Funding For Flipping Houses – An Actionable Guide



The property sector provides lots of ways for ambitious individuals to make money, either to supplement their primary source of income or as a standalone career.

The practice of flipping houses is a popular one in this context, as buying a home cheaply, renovating it inexpensively and then selling it on for a profit is an easy-to-understand process.

However, if you don’t already have lots of cash going spare, you might wonder how anyone can start house-flipping. To help you out, here are some tips on where to find funding, and the things to think about before you dive in.

Get a hard money loan

Rather than rushing to the bank or applying for a loan from a traditional lender online, it could be better to find hard money lenders in your area to help fund your mission to flip houses and generate cash.

So what is ‘hard money’? It basically refers to a loan from an organized private lender or lending group, rather than a bank. The fees may be higher, but a hard money loan can usually be approved and paid out to customers more quickly, which is important if you are dipping your toe into property-flipping.

Another caveat is that a hard money loan may need to be repaid within as little as 6 months, but again this is perfect for the purposes of flipping houses, as you usually want to get this process done and dusted as fast as possible.

As long as you go in with your eyes open and accept the risks involved, hard money loans might be a great launch pad for your career in property.

Seek out private lenders

While hard money loans can come from private lenders, it is worth talking about another example of this type of funding option as distinct from the property-specific individuals and groups out there already.

A private lender can be anyone who has capital they want to invest, and who may not be particularly tied to a property deal per se, but may be willing to get involved if you can convince them you are a good prospect to back.

Such lenders may be accessible via local networking events, as well as online. Their rates may be more favorable than hard money lenders, but winning them over with your pitch might be trickier, especially if you are new to the house-flipping scene and don’t have a track record to back you up.

Consider crowdfunding

Rather than relying on just one private lender to fund your property renovation and resale ambitions, you could turn to a group of investors offering up smaller amounts to get the same results.

Crowdfunding has become an intriguing option for flipping houses, and there are platforms like Fundrise and CrowdStreet which have evolved to cater to wannabe property moguls in particular.

The positive part of picking the crowdfunding route is that it will not matter how many other home loans you have to your name; you just need to hit the funding target and your cash will be offered up to you.

The downside is that hitting this target can take a long time, so you might want to choose a platform which pre-funds the desired amount and relies on backers trickling in over time to recoup its upfront investment.

Final thoughts

Flipping houses without having your own capital to put into the project can be a risky business, and one which is especially intimidating for first-timers who are not sure about how to handle all the ins and outs of such a transaction.

However, taking a careful and considered approach to finding funding should leave you in a solid position, so long as you work with reputable lenders and platforms

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