Complete a fix & flip deal where you don’t bring any of your own money. Learn 16 ways to get 100% financing for your fix & flip projects!
Investing in real estate is not something that requires a large amount of money. Actually, you can still invest in real estate without much of your own money, even 0% of your own money! That’s what we called 100% financing. Today let’s look at how to complete a fix & flip deal where you don’t bring your own money to the table.
WHAT IS 100% FINANCING?
Let’s say you’ve got a deal with a purchase price of $100k, rehab at $40k, and loan costs at $30k. When a lender says that they’ll fund 100% of the purchase price, what does it mean?
They’re most likely referring to 100% of the purchase price, or $100k. But you’ll still be coming with the rehab and loan costs, and you’ll be looking at $70k to cover those. Most lenders will also fund part of the rehab cost, but it’s still pricey to come up with the loan costs yourself.
What about 100% of the purchase & rehab? Is that 140% financing? Or what about 100% of the purchase, rehab, and loan costs? Is that 170% financing?
The short answer is: yes, to all of those. It depends on how you want to define it, and every company does it differently. For this article (and how we define it for the loans we fund) is that 100% financing means covering the purchase, rehab, and loan costs. In other words, you bring $0 to the table.
Now that’s out of the way, let’s talk about the 16 ways to get 100% financing and bring $0 to the table!
HARD MONEY ALONE
I have never heard of another company offering complete 100% financing on your project, so if that’s your goal, then we can help you out. However, I will tell you that it’s difficult to find a deal like that.
The hard and fast rule is that we’ll lend up to 70% of the property’s after repair value (ARV). If all your costs fit, you’re golden!
So for an example:
- Purchase price: $100k
- Rehab costs: $40k
- Loan costs: $30k
Your ARV needs to be about $243k to bring $0 to the table (243k x 0.7 = $170k). You can see how hard that might be. The lender takes on ALL RISK to fund 100% of the deal. The deal has to be perfect because the borrower is less incentivized to stay and finish the deal.
Any lender willing to lend all (or even most) of the deal will be more conservative in their valuations, including the property price and estimating the rehab and after repair value. For example, we’re very conservative with comparable properties our borrowers can use when submitting the numbers on a deal.
So of all the 16 ways to get 100% financing, getting hard money alone to cover it is the most difficult. It’s certainly doable, and we have borrowers frequently bring us deals that qualify, but I strongly urge you to use other strategies.
- You’re going to step over quarters looking for dollars. On your way to finding those deals for 100% financing, you’re going to miss out on other good deals because they require money. Instead of skipping over a deal with $50k in profit because you need to bring $10k to the closing table, combine hard money with another strategy and get the deal done!
- Hard money is expensive. Interest rates have to be high to take on risk and only lend money for around 6-9 months. A traditional loan can charge 4% because they make boatloads of money over 30 years. With a hard money loan, it’s a lot of risk in a short time, so interest rates are higher. Even if you find a deal that qualifies for 100% financing, perhaps only using it for 80% of the loan and finding another funding source can save you a good chunk of change.
RENEGOTIATE WITH SELLER
Let’s take that same example from before: $100k purchase, $40k rehab, $30k loan costs.
But you realize that you can only get $238k in your estimated After Repair Value! Now, you can only get a loan for $167k ($238 x 0.7 = $167k).
That’s still a great deal, right? But for this example, let’s say you don’t have any money, so you can go back and renegotiate! You bring $3k to the closing table, and you’ve got a deal with tens of thousands in potential profit.
My biggest tip would be this:
Don’t hide what you’re doing. Sometimes I have investors who try to hide that they’re going to flip the house because they think the seller will be angry or realize they could flip it themselves!
That never happens. The reason the seller is in that situation precludes them from having time or money to flip the house. People are reasonable enough to understand business, and you get a cut for fixing & flipping. They may be willing to lower the price by $3k to get the deal.
Something like this: “So when I do a deal like this, I have to project at least 10% of the purchase price in profit, or it’s just not worth it. The risk is too high. Would you be willing to drop the price by $3k?”
I have an extended member of my family who recently went back to tell a seller that he couldn’t do the deal because of the financials, and he lowered his price by $50k! Needless to say, he made the deal happen!
HOME EQUITY LINE OF CREDIT
In my mind, this is the easiest way to have your deal 100% paid for without using any of your own money!
If you’re unfamiliar, a line of credit means you have access to a certain amount of funds, but you only pay interest on the money you withdraw! And what makes this strategy truly 100% financing is that you can use money that you’ve withdrawn to make payments and pay the interest!
Then when you complete your deal, you pay it off, and you haven’t touched any of your own money. It’s brilliant.
It’s also nice to have a line of credit even if you don’t plan on using it for the project costs. This is because often, there can be emergencies, or your rehab goes over budget. Having his money readily available gives you the peace of mind to solve problems instantly.
With your home equity line of credit, you’re borrowing against the equity of your house. So naturally, you need to have some equity! You’ll typically need at least 15%-20% equity in your home. For example, if you’re house is worth $200k, you must owe no more than $170k to potentially qualify. You’ll also need a decent credit score, typically around 680.
HARD MONEY LOAN + HOME EQUITY LINE OF CREDIT
Of course, if your HELOC is large enough, it’s a great way to fund your deal! However, that’s not usually the case, and you can fall back on a hard money loan funding most of the deal and then use your HELOC to make up the difference.
Did you know that if you have a retirement account, you can usually borrow against it?
