Can You Really Flip Houses With No Money? Fix and Flip Loans 101
Can you really flip houses with no money? Is securing a loan hard? This guide will break down how you can start fixing and flipping with no upfront cost.
You’ve seen the late-night infomercials. You’ve read the best-selling books about others who’ve done it. But you might still be wondering, can you really flip houses with no money?
The short answer is yes, you can. The harder answer is you still need capital to run a business in America today. Can you run a business with no working capital? It’s very difficult, to say the least.
But don’t worry. We won’t leave you at that. Keep reading to see how you can start flipping houses, and make a lot of money doing it, even if funds are tight right now.
Can You Really Flip Houses With No Money?
Many investors before you have tried to make money flipping houses. Some made vast amounts of money, some did not.
Just as in any business, there will be examples of those who make ridiculous amounts of money, and those who lose their shirts trying to get their new venture off the ground. For you, to see success, the first thing you need to do is your homework.
With a little research, you can set yourself up for success flipping houses for a profit. Can you make a profit? Yes. Do you risk losing a lot more money? With poor business decisions based on your gut and not on research, of course.
However, if you’re still wondering is it profitable to flip houses, this will depend entirely on your work ethic, research, good decision making, and whether or not you can secure financing.
Is fixing up a house worth it? We think so. So, if you’re interested in building your new business from the ground up, then let’s get started.
How to Flip Houses
On the surface, the TV shows make it look so easy. You find the worst house in a neighborhood, fix it up, and sell it for a huge profit. Unfortunately, the real world isn’t quite so neat and tidy.
You will need to do your research on the neighborhood. Robert Kiyosaki from Rich Dad, Poor Dad suggests starting in your own neighborhood as you likely know the most about it.
You need to know specifics, such as are they building a large power plant nearby? Are the schools good? Is there ample employment options for new families moving into the area?
By knowing the value of the property, as well as having a good idea of the future value of the neighborhood, are key to starting your own real estate investment business.
You also will need to know the value of the home you want to purchase. Before you choose the home you want to flip, ask yourself these questions:
- How much maintenance has been done lately?
- Did the homeowners recently run into financial problems and need to move suddenly?
- But up until then, the home was being maintained?
- Or has it been the eyesore of the neighborhood for a long time?
Knowing the answers to these questions will help you to gauge how many repairs will be needed and what your investment will be to fix up the home.
Likewise, you also have to do your homework and build a solid team around you. Choosing the right contractor with whom you work well, and that you trust, is key to making money flipping houses.
There are many decisions that will go into flipping houses. Each time, do your research, surround yourself with a good team, and you can succeed at making money flipping houses.
The Elephant in the Room
So, do you need money up-front to make money flipping houses? This is the $64,000 question and doesn’t have a straight-forward answer.
Yes, of course, having money makes investing easier and opens more doors for you. But, if you’re willing to work hard and knock on more doors, then no, you don’t need a lot of money right away to start making money flipping houses.
One of the first questions you might want to ask yourself is how risk-averse are you? How willing are you to take on large amounts of debt with no money down? Or are you looking for the best deal and the best interest rate.
To get a lower rate, lenders will want to see some money down from you. But if you don’t have any money then you can still get financed. It will, however, be at a higher interest rate and will have higher origination fees. You can also spend some time saving some money and improving your bad credit.
Don’t let bad credit or lack of financial resources stop you from chasing your dream of buying, fixing up, and selling homes. Work with a trusted lender and you can start building your dream business today.
Other Costs Associated With Flipping Houses
Remember, borrowing money to get the house is only the first step. You also still need to worry about how you’re going to fix up your flip. And don’t discount other expenses such as maintenance and upkeep costs.
You will need to consider the property taxes in your area, if there is an HOA in the neighborhood, and if there will be any seasonal maintenance you need to worry about such as snow removal or yard work.
Most investors keep their day job when they first start out to help finance these costs as well as their daily living costs. Many investors dream of being free from going to work each day. But, before you walk out on your 9-5, consider how much capital and savings you will need to cover any discretionary costs around your properties.
Are you still interested in getting started in flipping houses? Do you have more questions about how much money you’ll need? While we’ve shown you that you can make money flipping houses and that it is possible with little money, let’s keep going with your next steps.
As we’ve established, if you’re willing to take some risks, you can get started flipping houses without much money down. Many investors get started with hard money loans. These types of loans come with higher interest rates but they can be a valuable option to get started if you don’t have a lot of money or poor credit.
Hard money loans use assets as collateral instead of a down payment or good credit history. So, if you find yourself asset-rich and cash-poor this can be a viable option for you.
Many large banks don’t deal in hard money loans, we suggest that you’ll need to do some research to find a financier who is willing to work with your situation.
How We Can Help
The good news is that when you find a direct lender, they will take the time to look at the full picture. Sure, you possibly have some dings to your credit but you can also show recent medical problems that caused you to fall behind. And outside of that, you have a regular history of on-time payments.
Or possibly you have income not typically counted such as a trust or dividend income, and this can work in your favor with a direct lender who has more wiggle room in their qualification process. There are non-conventional financing options available when your situation is less than conventional.
As you’re researching lenders, you will want to ensure that you’re working with someone interested in helping an investor. Many portfolio loans will come with prepayment penalties, so be sure you find a direct lender who specializes in fix and flip loans.
If you don’t have a lot of capital to get started, you will need to secure financing somehow. And if finding investors isn’t an option for, try working with a lender such as Orchard Funding. We specialize in helping investors start their business so they can follow their dream of fixing and flipping homes.
Get Started Fixing up Homes Today (Even If You Don’t Have Any Money)
We started out asking ourselves, “Can you really flip houses with no money down?”
And we saw that it can be difficult to answer that question succinctly. However, we also saw that with tenacity, research, and a good lender willing to work with your situation, you can still make money flipping houses.
If you’re ready to get started building the business of your dreams flipping houses, then contact us today. Our lenders can work with you to find the right loan for your unique situation.