs
Learning how to flip houses with no money can be an exercise in intimidation. If for nothing else, flipping houses with no money sounds like an impossible task for those on the outside looking in; rest assured that it’s not. Flipping houses without using the money in your bank account is not only possible; it’s the preferred method.
To understand that, however, there are a few questions that knowing the answers to may help break down the barriers.
What Is The 70% Rule In House Flipping?
The 70% rule is a valuable tool for aspiring house flippers looking to maximize profits without using their money. The rule provides a practical approach to ensure a safe investment by preventing overpayment and allowing room for profitable margins.
To apply the 70% rule effectively, determine the property's after-repair value (ARV) through comps or reliable ARV calculators. Multiply the ARV by 70% and subtract estimated rehab costs to calculate the maximum allowable offer (MAO). As its name suggests, the MAO is the most an investor can spend on a deal while leaving enough room for worthwhile profits. While the 70% rule is a great starting point, it should be combined with other evaluation methods for a comprehensive analysis.
How Much Money Do I Need To Start Flipping Houses?
Investors do not need to use their money to flip a house. However, rehabs still require transactions, meaning the funds must come from somewhere. Again, most house flippers turn to hard and private money lenders, which begs the more important question: How much do investors need to borrow to start flipping houses?
To answer that question, investors need to know how much the home can be acquired for. Industry standards suggest that investors can expect to spend about 10% of the home’s purchase price on a flip. Therefore, the total cost of a flip will be the acquisition price plus 10.0%.
Let’s say, for example, an investor finds a deal he can acquire for $100,000. Going off the typical budget, investors will need about $110,000 to flip the house. Of course, this is just an average, and every deal will come with unique circumstances and costs. As a result, anyone learning how to buy and flip houses with no money needs to adapt to an ever-changing environment. Then, and only then, will they be able to flip houses with no money and a higher success rate.
What Is A Good Profit On A House Flip?
A reasonable profit on a flip is entirely subjective. What one investor considers a successful endeavor, for example, another may view as a waste of time. Nonetheless, a good profit on a flip makes the time and money invested worthwhile. Remember, it’s not enough to simply make money. The gains must be significant enough to offset the time invested in a deal and net an attractive payday. As a general rule of thumb, investors will aim for a 15% to 30% return on their investment, with some willing to test the boundaries on both ends of the spectrum.
For a more objective answer, however, the latest data by ATTOM Data Solutions suggests that the average flipper in America grossed about $56,000 per deal, translating to a 22.5% return on investment. Therefore, if investors simply attempt to keep up with the rest of the industry, a 22.5% ROI looks like the current litmus test.
Can Beginners Start Flipping Houses?
Anyone can learn how to start flipping houses. Whether a seasoned investor looking to adopt a new exit strategy or someone whose never invested a single dollar in their life, there’s nothing to prevent anyone from flipping real estate. That’s not to say flipping houses with no money is easy; it requires a lot of time, dedication, and hard work. However, even beginners can flip houses with the right systems and acute attention to detail.
Of course, new investors shouldn’t dive into the deep end of flipping houses without a plan in place. As an investment strategy, there are inherent risks involved. Therefore, anyone wanting to flip houses must learn how to start flipping houses. In doing so, new investors will gain the necessary tools to mitigate risk and increase their chances of success.
Final Thoughts On Flipping Houses With No Money
Thanks to these ten proven methods, flipping houses with no money is possible. From creative financing options like seller financing and crowdfunding to leveraging home equity and utilizing sale-leaseback agreements, aspiring house flippers can confidently enter the market and pursue profitable ventures. By tapping into these strategies and combining them wisely, investors can embark on a successful house-flipping journey without the need for substantial upfront capital.
At Real Estate Skills, our team of experts is ready to provide you with the tools you need to flip houses with no money. We're committed to providing the knowledge, resources, and support necessary to enter the real estate flipping industry. So avoid common mistakes and maximize your returns by leveraging our expertise.