How to Flip Houses with No Money: A Comprehensive Beginner's Guide

ByJulija A.
February 21,2022

Flipping houses is by no means an easy business, but it can be a lucrative one if done correctly. Statistics show that an average house flip can make $67,000, with 80,000 US flips taking place in 2021. But working out how to flip houses with no money is challenging, as it means that the aspiring flipper will need to bring renovation skills, contacts, or previous real estate experience to the table. 

This comprehensive beginner’s guide on how to buy and flip houses with no money will cover the best ways to get started in the buy-and-flip sector.

What Is a Buy-and-Flip?

Buying and flipping a house refers to the process of purchasing a house at a lower price and selling it at a profit. The original purchase price might be low because the house needs repair, or because the investor is taking a risk on a lower price for a house in an up-and-coming area. Typically, the house will need renovations, and the purchaser will try to minimize the costs of the restoration to make a profit from the final house sale. There can be one, two, or many investors involved in one property buy-and-flip.

How to Flip Houses as a Beginner with No Money

A big part of purchasing the original property is that you will need money upfront. This will cover the original down payment, as well as the renovation costs you need to cover the price of materials and labor. Fortunately, there are ways to purchase a property even without any start-up capital.

Securing a Business Partner

Working with a business partner has a number of benefits. House flipping is a risky business, so spreading risk between one or more parties can be beneficial. However, in exchange for minimizing risk, you will be expected to share the profits with one or more individuals, which will detract from your final profits. You’ll also need to pay back the original cash injection, which will likely come out of your final sum after the house sale.

When securing a private investor, you should write up a contract outlining the exact expectations from all parties. This should include details on who is managing the renovations, the project, and who is paying what upfront. The final division of profits must be outlined on the original documentation and signed by everyone involved.

Bring Your Skills to the Table

When you have no money to put into an investment, you will need to bring skills to the table. This might be your own direct renovation skills, project management expertise, or knowledge of local contractors that you can pay, and still turn over a profit. The business partner will be the person putting up the cash, so you will need to be able to bring your own expertise to the table to be worth investing in.

Work with a Real Estate Investment Group

A real estate investment group (REIC), is a group of individuals who focus their efforts on the acquisition of real estate. Finding a local investment group can help you secure private investors to get involved in your buy-and-flip project with you. They may also have real estate contacts or advice on hard money lenders who can help you with a loan.

Explore Your Personal Network

House flipping investors may be present in your own personal network. Do you know anyone who might be able to help with the start-up fees and renovation costs? You could also consider talking to anyone you know who works in real estate. They may not be interested themselves, but they might have connections to local investors you could approach. You can also use various real estate services to find appropriate houses to buy. 

Use a Hard Money Lender

Hard money loans are short-term loans with potential high interest used to fund a buy-and-flip project. The lender takes into account the potential value of the project and the current financial security of the flipper. When negotiating a hard money loan, if you don’t have an initial down payment, you might need to use other property as security and ask for the final costs to be rolled into the closing costs of the property sale. House flipping loans are a viable option, although you’ll have to make sure you can afford the repayments.

Consider a Home Equity Loan

A home equity loan is when you release cash from a home that you have equity in. You can then use the money for another purpose - like setting up a house flipping enterprise. You can borrow money against the equity and pay it back over time like a traditional loan. This will help you obtain some of the funds you need on your own, without necessarily needing a private investor.

Flipping Houses 101: What If You Need More Help?

If a business partner or a loan isn’t enough for you to start house flipping, then you can pool the resources of multiple individuals. Crowdfunding or syndicates allow you to invest in real estate with multiple investors so you can start your house flipping business with no money. Read on to find out how to leverage the power of multiple individuals when flipping real estate.

Crowdfunding

Real estate crowdfunding sites help multiple individuals with a small amount of money get invested in real estate. Each individual contributes a small amount, like $500, and the fund uses that as a pool to purchase property. Sites like DiversyFund are a good example of these platforms. As an investor, you co-own these properties along with the group of individuals who also contributed to the original investment. 

Syndication

The syndication process is similar to crowdfunding, and is often managed by a real estate syndication company. They will curate a portfolio and show this to the investor that is looking to invest in real estate. The syndication will be made up of multifamily investments, which means like crowdfunding, the initial investment comes from different individuals, and the final costs are pooled into the purchase of property. Unlike crowdfunding, however, the company will approach the investor with a particular portfolio. Crowdfunding platforms traditionally have one set portfolio that investors can buy into.

Wholesale

Wholesale flipping is when you secure a contract with the seller of a house and then have a contact with an end buyer to purchase the property. You are essentially facilitating the end buyer’s flip-and-buy transaction and helping the seller find a buyer. It helps if you have some real estate investors in your network, as you’ll need to find a buyer interested in flipping homes. You obtain a transaction fee for the process and do not purchase the property directly.

