There are ways to flip houses with no money but be prepared to bring value in another way like wholesaling property by assigning contracts, building a private investor network, or giving up equity in another residence. Flipping houses with no money requires creativity, sweat equity, and the ability to take on risk.
If you have some experience flipping homes already and are looking for a financing partner, consider LendingHome. It offers fix-and-flip loans up to 90% of loan-to-cost (LTC) ratio and 100% of rehab with rates starting at 7.5%. See how much you prequalify for online in minutes.
How Flipping Houses With No Money Works
Flipping houses with no money can be an involved process. Typically, you’ll have to find an attractive investment, convince an investor or lender to put down money, and then invest some sweat equity. However, when people talk about flipping houses with no money, they typically want to know how to finance the property.
You can typically flip a house with no money in the three ways.
1. Flipping Houses With No Money by Wholesaling
A real estate wholesaler contracts with a seller to purchase property at a discount. Then, they remarket the home at a higher price, assign the contract to the new buyer before closing, and never take title. Wholesalers make a spread from the original contracted price and the amount paid by the new buyer or a fixed fee.
When wholesaling a fix-and-flip property, you’re selling the opportunity to purchase a property without ever taking title. You make an assignment fee for acting as an intermediary. It is best for beginners to have a real estate attorney review your contracts to make sure you include assignment contingencies and to hold escrow funds.
Who Wholesaling Is Right For
Wholesaling is right for people who have an existing network of investors looking for fix-and-flip deals. Wholesalers need to understand their local markets, real estate contracts, construction cost, and investor’s desires for real estate returns.
“The best deals are usually found off-market. You don’t need a real estate agent or a real estate license. Build a network with local investors by attending real estate meetups and real estate education seminars. Also, use LinkedIn to network locally. I’ve bought all but one of my deals off-market from wholesalers.”
— Adam Doran, Real Estate Investor, Adam Doran
Most wholesale contracts are bought by real estate investors that want to fix and flip a property. These contract assignment opportunities add value to their business. The wholesaler finds the property, negotiates a deal with the seller, and the investor goes to closing and rehabs the property.
Pros and Cons of Wholesaling
Wholesaling can be a great way to learn how to flip houses with little to no money down. There are pros like using sweat equity and information to make cash, and there are negatives like being responsible for buying a property you can’t afford.
The pros of wholesaling include:
- Provides a way to get into real estate with less money than traditional methods
- You don’t pay closing cost, down payment, or construction cost
- If done right, it is less risky than putting a large sum of money into a project if you’re inexperienced
- You can do more than one at a time
- You don’t need good credit or loans
The cons of wholesaling include:
- You must be familiar with contracts and knowledgeable about the process
- You need a pool of active and ready investors to purchase your contracts
- You need an exit strategy for each transaction
- You make less than the real estate investor
Wholesaling Tips for Flipping Houses With No Money
If you want to be a wholesaler keep these tips in mind:
- Be transparent: Let both the seller and the buyer know you are a wholesaler; ask the seller for a few weeks to find a buyer but don’t hold up the property too long
- Include contingencies: Make sure your contract allows you to assign the contract to anyone before the agreed settlement date and releases you if not sold
- Have a lead generation & marketing plan: You want to sell the contract yourself, without a real estate agent, build a network of buyers and sellers, and create a marketing plan
- Find product & properties: This is your sweat equity, it’s how to start flipping houses with no money
- Know the property: Know the estimated repairs needed and the after repair value (ARV), and leave enough room for the investor who purchases your contract to make money
- Qualify your buyers: Your information is valuable, make sure your investor leads are qualified, have cash or financing; some wholesalers require nondisclosure agreements (NDAs) to be signed
- Save your proceeds: Save the proceeds for your next step of flipping houses with money
If wholesaling sounds interesting and you would like to find out more, check out our in-depth guide on how to wholesale real estate the right way. This article dives deeper into wholesaling contracts as well as how to find properties and how to find investors to purchase them.
2. Flipping Houses With No Money Using Private Investors
A private investor or private money partner allows you to purchase begin a fix-and-flip business with no money down. Private money is considered cash from a partner or partners, an investment group, or an existing relationship. In exchange for their cash, the private money partner expects an agreed upon return.
Things to look for in a prospective partner include:
- A qualified investor: Make sure your partner has access to cash or loan products
- A good communicator: You will need to both be transparent about the purchase, the construction phase, and the sales phase
- Realistic expectations: Investors who bring the cash may not understand all the sweat equity partner does; make sure you both understand your role and scope of work
Once you find a partner, decide together how you will split the workload and the proceeds from flipping the property. Regardless of what each partner brings to the table, make sure you have a partnership agreement in place. This will help prevent disagreements over each partner’s roles and their expected proceeds.
For example, you identify an attractive fix-and-flip deal and have the expertise to manage the rehab, which is your sweat equity, and your partner uses his resources ― cash or loan ― to fund the deal. At the end, you distribute the profits equally or according to your predefined agreement.
“One common form of partnership for home flipping is when one partner supplies the entirety of the funding, and the other partner brings the deal and manages the renovations. The partners then split up the profit how they see fit. Similarly, a home flipper can avoid putting any money down on a flip by utilizing a lender with a down payment requirement, and then finding a partner to make that down payment in exchange for profit from the flip.”
— Lucas Machado, President, House Heroes LLC
There are several options of where to find private money partners for flipping houses with no money.
Flipping Houses With No Money Down Using Investment Group Networks
An investment group is an organization that brings together local real estate investors and other industry related pros, such as hard money lenders and title companies. It provides networking opportunities and the chance to collaborate on investment deals including fix-and-flip projects.
