7 Best Ways to Fund a Flippable Property
Oftentimes people don't do things because no one has told them the secret. Knowledge is power indeed. Many a times, we meet contractors and handymen who rehab properties for others but have no experence of doing the same for themselves. When quizzed, they say lack of money is their handicap. Well, if that's you, that handicap is now healed. You don't need any money to flip properties. You need deals. And for you the seasoned rehabber/flipper, we are about to unleash an epiphany for you as well.
Money Follows Deals. 7 Best Ways to Fund Your Deals
1] W2 Income
If you are a W2 employee, you can fund your deal using your last 2 W2s, last 2 pay stubs, last 2 bank statements. This way you will be buying the property using a conventional loan with the best pricing and avoid paying any origination points. In fact, if you decide to get the money for the rehab, you may go the FHA 203K route and only have to put down 3.5% of the purchase price. The 3.5% can be a gift from a relative and all your closing costs can be paid by the seller. So you may be able to do this deal with zero down. If the property is functional and only needs to be upgraded, you may be able to get some downpayment assistance, which can be 100% forgivable. There are conventional lenders out there who'd allow you to put just 1% down, which can also be a gift. As a W2 employee, you may have some money in your 401K account, of which you can borrow 50%. Other options include having an equity partner, i.e. a co-borrower with a little bit of money. The W2 route is the least expensive route you can take to do your first flip.
​
2] Bank Statement Income and DSCR
A bank statement loan is for someone who who self-employed. You can put as little as 10% down and get 90% from the Non-QM lender and whatever you need for the rehab could come from an equity partner. If the deal is good, money will follow. Alternatively, you could choose to go the debt-service-coverage-ratio (DSCR) route where you will have to come up with 15% of the purchase price and the lender would fund 85%. If the property needs work, you could use your own funds or those of your equity partner's. In fact, some lenders allow your down payment to be gifted.
​
3] Excellent Credit
If you have excellent credit, you can fund your deals very easily. You could form a new flipping company, register it as an LLC, and borrow money just due to your great FICO score. You can then use this money as the down payment, closing costs, holding costs, and borrow the rest from the lender in love with your excellent credit.
​
4] Private Money
Go to country clubs and places where rich people hang out. Tell them you are a member of Flipping America Today; that we buy discounted properties, fix them up, and sell them for top dollar. These wealthy people have their money in stocks, IRAs, 401Ks, mutual funds, bonds, and CDs that don't deliver quite as much as you are willing to offer. They lend you money and they are in first position, guaranteed by a recorded deed of trust and promissory note. You buy the property, fix it up and sell it for top $$$. They send you a payoff statement at closing and they get their money back plus their interest. You bought a property, fixed it up, beautified the neighborhood, and made a good chunk of money. The private money lender is equally happy. You give them a far better alternative than their current fund managers.
​
5] Equity Partners
People are always looking for ways to make more money. Your colleagues, relatives, and friends are all looking for ways to make more money. If you bring them great deals and you are convincing, especially now that you are a member of Flipping America Today, they will go for it. You do it once. They make money. They will keep coming back. Don't be surprised if some want to be exclusive. Now, that's the power that you need.
​
6] Seller Financing
Seller financing is another great way to fund your flips. A seller may not be in a position to handle all the work the property requires to reclaim its former glory. If you show up as the best flipper in town, don't be surprised to see the seller interested in carrying the first or second mortgage. Who says that the seller can't become your partner?
​
7] Hard Money
As much as we hate hard money, it is also a great way of funding deals. They may charge points up front and their interest rate may be the highest on the block, but they are also among the most flexible and fastest. All they care about is the asset itself and its future value. Your experience and credit as a plus, but not super critical.
​
We go more in-depth on this and other subjects during our monthly Zoom calls. If you are not yet a member of our tribe, join today. For only $99 per month, you become a member of an incredible ecosystem where great minds exist, commune and do great deals. What are you waiting for? Join today.
​
​
​
