If you are looking to get into real estate investing in 2021 and make a quick profit, house flipping can be a lucrative investment strategy. House flipping is where you buy a distressed property at a discounted price, increase its value by making necessary repairs and improvements, and sell it at a higher price. However, flipping houses requires a sizable cash investment. Apart from the cost of buying property and doing the renovations, you need funds to cover homeowners’ insurance, property taxes, and utilities until when it sells. If you don’t have enough cash with you or you do have it but simply want to limit your risk, you need to learn how to flip houses with no money.
While you might have been thinking that you need a substantial amount of money of your own or a good credit score to qualify for a loan, this certainly isn’t true. Learning how to flip houses with no money or credit is very possible. There are plenty of ways to get funding if you can prove that you deserve it. You don’t have to use your own money.
Watch out real estate video below to learn how to flip houses step by step:
To learn how to flip a house with no money, follow these 5 steps:
Related: Will the Fix and Flip Strategy Be Profitable in 2021?
1. Find a Profitable Market for House Flipping
Whether you know how to flip houses without money or not, the first and most important thing is to find a profitable market. Like in every real estate investment strategy, location is key when flipping homes. Not every market will be profitable for house flipping. The market you invest in will determine how much you can make from your house flipping project.
You need to make sure that the market conditions are right for house flipping before you choose to invest in a particular area. You want to find a market that’s growing but affordable. If you invest in a declining market, you risk selling at a loss if the value of the property goes down.
Here are some of the main things to consider when looking for the best cities to flip houses:
- Seller’s market. Properties sell fast and get multiple offers, indicating a strong demand.
- Areas with older homes and fewer new buildings. This offers more opportunities to buy distressed properties.
- Strong local economy with a good job market
- High population growth
- Low crime rate
- Proximity to amenities like schools, shopping centers, hospitals, etc.
An easy way to find up-and-coming neighborhoods that fit your budget in the US housing market is to use Mashvisor’s real estate heatmap.
2. Identify the Best Financing Strategy for You
If you are thinking of flipping houses with no money, you need to line up financing early enough. The last thing you want is to find a lucrative offer but don’t know how to fund the deal. Before you make an offer, consider the financing options available to you and pick one that suits you the most. Basically, if you don’t have the cash to invest in house flipping, you’ll need to use other people’s money. Fortunately, there are plenty of ways to do so.
Here are some common options on how to flip houses with no money in 2021:
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Partnerships
If you are wondering how to start flipping houses with no money, one of the best ways to do so is to partner with someone with enough funds to pay for the initial cost of acquiring the house and the rehab costs. This is a great option if you have the technical skills, experience, and time but lack the funds.
As a partner, you will offer value by managing the logistics of the house flipping project. This includes purchasing the property, hiring contractors, managing the flip, and quickly selling the house. Your partner may have the capital but lack the time or skills to flip a house. Once the house has been successfully flipped and sold, the profits will be shared between the two of you.
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Private Money Lenders
A private money lender is an individual with substantial liquid money to loan you. This may be a friend, a family member, a colleague at work, or another person you know. The key benefit of using these real estate investment loans is that they are more flexible. Individual lenders are usually more open to negotiating loan repayment terms compared to other lenders. If you want to find private investors, you need to go out there and build your network. Before you seal the deal, be sure to shop around first.
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Hard Money Lenders
If you are looking for how to flip houses with no money and bad credit, consider hard money loans. Since hard money lenders use the property you are flipping as collateral, they are less concerned about your credit history. However, they are usually expensive as they charge very high interest rates. So, make sure you can rehab and sell the house quickly. The collateral system also makes this a riskier financing option. It is one of the rehab loans typically uses by experienced investors.
For first-time house flippers with little experience, getting these fix and flip loans may be difficult. Remember, they are in business and are keen to minimize risk. To increase your chances of getting a hard money lender to fund your house flipping deal, make sure it’s very profitable. When looking for ‘hard money lenders near me’, you should pay close attention to their loan fees, interest rates, and terms.
Related: Where Can You Find the Best Financing for Flipping Houses?
3. Find a Fix and Flip Deal
One crucial part of how to flip houses with no money down is finding a lucrative deal. For you to easily find a lender or convince investors to partner with you, you need to convince them that the house flipping deal will be profitable. This comes down to the numbers.
According to the 70% rule of house flipping, the maximum price you pay should be 70% of the property’s after repair value (ARV) minus the cost of repairs and improvements. If you are wondering what is ARV in real estate, it is simply an estimate of the value of a property after necessary repairs and renovations have been done.
To find a profitable house flipping deal, you want to search for an investment property that is priced below market value. These are often distressed properties like short sales, foreclosures, and bank owned homes. There are many strategies to find below market off market deals for house flipping including networking, real estate agents, wholesalers, and direct mail.
However, the easiest method is to use Mashvisor. The Mashvisor Property Marketplace allows you to search and analyze a wide variety off market properties in the US housing market in a matter of minutes.
Related: How to Find Off Market Properties Using Real Estate Investment Software
4. Do the Renovations
Once you have bought the house you intend to rehab, the next step is to begin renovating it. Keep in mind that for you to maximize your profit, you keep your rehab costs low and finish the rehab work in the shortest time possible. It’s important that you set up a budget and stick to it. Focus on cost-effective renovations that will improve the value of the house most significantly. If you have house flipping skills and can do it on your own, you can save a lot of money by not hiring contractors.
5. Sell the House
You want to sell the flipped property at a good price and as fast as possible. If you invested in a good market, ran the numbers before buying, and stuck to your budget, this should be easy. However, you’ll also need to price and market the property well.
The Bottom Line
While flipping houses can be a lucrative real estate investment strategy in 2021, it often costs a lot of money. If you don’t have enough funds or don’t want to risk your own money, you need to learn how to flip houses with no money. While there are several ways you can fund your rehab project, you need to find highly profitable deals to boost your chances of obtaining funding. Be sure to use Mashvisor’s real estate investment tools to easily find profitable markets and investment properties in the US housing market.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
