Although it can be challenging, there are still a few ways to flip houses with no money down in 2021. If you don’t have money for a fix-and-flip, you will still need to bring some value to the transaction, which could include fix-and-flip experience, a strong network, or renovation skills.
If you have some experience flipping homes already and are looking for a financing partner, consider Kiavi. It offers fix-and-flip loans up to 90% of the loan-to-cost (LTC) ratio and 100% of the rehabilitation costs, with rates starting at 6.5%. See how much you can prequalify for online in minutes.
What Is a Fix-and-Flip?
A fix-and-flip is an investment where you buy property that needs repairs below market value, renovate it, and sell it for a profit. Fixing and flipping real estate can be lucrative when done properly. It involves knowing real estate market values, evaluating renovation and carrying costs, and timing the sale.
Renovations don’t have to be extensive. Sometimes, terrific deals are made on properties that simply need cosmetic upgrades, bringing them into the 21st century. Still, you can expect to invest sweat equity into a no-money-down fix-and-flip.
How Flipping Houses With No Money Works
To flip houses with no money, you’ll have to find a property with a good return on investment (ROI) and find someone willing to put up the cash. This can be more challenging if you’re new to real estate investing. However, if you can demonstrate that you can manage the project and plan to invest sweat equity, you may find an investor or lender willing to put up the cash.
Today’s fix-and-flip investors need to get creative and leverage “other people’s money” (OPM) if they don’t have their own money to invest. Aside from down payment, investors will need additional money for the fix-and-flip project to cover other costs, including:
- Money for renovations
- Taxes, insurance, and loan payments while they own the house
- Keeping the utilities on
- Marketing the property for sale
- Real estate agent’s commission―if the investor uses an agent
1. Flipping Houses With No Money Using Private Investors
Pros of Using Private Investors
Cons of Using Private Investors
Construction and management skills add value
No track record limits access to investors
Leverage other people’s money
Big time investment in exchange for cash
Divide tasks based on skills
Poor communication between partners poses challenges
Investors may expect a larger percentage of profits
A private investor or private money partner can assist you in starting a fix-and-flip business with no money down. Private money is cash you borrow from a business partner or partners, an investment group, or another existing relationship. In exchange for their cash, the private money partner expects to make a profit from the sale like you do.
A good partnership agreement should be in writing and should provide detailed explanations of everyone’s roles. It also should include how much money is being invested and by whom, who is managing the project, making key decisions, how profits will be divided, and who is completing the renovations.
Find Private Investors Using Investment Group Networks
An investment group is an organization that brings together local real estate investors and other industry pros like hard money lenders and title companies. It provides networking opportunities and the chance to collaborate on investments, including fix-and-flip projects.
Local investment groups can be found by doing a quick Google search using “your city + real estate investment group,” or you can look on Meetup. You can also get recommendations from other investors and real estate agents. Some national investment groups include National Real Estate Investors Association (National REIA) and National Real Estate Investors Club (REIC).
Use Your Existing Network to Find Private Investors
Another option for finding private investors for flipping houses with no money is to tap into your existing business connections, friends, family, neighbors, and coworkers. Also, share your investing goals with real estate agents, appraisers, inspectors, or real estate attorneys that work with investors. They may know someone looking to invest.
Who Private Money Is Right For
Private money is right for fix-and-flip investors who have contracting, rehabbing, or project management experience. This is because they’ll have to add value that matches the money invested by a private money partner.
2. Syndication or Crowdfunding for a No Money Down Fix-and-flip
Pros of Syndication and Crowdfunding
Cons of Syndication and Crowdfunding
Real estate syndicates have investors looking for projects
Syndication requires knowledge and larger projects
Crowdfunding pools smaller investor funds
Marketing for investors is a lot of work
Investors are hands-off
More investors can create challenges
If done well, everyone makes money
Real estate syndication is when a group of investors pools money to invest in real estate. One investor acts as the syndication sponsor, managing the project, and the other investors are limited partners. Most syndications operate as a limited liability company (LLC). Investors make money―through both rental income and property appreciation―when the property is sold.
