I am often asked if flipping with little or no money is actually possible. I use to think that it was not really possible to flip a house with no money. I felt that it was necessary to have some of your own money invested, either during the purchase or during the rehabbing.
Recently I have been working with another flipper who frequently uses a hard money lender. A particular hard money lender he uses did not allow second mortgages on the property being flipped. The lender wanted to see that the flipper had some “skin in the game.” It is not unusual for a hard money lender to write into their note/mortgage that no second mortgages are allowed. So, when this flipper found a great house to flip, and had his money with other projects, what did he do?
Well, we figured out of way of getting 100 percent funding for the flip. We had to provide some security without putting a second mortgage on the property. What did we do? We found another investor who normally funded flippers, but he also usually wanted a first mortgage with no seconds. After showing him the past experiences and successes of my flipper friend we made him an offer that he could not refuse.
We offered to put his LLC on the deed as part owner of the property. The property was quitclaimed to him after the closing. He was then 50% owner. Now, in order to secure his funding, and put him at lower risk, a note was prepared which indicated the amount of his investment and the interest rate that he would receive. The investor was not participating in any income or loss from the sale of the flip when it was completed. He was getting his principal back with an agreed upon interest rate. Since that time I have worked with flippers who have also been able to do this. So, as you can see, finding the right investor and using this tactic can lead to flipping a house. This shows it can be done with little or no money of your own. As long as the numbers work, it can be worth doing.