Looking for an effective way to achieve financial freedom and build wealth? Flipping houses may be the answer.
House flipping can offer large payoffs, but it does require a substantial investment upfront just to get started. In most cases, regular loans and mortgages require you to put money down… but sometimes this just isn’t possible, especially if your money is tied up in other investments.
Plus, traditional loans aren’t always available when you’re trying to purchase a property that requires renovations.
Fortunately, you can find money to fix and flip, even if you don’t have cash freed up to make a down payment. Read on to learn how to get money to flip a house without having to put money down.
1. Consider a Cash-Out Refinance
Do you have home equity in another property? If so, you may consider a cash-out refinance, in which you use your home as collateral when taking out money to flip a house.
In a nutshell, a cash-out refinance takes the place of your existing mortgage, replacing it with a loan that’s more than you still owe on the home. You can use the difference for renovation projects. This type of loan is best used for minor repairs and upgrades.
Keep in mind that you’ll still need to pay closing costs. Additionally, cash-out refinance loans tend to have higher interest rates than regular refinancing. Also, you may need mortgage insurance is you refinance for more than 80 percent of the property’s value.
2. Work with a Private Lender or Partner
Do you know anyone who has “disposable” money they’d like to invest with?
Private lenders may have money sitting in a bank account, 401(k), or even equity in their own home that they’d be interested in investing… but only if you approach them and ask them to partner with you.
This option to get money to flip a house is great for house flippers who don’t have money of their own but have contracting, project management, or home rehabbing experience. Why? Because in most cases, you’ll need to add value to the transaction that’s equivalent to the money invested by the private lender. The most successful partnerships strike a balance between needs and skills.
Though it can be hard to find private investors, it’s worth a try if you have a large network. Remember, not every house flipper will be able to find a qualified partner — and if you do partner with an investor, you will lose some control over the project.
3. Take Out a Hard Money Loan
Hard money loans offer a solution to flippers who only need a short-term loan to complete the project. These loans are typically offered a higher interest rate and are popular with real estate investors who know they’ll be able to pay off the loan in a shorter time period.
Hard money loans are great for those who want to purchase and rehab a distressed property. Plus, this type of loan features fast approvals based on collateral, rather than credit scores, so they’re more accessible.
If you’re short on cash but ready to invest, there are multiple options to get money to flip a house without having to put money down.
Cash-out refinancing is best for smaller projects.
Finding a partner or a private lender usually offers lower interest rates, but can pose a challenge. This option may also force you to relinquish some control over the flip.
Hard money loans offer fast, easy approvals, but higher interest rates mean these loans are best when you’re sure of a quick turnaround.
Are you ready to find your next property? New Western is here to help. We’ve been connecting investors to properties for more than a decade. Let our licensed, expert agents introduce you to exclusive, off-market properties that are perfect for your next flip.