To get involved in real estate syndication, you can search online for reputable syndicates to join or start your own. Technology has made syndication sponsorship much easier than in the past, and some software markets the properties for sale in addition to matching investors to projects.
No-money Down Crowdfunding
Similar to real estate syndication, crowdfunding real estate is accomplished by individuals investing in a fix-and-flip project. You can do an online search for real estate crowdfunding platforms to compare which one will best fit your project. You register and follow the prompts to set up your campaign.
You’ll need to put in a lot of work to market the project to investors. Start with your network and encourage people to share your campaign. Some online crowdfunding sites provide tutorials to get you started.
Who Real Estate Syndication and Crowdfunding Are Right For
Syndications tend toward larger investment projects or portfolios while crowdfunding can be for a single project or smaller investments. If this is your first project, you might start with crowdfunding. If it’s your first syndication, you may want an experienced project manager to handle the details.
To be successful in real estate syndication with no money down, you’ll need proven project management experience and a larger commercial investment project. If it’s your first fix-and-flip, and a it’s smaller project, it’s better to start with crowdfunding.
Many people who attempt to crowdfund a project list their project on a popular site and expect investors to find it. Crowdfunding requires a network and knowing how to market the project, making it appealing to investors.
3. Flipping Houses With Seller Financing
Potential for 100% financing
The seller needs to have no mortgage or a lot of equity in the home
Flexible repayment structure
Seller-financed homes are hard to find
Less stringent credit requirements
Sometimes higher interest rates and shorter loan terms
Seller financing is when a property owner acts as the lender on real estate. If you can find a property that needs repairs and an owner willing to finance it, or at least finance your down payment, you can structure the deal by offering the seller monthly principal and interest payments until you flip the home.
Another option, instead of monthly payments, is to offer them a percentage of the profits when you sell. You could also offer them both with regular monthly income plus a final balloon payment that pays off the loan and gives them some of the profits.
Who Flipping Houses With Seller Financing is Right For
Seller financing is a good option for a fix-and-flip with no money down if you can’t get financing from other means or find properties that a bank won’t finance because they need a lot of work. To find a seller-financed property, you’ll need to identify properties that need work and a seller who has substantial equity in the property.
4. Flipping Houses With No Money by Wholesaling
No expenses or costs
You need knowledge of the process
Less risky than doing the fix-and-flip yourself
You’ll need to find investors
Can do multiple projects at one time
You’ll have to develop an exit strategy for each project
No loans or credit requirements
You make less than an investor
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.
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. It’s best for beginners to have a real estate attorney review contracts.
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.
5. Flipping Houses Using Hard Money Loans
Pros of Hard Money Loans
Cons of Hard Money Loans
Will finance distressed properties
Higher interest rates and fees
More lenient borrower qualifications
Need substantial equity in another property for no money down
Short approval process and funding time
Preference to experienced fix-and-flippers
Hard money loans are short-term loans commonly used to fund fix-and-flip projects. Hard money lenders focus on the project potential and the borrower’s experience with a fix-and-flip more than their credit. Some also factor in the investor’s personal financial statement.
Finding a hard money loan 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 instead of a down payment.
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% to 25% or more down, so you must have equity in another property if flipping properties with no money down.
Who Hard Money Loans 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.
Alternatives to Flipping Houses With No Money
Trying to get funding for flipping houses with no money can be challenging. If you don’t have a proven track record, good credit, or construction skills, many investors will be wary of putting up the funds. Don’t lose hope, however. Here are some other options to consider.
Home equity loan or line of credit: If you have substantial home equity, you could take out a loan or home equity line of credit (HELOC) for the down payment and get a loan for the purchase and rehab costs.
- Cash-out refinance: Refinance your home and take cash out of your equity for a down payment.
- Borrowing from a 401(k): You can take out a loan against your 401(k) to buy an investment property.
- Credit card advance: Least favorable, but you can get a cash advance for a down payment. Pay attention to how it impacts your debt-to-income ratio (DITR).
- Borrow funds from family and friends: Share your investing goals and ask if they’d be willing to help you get started.
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, leaving enough room for everyone to make money when it’s finished being rehabbed.