How To Flip Houses With No Money or Credit
How to flip houses with no money or credit? Learn here how to do it.
It may seem like an almost impossible task to flip houses with very little cash. It is much easier to flip houses when you have at least a few bucks in your bank account but this does not mean that you cannot do it without the money.
It is quite simple to flip houses considering all you need is a little wit, willingness to think out of the box and an idea of where to look and start.
How Can You Learn How To Flip Houses With No Money or Credit?
If you do not already know, one way that you can learn how to flip houses with no money or credit is to use other people’s money (OPM) to fund your deals. You have to approach an investor who will give you the money that you need to buy and renovate the property. From there, you will repay them their money with interest.
Sound like a good deal? Here’s where to start looking for investors.
Do you have a relative, business associate, close friend or an entrepreneur who has money? This is the first person you should approach and ask for funds to invest in house flipping. You should also consider people you are acquainted with such as your attorney, dentist, doctor, or an investor in the stock market.
Once you find an investor, you can convince them to invest in your project by suggesting to them that all they have to do is invest their money and not their time. You will do the renovation, the flipping and still share the profits 50-50.
If you are just starting out, you should avoid forming partnerships with your investors. Yes, forming formalized partnerships sounds like a great deal but you should try as much as possible to stay independent and see how things work out first. Keep in mind that there are just as many people who have formed partnerships and have succeeded as those who have failed.
2. Hard Money Lenders
If you know you can flip property quickly, then hard money lenders can be a valuable source of funds. They usually lend money at interest rates which are very high. In addition, they also charge points. So the quicker you repay the loan, the less interest you will have to pay.
Hard money loans should be paid off very quickly if your lender, for example, charges you 14-20% and with 4-6 points on top. Say you borrow $100, 000 at an interest rate of 16% and it takes you half a year to repay, you would be charged an interest of $8, 000. If you have points to pay at say 6 points, that would be an extra $6, 000, which means that your interest charges would add up to $14, 000.
If you were to flip the house in three months, you would pay an interest charge of $6, 000. Hard money lenders are a great source of financing but if you are just starting out, they may not be a very good source.
3. Private Money Lenders
Private money lenders are probably the best source of money if you have no cash to start your house flipping projects. They are usually ordinary people who have disposable income and are not enthusiastic to invest. They might, however, be willing to invest with you but you have to ask.
Private lenders are a much better option to hard lenders because you can negotiate a better interest rate with them and you have more control over the terms of your agreement.
All you have to do is encourage them to invest in your house flipping project by offering them an interest rate that is high enough for them to get interested but low enough for you to make a profit.
Get Out There And Find Investors
Investors will not show up at your doorstep so you have to get out of your comfort zone and start looking for them. Start networking and get business cards from Vista Print. Hang out with people who are in real estate or are in the house flipping niche.
Social events are the best places to meet potential investors for your house flipping projects. Here are a few places where you can start networking:
- Your local association for real estate investors
- Meetings for real estate investors
- Chamber of commerce
- Volunteering at your local charity
- Create your own association for real estate investors
- Your local business networking international chapter
- Local community organizations
If you don’t have cash but you want to start flipping houses, you need to put yourself out there and make it known that you are looking for an investor.
What do you think? How do you flip houses with no money? Have you ever done it? Please leave a comment below.