I have had many people ask me over the years about the best ways to find funding as a new flipper. People often get into the mindset that you must have a chunk of money saved up to get started, but that’s certainly not the case. It’s actually possible to flip houses with no money down.
Be aware that you’re still going to pay for each house upfront and in cash, but you’re not going to be putting any of your own money down on the investment. This is absolutely the best way to flip a house. You don’t have to be independently wealthy; you just need to know where to look for funding and how to approach potential investors.
The Difference Between Private Lenders and Hard Money Lenders
As you look for ways to pay for flips, you’re going to hear a lot about different types of lenders and investors. Private lenders can be some of the best sources for funding when you’re thinking about flipping a house with no money down. Hard money lenders can also be a good choice, as they make it easy to borrow cash for flipping homes, but be careful of the terms of their loans as they can also come with hefty interest payments and additional fees.
A private lender is someone who won’t necessarily think of him or herself as a lender. They’ll be someone who has liquid capital that they want to invest wisely, and you can help them invest it. However, private lenders will almost never advertise that they’re looking for new and promising ways to invest. They won’t come to you; you have to go to them.
Your private lender will likely be someone you know. They’ll be a colleague, a doctor or attorney in your area, someone your kids play little league baseball with, etc. The best way to flip a house with money from a private lender is to approach them softly. Talk about your investment ideas first. Then discuss some of their investments with them, too. Finally, offer to discuss an investment opportunity that will get them a positive ROI quickly and easily.
When approaching a private lender, you’ll need to offer them an attractive interest rate, one that will hopefully perform better for them than other investment opportunities’ appreciation in the time you’ll need to buy and flip your property. Now, this rate may be higher than your personal ideal, but it will ordinarily be lower than a hard money lender. It also won’t involve those extra fees, either.
Private Lender or Partner?
Now, when talking to the person you’d like to be your private lender, you may also want to keep your mind open to taking them on as a partner instead. With an investment partnership, your partner will agree to put down the money for the investment, while you do all the legwork. Once you flip the house, you’ll split the profits.
While a partnership isn’t for everyone, if you’re looking for an ongoing relationship and financial assistance with future flips then this is a great way to go about things.
It’s absolutely possible to flip houses without spending a single penny of your own money!