If you can manage a rehab but need a money partner, you can use the connections you meet at an investment group to fund a deal using an investor’s money. It’s an opportunity to meet and form relationships with people you wouldn’t otherwise get to interface with.
An investment group can be found in your local area by doing a quick Google search using “your city + real estate investment group.” You can also get recommendations from other investors and real estate agents. Some national investment groups you can check out first include National REIA and National REIC.
“If you join a real estate investment group in your area, you will build your cash buyers list, meet the most honest hard money lenders, and find the most creative title companies for doing deals like wrapping mortgages and buying subject to the mortgage. You can build your power team and expand the options available to you.”
— Todd Hutcheson, Founder, IBuyHomes.com
Using Your Existing Network to Flip a House With No Money Down
Another option for flipping houses with no money is to tap into private money using your existing business connections. These relationships can be found through friends, family, neighbors, and coworkers. Also, consider real estate professionals like real estate agents, appraisers, inspectors, real estate attorneys, or other investors.
“Find a real estate agent that understands investing. Most real estate agents focus on helping people buy and sell primary residences. Helping investors purchase investment properties takes different skill sets. Your real estate agent needs to understand all the financial metrics and find properties to meet your investing requirements.”
— John Myers, Real Estate Agent and Qualifying Broker, Myers & Myers Real Estate
Who Private Money Is Right For
Private money is right for those flipping houses with no money who have contracting, rehabbing, or project management experience. This is because you’ll typically have to add value that matches the money invested by your private money partner. Successful private money partnerships are those that have a balance of skills and needs.
Pros and Cons of Using Private Investors
Private money has its advantages and disadvantages when using it to flip houses with no money. There are several pros and cons of using private money for flipping houses.
The pros of using private investors include:
- Your sweat equity and construction management skills are valuable and considered equity
- No money down
- Dividing up tasks so that you have less to do
- Splitting the risk if something goes wrong during the deal
The cons of using private investors include:
- You will need to invest the most time, effort, and expertise
- Some investment groups charge members a monthly fee or other costs
- Someone else will need to sign off on your decisions
- Lack of communication between partners can lead to a longer timeline which increases project carrying costs
3. Flipping Houses Using Hard Money Loans
Hard money loans are short-term loans commonly used to fund fix-and-flip projects. Hard money lender underwriters focus on the project potential and the borrower’s experience rehabbing homes more than the borrower’s credit. If you own a property with equity, you may be able to qualify for a hard money loan.
Reasons investors use hard money loans:
- Quick pre-approval: Lets you know fast if you should move forward with an offer
- Fast funding times: Allows you to close quickly and get started on the renovations
- Few qualifications: Low credit score requirements and no personal income verification
- Interest-only payments: Keeps your monthly overhead lower
To flip a house with no money, ask your lender if they will roll the closing cost into the deal and cross collateralize for the down payment. Hard money lenders require 20-25%+ down so you must have equity in another property if flipping properties with no money down.
A hard money loan, in general, is easy to find, but one with no money down can be challenging. Start by calling hard money lenders and asking about their down payment requirements. Tell them about your project and other properties you own that could be used in lieu of a down payment.
Who a Hard Money Loan With No Money Down Is Right For
A hard money lender will only offer a loan with no money down if you have other assets to pledge as collateral. For this reason, this option for flipping houses with no money is best for experienced investors with one or more existing properties. It’s also good for owner occupants with significant equity in their home.
Pros and Cons of a Hard Money Loan With No Money Down
A hard money loan with no money down isn’t a traditional financing tool so that it’s harder to find than hard money loans that require down payments. You will need to have equity in another property to avoid using cash for a down payment.
The pros of using a hard money lender include:
- Loan is acceptable for a distressed property
- More lenient lending criteria, qualifications are mostly based on the property and your cross collateral
- Lending and credit criteria are not as strict as conventional lenders (check your credit for free here)
- Fixer upper properties are accepted
- Short approval process lets you compete with cash buyers
The cons of using a hard money lender include:
- Hard to find these lenders
- Being a short-term loan, a strong exit strategy must be in place
- Must own another property that has a lot of equity
- High closing cost
- Lenders prefer borrowers who have renovation experience
For more information on hard money loans and where to find them, check out our hard money lender directory. Read it to find out which hard money lender can provide a rehab loan for your investment property.
How to Find the Right No Money Property
Flipping a house with no money often requires the help of others through wholesaling the deal, using private money or using a hard money lender. Because they have to agree to the deal, you need to know how to identify the types of no-money-down opportunities that excite them. It’s the first step to flipping houses with no money.
Wholesalers, private money lenders, and hard money lenders all want a deal that has upside potential. Investors that buy wholesale properties and private money lenders focus on the neighborhood, school ratings, and local amenities since they affect who will buy the house and for how much. Hard money lenders look more at if the deal makes senses from a numbers’ standpoint. They also consider if the investor has prior real estate experience and what their exit strategy is.
You need to get someone to fund your house flip, so you want to buy in a stable or up-and-coming neighborhood that has desirable amenities for homeowners. You also want to choose a property that will have enough room for everyone to make money when it’s finished being rehabbed.
The Bottom Line
Flipping houses with no money down involves being creative, thinking outside the conventional loan box and working closely with other investors. Build your network of investors, real estate agents and lenders and buy in a stable or up-and-coming neighborhood and leave enough room for everyone to make money when it’s finished being rehabbed.
If you have some experience flipping homes already and are looking for a financing partner, consider LendingHome. It offers fix-and-flip loans up to 90% of LTC and 100% of rehab with rates starting at 7.5%. See how much you prequalify for online in minutes.