How to Flip Houses with No Money and Bad Credit

If you have bad credit, then the focus should be on either working with a business partner or private investor. Hard money lenders are also less strict with credit scores than traditional lenders, but will very rarely loan 100% of the house value, so you may have some extra upfront costs to get the loan. You could also consider the wholesale option above, where you act as an intermediary, or consider a home equity loan to release some initial funds upfront.

How Do I Actually Make Money: Quick Flip Real Estate

If you’re working with other people who are invested in the project, there is even more emphasis on making a quick profit. Before purchasing a property, have a building survey or assess the building yourself to see how much needs to be done. Does the property need a few upgrades to take it to the present day, or will the upgrades be more extensive? If you’re splitting profits with more than one individual, a house with minimum renovations required is less risky. Get quotes for the restoration work upfront, before you decide to purchase a property that needs lots of work.

The 70% rule can help you make a decision on whether or not to invest in a property. The rule is that the flipper should invest no more than seven-tenths of the final value of a property, minus the overall cost of repairs. 

Is House Flipping a Bad Idea?

Flipping houses for a living can be a lucrative business, but it comes with its risks. When house flipping with no money, you’re also taking on additional pressure. as you’ll need to consider that your private investor is also looking to make a profit. When flipping a house, consider some of these additional points to weigh up the risks of investing in a buy-and-flip property.

Where Is it?

It’s not just the property’s resale value you need to consider. Is the location desirable, or at least up-and-coming? Are there lots of properties that need renovation, and is there a demand for renovated properties in the area? You need a pool of suitable houses and willing buyers who are prepared to pay a premium to live in them.

Be Realistic with Your Profits

Look at similarity renovated homes in the area and work out how much the home could realistically sell for. Then review the renovation costs and see what the potential profit is. Is the original purchase price going to give you enough room to make a profit? The bigger the potential profit window, the smaller the risk in investment.

How Much Work Needs to Be Done?

The amount of work that needs to be done isn’t just a cost factor, but a time factor. How long is it going to take you to complete the works on the property? Your private investors or business partner will need to know how long it’s going to take them to get their original investment back and make a final profit on the property. You want to make sure everything is nice and neat when you show the house to potential buyers

Conclusion: What’s the Best Way to Flip Houses with No Money

The ultimate conclusion is that if you have no money or bad credit, you’re going to need to bring renovation skills or a significant network of real estate investors to the table. If you don’t have the start-up capital, you can consider exploring your personal network for a potential private investor or business partner. Don’t know one? Network through local real estate investment groups to find potential partners in your local area.

If you want to flip houses on your own, then a hard money lender or a home equity loan might help you with financing. If this is too risky or you need even more support, then syndication companies or crowdfunding sites might be a viable option. If you do have an active network of real estate investors, then wholesale might help you start a viable flipping business with you as the intermediary.

Ultimately, the best way to flip houses depends on the area you’re looking at, the purchase price of the property, and the expenses and time it will take before flipping. The less work and the quicker the turnaround time, the faster you’ll start making money from your buy-and-flip projects. We hope this guide has given you a comprehensive overview on how to flip houses with no money or credit.

Frequently Asked Questions
How do I learn to flip houses?

Before you start flipping houses with no money, you need to become an expert on your local real estate market. Find out what the standard price for a fixer-upper is and compare it with the final costs of a brand-new house. You’ll need some expertise in home renovation, so look at the costs of a home-renovation project in the area and get a rough idea of how much it will cost. Finally, network with local buyers to see what their price range is and what they will pay for a renovated property.

What is the 70% rule in house flipping?

The 70% rule is that the flipper should invest no more than seven-tenths of the final value of a property minus the overall cost of repairs. As an example, if the final value of a house is $200,000, and the repairs will cost $30,000 then the investor should only invest $110,000. That’s 70% of the after-value costs ($140,000) minus the estimated repair costs ($30,000).

Is flipping houses still profitable in 2022?

Flipping houses is still profitable in 2022, although the profit margins are the tightest they have been in over a decade. This is largely due to the increasing popularity of house-flipping alongside the increased cost of repairs. However, as long as you follow the 70% rule and carefully weigh up the risks of flipping homes, you’re still likely to make a profit. If you don’t feel confident in house flipping but want to invest in real estate, you should consider joining a syndicate or crowdfunding real estate platform.

Where do I find money to flip a house?

Sourcing a private investor is the best way to flip a house and obtain money quickly. If you have some funds or want to fund a house flip alone, then a home equity loan or a hard money lender is a good way to raise the funds. Finally, if you need a lot of support, then investing in a syndicate or crowdfunding can take the pressure off until you have the funds you need to start house flipping on your own.

