Novice real estate investors often ask how to turn a home over without money. And to them, it may feel like a stupid question: Impossible You can start turning the house over without at least Your own little money … is that so?
True — to some extent. Investing in real estate is easy with money. But you can certainly turn the house over without money. Even if you are a new investor, it’s not as difficult as you might think. You need a little hutzpah, the courage to escape your comfort zone, and an understanding of how to get started.
How to turn a house over without spending money
To turn a house over without funding a project, you need to use someone else’s money (also known as “OPM”) to fully fund the transaction. The lender will provide you with a loan to buy and rehabilitate the property and you will pay them the initial loan amount and interest.
However, traditional banks and creditors rarely offer loans that cover both real estate and rehab. So where is the OPM for turning home?
1. Real estate investment partner
One of the easiest ways to start investing without money is to find a partner When money. Think of close friends, business associates, colleagues, relatives, business owners, and even other real estate investors and owners of rental properties.
If you can’t think of someone out of your head, start thinking of someone you see on a regular basis. This includes:
- Anyone on your network with a successful business
- Your doctor or your dentist
- Your lawyer
- Those who invest in the stock market
Ideally, you ask your partner for money to fund the transaction and you want to do all the leg work. In this simple arrangement, two people split the profit into 50-50. Your partner will enjoy the financial rewards of the transaction by tipping the money, not the time.
When you first enter the home-turning business, it may immediately want to form a formal partnership. We recommend that you postpone it for the time being. Many real estate investment partnerships have been very successful, but just as many are on fire. As an amateur home flipper or new investor, you will remain independent until you have the flipping know-how you need to attract your business plan and solid partners.
Professional tips: Real estate investors of any kind can make great partners, but investors who are already flipping home are probably even better. Veteran home flippers bring both money and experience to the table.
To attract experienced investors, first understand what value you will add to your transaction. Maybe you have the know-how to find a deal and a long list of contacts. Leverage all your skills and run out of all your options.
2. Hard money lender
Another great source of funding for rehab contracts Hard money lender.. Hard money lenders lend at very high interest rates — and usually charge points on top of it. But on the plus side, they don’t really care if you have good credit and instead tend to focus on the potential of the property, especially the value after repair (ARV).
This OPM source is especially useful if you can rehabilitate your property and sell it quickly, especially if you only need a short-term loan.Like other types loan, The shorter the loan holding period, the less interest you will pay. The longer you hold your property, the more you pay.
Interest on hard money usually ranges from 14 to 20%, often with 4 to 6 points above it. Therefore, these loans will be repaid immediately. Hard money lenders can be a great starting point, but there are certainly better sources of funding at better rates.
For example, if you borrow $ 100,000 at 16% from a hard money lender and it takes 6 months from the start to the end of the repayment, the interest will be $ 8,000. If you need to pay more points, the price will be even higher. Four points are worth an additional $ 4,000, for a total interest of $ 12,000.
If you hold the flipped property for half that time, your interest will be $ 6K instead of $ 12K. This is simply why hard money is preferred for properties that you know you can quickly flip over.
3. Private moneylender
Private moneylenders are probably the best source of funding for no-money transactions. They are ordinary people who want to invest, like family, friends and acquaintances.
From time to time, these individuals aren’t actively seeking investment opportunities — they just put money around that they may be open to investing if you ask. Private moneylenders may have a wealth of housing assets in banks, IRAs, 401 (k), investment trusts, and even homes.
Because you can negotiate better than usual Degree of interest, Private moneylenders are preferable to hard moneylenders. Private moneylenders set rules and interest rates rather than lenders, giving you more control over conditions and interest rates.
It provides high enough interest rates to encourage investment in private moneylenders. Rates, at worst, are well worth the profit and need to be profitable enough to be fair.
Find returns from other investments and consider exceeding that number. Lending to flippers with a guaranteed rate of return is attractive when stock market performance is volatile.
4. Wholesale to other flippers
Wholesale allows investors to make money from real estate without taking ownership. It’s perfect for turning your house over.
Real estate investors looking for wholesale properties need to find and sign a property that is worth turning over. We will negotiate with the seller about conditions such as contract costs and purchase prices. Then find an investor who actually buys real estate and flips home to complete the rehab.
Wholesalers make money based on the spread negotiated between the transaction and the amount the buyer is willing to pay. Alternatively, wholesalers can make money based on the fixed price of the final sale. That is, when the flipper is sold to the end buyer. This can be in the range of 5 to 10 percent. You do not take ownership of your property or rehabilitate yourself. Wholesale is an easy way to start flipping a house without money.
Successful wholesale by building a group of investors and contacts who are interested in turning home. And your work is done after negotiating a deal with the seller. Investors handle closing and rehabilitation.
5. Flip crowdfunding
Crowdfunding is the collective financing of a loan by a group of individuals. Each of these lenders (also known as an investor) donates a small amount of the necessary funds. In return, they earn interest in addition to repayments.
This method can be time consuming when it comes to financing. However, some specialized crowdfunding real estate websites may provide upfront funding for transactions.
One of the drawbacks of crowdfunding is its limited ability to negotiate. However, there are some cases where you can avoid the down payment.
6. Seller Financing
If traditional lenders or other creative financing options are not available, consider seller financing. In this method, the seller of the property raises the purchase funds. You don’t have to qualify for funding (ie have a good credit score) or run out of a network of private lenders.
Investors can search for properties available for optional seller loans, or find opportunities for corrections and reversals and contact the owner to see if they are interested in the loan.Yes, seller funding Might be so A down payment is required, but often less than traditional mortgages and traditional lenders need.
Even better, you may be able to avoid paying realtors fees by dealing directly with the seller.
7. Traditional bank
Yes, banks lend money — sometimes even to real estate investors! If you have a good relationship with a banker or your bank, they may offer a viable loan to turn the house over or fund your investment.
Don’t step into the bank’s ideas, “”There is no way for them to give me a loan.“ After that, you have already lost.
Traditional bank loans are time consuming and difficult to obtain, but are an option if you have a solid business plan and are confident in your ability to make great profits.
Where to find house flipping investors
If you want to turn the house over without money, your first job: get off the couch and get out there! Order some business cards and start networking.
Immerse yourself in the local real estate market. Surround yourself with people who are already doing what you want to do, such as fellow real estate investors and flippers.
The people you meet at networking events are usually the best partners possible and potential new investors. Absorb as much real estate investment information as you can from these new friends.
Here’s where to find them:
Don’t wait for the opportunity to come to you. Instead, learn the business of flipping homes, actively acquire know-how, and go find an investor yourself.
question? comment? Do you have a money strategy to add to this list?
Please leave a comment below!