Now I know that the above topic looks like a Ponzi scheme. For a newbie, real estate investor flipping a house with no money seems impossible. It makes sense though as it is pretty easy to invest in real estate with money. But there are ways where flipping houses with no money can take place. You just need to seek discomfort (getting out of your comfort zone) and find how, to begin with, it.
Flipping of Houses With No Money Down
When we talk about the above notion, it simply means that we are not going to fund the projects ourselves. Therefore, we have to use “other people’s money” (OPM) to finance the deals. Here a lender will provide you with a loan in order to purchase and rehab the property. After that, you need to repay them the initial loan amount (principal) and interest.
But wait. Where will you find OPM for flipping houses? As traditional banks and lenders hardly extend a loan covering both the property and rehab.
Real Estate Investor Partners
Now, get started with finding a partner who has got the money to make investments. It will be great if you had any close friends, relatives, business associates, co-workers, or any real estate investor who knows you as a person. You see, everything is about trust or credibility. A real estate investor with money will only invest with you if he knows you or has trust in you. Therefore finding someone who is close to you makes sense.
You can also start thinking about the people you see on a daily basis. This may include:
∙€Someone within your network who runs a business
∙€Your attorney
∙€Anyone who invests in the stock market
∙€Hotel owners (maybe a friend of yours)
After this, you ask the partner to finance the deal with his own money and you’ll do all of the heavy liftings such as legal work, documentation, etc. In return, both of you will split the profits. But make sure that you are aware of the nitty-gritty of flipping houses and have a solid business plan to attract the partner.
It is advisable to find an experienced house flipper as a partner, this will be great for your endeavors. By giving them a deal that is promising, exhibits an impression of your understanding of the market. Display your curiosity and honesty to them.
Private Money Lenders
Private money lenders are by far the best option in getting the funds for no money deals. You will come across various individuals who have the money but do not wish to be an active investor. They are not actively seeking investment opportunities but they have what you don’t ‘money’. Private lenders can be your family members, acquaintances, or friends (regular people) who have the money to invest.
Another reason why private money lenders are better because here you can set the terms and conditions as well as the interest rates more often. The lender will extend based on your faith and understanding of your markets. One of the ways to attract them to invest in your deal is to offer them high-interest rates. Choose a rate that is lucrative and solves the purpose for both. Do not forget to take ROI into consideration before setting your terms with the lender.
Wholesaling the property
Wholesaling of the property is another alternative that allows investors to make profits without any stake or ownership in the property deal.
All you need to do is to find properties that are lucrative or worth flipping, only then you should get the property under the contract agreement. Then comes the negotiation process with the seller such as asking asset price (purchase price) and other developmental costs (closing costs) etc. After that, you look for house flipping investors who will further invest in purchasing the property and for rehab.
The wholesalers usually make money based on the exposure they negotiate between the deal and the amount the purchaser is willing to pay. Thus wholesaling seems to be an easier way to start flipping homes without any money.
Your next job is to wholesale the property successfully by building up a group of investors (contacts) interested in flipping houses. The rest of the closing and rehab will be taken care of by the investor.
Crowdfunding
When a group of individuals or investors pool their money together and collectively finance a loan that is known as crowdfunding. These groups of investors contribute a minimum percentage of the needed funds. In return, they earn interest on top of repayment. (Principle +Interest)
This is really a challenging task as it takes a lot of time to bring in the group of investors together and asking them to invest in a deal. On top of that, there is a limited window for negotiation. However, we should not miss any opportunity no matter how difficult the task gets. After all, something is better than nothing.
Seller Financing
Seller Financing is also a great way to get funds for no money deals. As the name suggests, the property’s seller finances the purchase. You won’t need to prepare documents in terms of qualify for financing (i.e., have an acceptable credit score) or use your networking for getting funds.
All you need to do is to look for available properties with optional seller financing or find a fix-and-flip opportunity. It will be great if you reach out to the seller/owner of the property to see if they’re interested in financing. It is way better than traditional lenders and banks in terms of paying the down payment.
Since there isn’t any third party like agents, therefore you do not pay for the commission as you directly deal with the owner of the property
Finding Investors for House Flipping
Alright, First get serious about getting funds for no money deals. This seriousness should reflect in your ways approaching potential real estate investors. Go out and start your networking. Meet like-minded people who are already working in this field of real estate.
Also, know your local real estate market. This will come in handy while discussing your views with respect to your local market to those like-minded people.
Either connect with a local ‘Real Estate Investors Association’ or form your own. Sign up for the networking events and absorb as much real estate investment information from these like-minded individuals as you can.
Just think logically, in order to flip a house, all you need is to have knowledge about the business of house flipping. (Clear your basics of BRRRR methods) and then you need to find a group of investors who are convinced with your understanding.
So don’t wait for the golden moment instead create one by coming out of your comfort zone.
Prashant Kumar, CCIM
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