Dreaming of breaking into the house-flipping game? While it might sound like something anyone can do simply by reading a book or watching a few TV shows, house flipping actually requires a substantial amount of capital to get going…and that’s the first major snag most folks face. Here are four strategies that can help you successfully navigate that issue, many of which require little or no money to make the deal happen.
1. Work a second job
Many investors begin by working a second job to amass the capital required to become a flipper. All of the money from the second job goes into savings as they await the day they get a couple deals under their belt.
This is the slow and safe way to afford to become a house-flipping investor, but it’s not necessarily the best way to achieve such a career goal.
2. Use other people’s money
In the house-flipping industry, there’s an old adage that explains how most people come to afford their way into a deal after deal: “If you do not have enough of your own money to work a deal, then use other people’s money.”
One way to do this is to look into fix-and-flip loans as a way to get a foot in the door. To use this strategy, however, an investor must be ready to hustle and turn a profit on a flipping opportunity quickly to gain momentum.
3. Learn how to flip contracts
Because many investors have very little money to work without the gate, they slide into a house-flipping opportunity by flipping a contract. This typically means placing a house under contract with an addendum that allows the person to control the contract to assign it to a third-party buyer or investor.
Meanwhile, they pocket the difference between how much the original owner is selling the house for and how much the buyer is willing to pay to have the contract assigned to them.
4. Assume a pre-existing mortgage
If a homeowner is about to enter foreclosure, it’s often possible for them to prevent major damage to their credit by putting a home flipper on the title and allowing them to assume mortgage payments.
In most cases, the occupant must move out of the home and get a renter to help the flipper cover the cost of the monthly payments. After renting for a while, this builds more equity in the home to ensure it will turn a higher profit when it comes time for the flipper to sell the home.
