Having the cash-on-hand to buy a dilapidated house and renovate it into a profit-generating dream home takes much of the financial strain off a house flipper's shoulders. But what about that hard-working person who possesses the skills and expertise but lacks money?
Does the mere fact someone doesn't have the cushion of a large bank account prevent them from building a successful fix-and-flip business? Not necessarily.
Although people who enter the industry with cash to spare may have an easier go of it, everyday Americans can roll up their sleeves and leverage a wide range of financial resources to launch a start-up enterprise. These are ways a determined individual can create an opportunity for themselves with little cash-on-hand.
Negotiate A House-Flipping Deal
People in the construction and real estate sectors gain valuable experience about the methods and costs associated with house flipping. That knowledge can prove a valuable asset in business. Upstart house flippers can reach out to people with investment capital and broker a deal. One or more parties usually put up the money, and the other sees the project through. It may be worth considering entering into agreements on a house-by-house basis. As the person with the industry knowledge, forming an LLC or other corporation type could limit your freedom once you have cash-on-hand.
Consider Hard Money Lenders
These resources typically charge high-interest rates, as well as points, for relatively short-term financing. They generally offer borrows more flexibility and larger sums than traditional banks. A hard money lender may provide a house flipper with all the funding necessary to make the initial purchase, complete all the renovations, and bring the property to market. Some form of collateral usually secures the loan. In the house flipping sector, the lender may place a lien on the property to ensure it can recover the investment. From the upstart house flipper's perspective, that can seem fair given you gain an opportunity to launch a business.
Work Directly With A House Seller
This can be a type of backdoor into the house flipping world. Look for blighted buildings that could bring a hefty profit if restored. Ask property owners to do a walk-through and develop a cost estimate of potential rehabilitation. Evaluate that number against the anticipated resale price and craft a proposal. If the numbers make sense, you could offer your renovation knowledge and sweat equity. The property owner would be responsible for financing the costs out of pocket or borrowing against the house's equity. The seller probably understands fixer-uppers languish on the real estate market and rarely bring a decent return. But when the house has been renovated, you can split the profit and move on to the next project.
Crowdfunding Can Launch A House-Flipping Career
This practice involves groups of people pooling small amounts of money to invest in projects and businesses. These non-traditional lenders earn interest on the money and enjoy wide-reaching flexibility about how its deployed. Persuading people to invest in your venture usually requires a concise business plan that demonstrates a secure return on investment. Although crowdfunding efforts can be time-consuming, they deliver an opportunity to get into the house-flipping sector without significant cash-on-hand.
About the Author
Kimberly Hering
Kimberly Hering's devotion to helping people achieve their real estate goals stems from her genuine enjoyment of the process. Whatever the task, Kimberly makes it her mission to get it done, however she can, without compromising her client's needs. Often, that means thinking outside the box. After working with Kimberly, clients describe her as being Trustworthy, Creative, Patient, Highly Skilled, Attentive to the Process and having a lot of Integrity.
After spending more than 15 successful years working on Wall Street, Kimberly transitioned into Real Estate, joining Alain Pinel Realtors, then moving to Zephyr, now Corcoran Global Living, in 2018. During her career on Wall Street, Kimberly was a Vice President working as an Institutional Equity Salesperson for Montgomery Securities for 10 years. She covered the top money managers throughout the US and Canada. She joined Jefferies & Co as a Senior Vice President managing the Western Region Institutional Sales group, while continuing to cover the top money managers.
Kimberly leverages her extensive experience selling equities to top money managers throughout the US and Canada, to successfully negotiating any Real Estate transaction seamlessly for her clients. Kimberly is well versed in Marin's neighborhoods, towns, cities, and education system.
Living in the Bay Area for 35 years, 25 years in Marin and having 2 sons in local Marin schools, Kimberly spends a lot of time volunteering in the community and serving on various local Boards. Kimberly has a collection of resources ranging from the best local breakfast spots to vetted contractors. With her reliable list of valuable resources, Real Estate experience and unsurpassed knowledge of Marin's many communities, Kimberly can guide her clients through every aspect of a Real Estate transaction seamlessly.
Relocating to Marin, downsizing, upsizing, first time home buying, final home purchase or sale, or a lot to build a dream home, no matter the undertaking, Kimberly works seamlessly until the job at hand is completed with 100% satisfaction.