If you’re up for a high-risk and high-reward investment, you might want to try flipping houses. It involves buying a home at a low price and then selling it for profit. This is easier said than done, though, as you will often need a lot of money to start. After all, residential properties aren’t cheap, and you’ll typically need to spend even more before you can sell.
When you purchase a home at a low price, it usually means it’s a fixer-upper. That means you will have to renovate the place, making people more likely to buy it. Like any other product, you’re not always sure you’ll get buyers. Fortunately, this article will show you how to flip houses with no money so that you can start as soon as possible.
Before you go out and buy homes, I’ll give you an overview of the current real estate market during the COVID-19 pandemic. Then, I’ll go through the various ways of flipping houses with no money down. Remember that all investments have risks, including this one. That’s why you should plan carefully before you start flipping houses.
Real estate during the COVID-19 pandemic
At the time of writing, the coronavirus is still spreading worldwide. Despite being a public health issue, it affects various assets, especially real estate.
Let’s look back to the start of COVID in March 2020. Countries implemented lockdowns to control the spread of the virus. Sadly, this caused millions to lose their jobs and businesses.
After losing their means of income, many of them held on to their homes. This was why the number of new listings decreased by 40% in April 2020, and there weren’t enough existing ones.
Eventually, home prices increased, but this didn’t stop Americans from buying them. Many of them thought that flipping houses were a good idea because of the following factors:
- Low-interest rates – The US Federal Reserve and other central banks reduced interest rates to help their economies recover from the pandemic. This meant that it became easier to buy homes to sell later.
- Fewer homes under construction – The COVID lockdowns made it harder to import materials, so many of the ones needed to build homes became more expensive. This is another reason why there weren’t many homes for sale.
- Shifts in family spending – People allocated more of their budget for essentials because the pandemic made it harder to buy them. This included housing. That’s why the real estate market received more demand.
- Remote work – The COVID-19 crisis sparked a global remote work experiment. More people wanted to work from home to earn money during the lockdown.
Flipping homes during the COVID-19 pandemic
These conditions caused a home-buying frenzy. Some people even started bidding wars on many homes. However, the hype is now simmering down.
That’s because overall costs are roughly 30% higher than during pre-pandemic times. Moreover, the Fed may soon work against the boosted real estate demand.
Back then, Fed chief Jerome Powell described the rising US inflation as “transitory.” Recently, he admitted that this wasn’t the case, so people thought he might increase interest rates soon.
They have cooled down the hot real estate craze with other factors. You have more people selling homes but fewer folks buying them.
You’ll likely lose money if you start buying and selling homes now. While risk is present in any investment, it’s much higher for the real estate market nowadays.
This is why more people want to learn how to flip houses without money. If they could do this, they could reduce risk and boost profits from every flip or home sale!
Read More: How To Buy A Foreclosed Home
Tips Before You Flip Houses
You have to start by finding homes to flip, and there’s no better place to start looking than your neighborhood. This is the best choice for first-timers, too, because of these advantages:
- You learn about the local real estate area you won’t find on listing info. This includes stuff you can’t put into numbers, like the culture of your neighborhood and the attractive landmarks nearby.
- Being close to the home you’ll buy will save you time and money. You’ll be able to quickly head there to inspect the property and visit it when it’s undergoing construction. Once you sell it, you can come there soon to show the home to a potential buyer.
The usual next step is setting a budget, but this guide is “how to flip houses with no money.” That’s why you can go ahead and look for houses with certain traits.
Let’s assume you don’t have much experience buying and selling properties. Looking for a low-quality home in a high-end neighborhood would be much better.
This makes sure the home value can catch up to the others nearby. Also, buy a house that doesn’t need a lot of renovations. This makes it easier to improve and sell the house.
Follow the 70% Rule to make it easier to gauge the purchase price. The rule says it should be 70% of the home’s after-repair value minus the repair and renovation costs.
How to flip houses with no money down
Let’s get into the meat and potatoes of flipping houses without money. You can do this using the following methods:
- Private lenders
- Hard money lenders
- Partner with house-flipping investors
- Home equity
- Option to buy
- Real estate crowdfunding
#1. Private lenders
House flippers usually borrow funding from banks. Unfortunately, they have strict requirements such as credit scores, especially because of the pandemic.
Instead, you might want to borrow funds from a private lender. Unlike banks, they don’t have to check your credit rating and often provide funds faster.
This speed is a good choice for flipping homes with no money. You must prove you can repay them by showing your other assets.
You can negotiate, but that’s impossible if you don’t hold other investments. This might be a better choice for experienced investors than first-timers.
#2. Hard money lenders
These are similar to private lenders, but they’re connected to a company that specializes in lending. Besides that, hard money lenders work similarly.
Hard money loans are a lot faster and easier than traditional ones. Like private lenders, hard money lenders often have a higher interest rate from 8% to 15%.
This option isn’t a good choice if you want to pay the full amount for a property. If you’re going to stay true to the guide on “how to flip houses with no money,” look elsewhere.
If you want to earn quickly from flipped homes, wholesaling might be for you. This involves buying a home, getting it under contract, and then selling the contract to a new buyer.
What does the contract entail? It involves a wholesaler (you) agreeing to renovate a home so its owner can find buyers better.
This also gives you the right to take the owner’s hands below market price. In turn, the homeowner would want to find someone willing to buy much higher than your specified price.
Wholesale is a great way to earn from flipped homes quickly, and you don’t have to buy the property. However, finding a homeowner who will agree to such an arrangement is often hard.
#4. Partner with house-flipping investors
You’re not the only one who wants to know how to flip houses without money. If you find other real estate investors, you could try teaming up with them.
Working with fellow house flippers can help you find good properties much faster. Also, you could pool your funds together to flip more expensive properties.
If you have no money, you must provide a different contribution method. For example, you could show you have a lucrative deal or great contract.
#5. Home equity
This is a viable option if you already have other properties. Home equity is the difference between a home’s appraised value and your mortgage payments.
You could borrow funds from that in two ways: home loans or a home equity line of credit (HELOC). The former is a lump sum, while you can repeatedly borrow from the latter like a credit card.
It could pay for another home or its renovations. Remember that this can hurt your credit greatly if you’re not careful. Otherwise, this can be a great way to flip houses without money.
#6. Option to buy
This involves buying a property after you’ve leased it for some time. You must find a property owner willing to enter this sort of agreement.
An option to buy enables investors to flip a home without money because it often doesn’t require an upfront payment. Setting up the contract for this can be not easy, though.
You and the other party must ensure you understand every part of the contract. If you’re not keen on reading reams of documents, this might not be for you.
#7. Real estate crowdfunding
Real estate crowdfunding makes it easier for people to invest in properties. Now, they can start with just $500! This is an investment option that’s been trending lately.
Investors can use other people’s money to fund different objectives in exchange. This divides the types of real estate crowdfunding into the following options:
- Buy-to-let – The investor funds will fund renovations, so more people are willing to rent.
- Buy-to-sell – It’s like buy-to-sell, but it’s for attracting buyers.
- Development loans – The investor funds are for constructing a new building that will be sold or rented out.
Once the funds fulfill the goal, those investors get some of the profits. It’s a lot easier to do this nowadays because websites connect investors and crowd funders.
This article is not meant to provide investment advice. Note that all investments pose risks! Make sure you have a plan before you invest in anything.
If you want to learn how to flip houses without money, you might want to speak with a real estate agent. These pros will guide your first real estate investments.
Check the other Inquirer USA articles for more investment news and global trends. See what’s happening in finance and other stuff under the sun.