About the author

Julia A. is a writer at SmallBizGenius.net. With experience in both finance and marketing industries, she enjoys staying up to date with the current economic affairs and writing opinion pieces on the state of small businesses in America. As an avid reader, she spends most of her time poring over history books, fantasy novels, and old classics. Tech, finance, and marketing are her passions, and she’s a frequent contributor at various small business blogs.

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So, you may want to consider: Creating content such as blogs, podcasts, and vlogs to give valuable insight and educate your future clients Providing a guest column for local newspapers or appearing as a guest on local media Making a clear portfolio of all your clients and celebrating any accolades Being happy to interact with people and answer questions through social media or by creating a FAQ page on your website Organizing networking events or classes for buyers, sellers, and other interested parties The real estate you try to sell on behalf of clients will sell itself as long as you present and price it correctly. However, human interactions are an important aspect in the client’s decision-making process. Prove your value, and you’ll win more contracts. #7. Empower your team The vast majority of consumers believe the way a company treats its employees is a measure of trustworthiness. Furthermore, you’ll find that your employees are responsible for many of the client interactions. So if you want to know how to get business in real estate sectors, establishing a sense of consistency across all teams is vital. In addition to realtors and salespeople, your team may include mortgage advisors, receptionists, and other valuable staff members. Some of the best ways to build a better team include: Going the extra mile to enhance your recruitment processes Investing in a clear mission statement and vision statement that underlines your purpose as a realtor Investing in valuable staff training practices to ensure all employees deliver consistent experiences for potential buyers and sellers Implementing wardrobe guidelines and using company cars to help your agents make a better first impression Making yourself available as a mentor or simply answer questions your staff may have Running a successful real estate business cannot be a one-person show. By building the strongest possible team, you’re giving yourself the best chance of winning real estate clients while putting your mind at ease. #8. Show that you understand them 52% of homebuyers say the main purpose of a real estate agent is to find their desired property. So, in order to provide the best service as a realtor, you need to understand people as well as properties. After all, the assignment isn’t to help them find the perfect property - it is to find the perfect property for the client. When it comes to handling a seller, it’s about getting the right price. Clients looking for a property will give you a few chances to get it right but will soon look elsewhere if you keep showing them the wrong properties. Get to know them by: Actively listening to what they tell you about their dream home and, more importantly, their priorities. Being honest with them throughout the entire process, especially when it comes to their budget and the fees they can expect to face. Looking into issues that may affect them most, such as commute times or local attractions. Where possible, showing evidence of past examples where you’ve helped clients in similar positions. Staying in regular contact with them throughout the process. The final point is of particular importance because most people will naturally wrestle with their decision for months before making a commitment. If you want to know how to get clients in real estate, persistence is key. A good CRM software that helps you to follow up is vital. #9. Look to new avenues Just under two-thirds of American families own their primary place of residency. So, one of the best ways to win new clients in real estate is to branch out. This allows you to reach new demographics and avoid the threat of hitting a bad patch if the market takes a plunge. Here are a few ways to secure more leads in real estate: Work with landlords, as over 35% of homes are rented. Look at land and home packages in the fields of agriculture. Work at commercial properties. Branch out to other states or international markets. Add luxury homes or family homes to your existing platform. In addition to exploring new markets, you should also consider new services. Offering a property management service to landlords or free virtual tour video creation to home sellers may give you the edge and help you get more real estate customers. #10. Build your network The real estate SOI or sphere of influence is a powerful tool that allows you to make the most of your contacts as well as word-of-mouth referrals. With this in mind, building your network should be an ongoing process. While organic network building through non-business matters is great, you should not ignore the benefits of direct real estate networking. You can bolster your network with a range of SOI real estate endeavors, such as: Hosting open houses for experienced agents. Directly working with other agents, especially on bigger contracts. Capturing relevant contact details while working open houses. Handing out business cards to friends, family, and local businesses. Joining a luxury real estate council. The realtor game isn’t just about properties. It’s also about people, and the sooner you realize this, the better. The best estate agents don’t just sell homes; they sell dreams. A larger network allows you to match the right home to the right person. Further Reading The Difference Between a Townhouse and a Condo - A New Homeowner’s Guide What Do HOA Fees Cover? Understanding Homeowners Associations  What Is Due Diligence in Real Estate? Conclusion Knowing how to get clients in real estate isn’t the only part of making your realtor business work, but it is the most important. To get the desired results, you may have to present yourself in a more effective way, revamp your real estate marketing techniques, or reach out to new audiences in different areas of the market. One way or another, attracting and dealing with clients in real estate is an ongoing process. The grind never stops. But when you get it right, your business will be as safe as houses.
By Julija A. · February 17,2022

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