It makes sense—banks love to loan out money (so they can make money, of course), and they just want to see that you have reliable collateral. Money sitting in a retirement account counts. You are just borrowing against yourself, although some administrators will want you to pay back the money with interest.
You can often get these loans for six months to a year. And like a HELOC, if you have a big enough retirement account, you may be able to borrow enough just to fund your whole deal.
HARD MONEY LOAN + 401(K)/IRA/RETIREMENT LOAN
Use that hard money as the sound foundation for your loan, and then borrow the rest from yourself!
SELF-DIRECTED RETIREMENT ACCOUNTS
So, when you’re setting up a retirement account, you’re usually looking at a 401(k), which is through your employer, or an IRA account, which is for an individual. Most people set up standard accounts, meaning that your money is invested into a typical portfolio of stocks and bonds.
However, you can set up a self-directed account instead of the standard route. Typically you can choose a traditional portfolio of stocks and bonds, or you choose an alternative investment, such as cryptocurrency, precious metals, and—you guessed it—real estate! These are great because you can have more control over how that money is being invested.
You can take your self-directed retirement account funds and use them to fund your deal! Then your profit at the end goes straight back into your retirement account. Talk about having a nice retirement!
Okay, here’s the REAL secret and the thing that I love to do that grows my retirement account at an astronomical rate. So, you can also choose between a traditional retirement account and a Roth. Here’s the difference:
A Roth retirement account means that you’re putting the money in after it’s been taxed. A traditional account implies that the money goes in tax-free.
I’m a massive fan of Roth retirement accounts for these reasons:
- Roth accounts allow you to withdraw any contributions you’ve made to the account! You can’t withdraw any earnings that your contributions have made, but the money you put in is yours. The way I see it, it’s like a bank account, except with incredible gains.
- Roth accounts even have some tax-free benefits for passing those accounts to your children. That’s a bit complicated, but it can be done, so if you’re interested, talk to a professional.
- Even though a Roth account is taxed upfront, any gains you put in there will never be taxed.
That last one is perhaps my greatest wealth-building secret. I use my self-directed Roth IRA to fund real estate deals. Then when I profit on the sale, it all goes back into my Roth IRA account, NEVER TO BE TAXED, EVER.
That’s amazing! I can pull out my contributions, like a bank account! If you’re stashing money in your Wells Fargo account, stop.
HARD MONEY LOAN+ SELF-DIRECTED RETIREMENT ACCOUNT
Use your self-directed retirement account to make up what hard money won’t cover!
For this strategy, your seller will likely need to have a bit of an entrepreneurial/investment mindset and not need the cash right away. This works very well with someone who owns several rental properties and is trying to offload one because of vandalism/tenant issues.
What happens here is that the SELLER will help you finance the deal! Are they going to give you the money to buy their own house? Sounds a little weird, right?
But it’s just like a business partnership. Think of it as a friend of yours just lending you money for the deal; it’s just, in this case, the seller.
There are several ways to do this:
- They can lend you the entire cost of the property or just the percent that you’re lacking
- They can have you pay back a percent of what you borrow (like a traditional bank)
- They can ask for a percent of the deal itself. For example, you pay back the money plus 20% of whatever profit you make.
- You can earn interest payments along the way.
- Or you can pay it all back at the end after you sell the property.
Some of these strategies might seem a little tricky, but here’s a note I’d like to add:
Depending on the situation, a career real estate investor will use many ways to fund deals. At first, you might use simple ones, but don’t be scared to try out as many as you can as you move forward.
Then as you encounter different types of deals, you can pull a funding strategy out of your toolkit and use it!
- Maybe a friend finds a deal, so you partner up for it
- Perhaps you already have an agreement, and another falls in your lap, so you wholesale it
- The seller is well off and interested in investing, so you do seller financing!
Whatever makes the deal the easiest, makes the deal possible, and gives you the fewest headaches can all be determining factors in which 100% financing strategy you can use.
HARD MONEY LOAN + SELLER FINANCING
This is more common. If your hard money loan doesn’t cover all your costs, use seller financing for the rest!
Okay, so not a fix & flip strategy, but certainly one of the most popular flipping strategies out there!
If you’re unfamiliar, this means that you’re going to find a great deal, as if you were going to fix & flip it. Then you put it under contract (You’ll, of course, have done all the evaluations and rehab estimates, so you know it’s a profitable deal). But then you assign the contract to another real estate investor, and they pay you a finder’s fee!
So if you find a deal that might have $50k in profit potential, you can find someone else who goes and gets a loan and then pays you $5k or so.
Wholesaling is awesome because:
- No loan
- No rehab
- No contractors
- No deadlines
- No interest payments
- Fewer headaches!
You’ll make less money, but $5k for a week or two of work is still incredible! In fact, with my Find-Fund-Flip System, our members bring us deals that they’d like to wholesale, and we send them out to our list of real estate investors to help get it moved fast!
This is a company or an individual who will cover the “gap” of what you’re missing. Like seller financing, you can arrange to pay back the gap financier with interest payments or a profit split.
I’d also like to mention that you could be a gap financier! You don’t have to do anything, but you can earn 15%+ back on your money. You don’t even need a ton of money to do it—even $5k to $10k can get you started.
The trick, of course, is to find people interested in fix & flips, so online forums, groups, or even in-person real estate clubs can be good places to find them. A lot of this is happening on social media as well!
DEAL PARTNER – DEBT
Your deal partner will either come to the deal with cash or good credit. They can finance part of the deal or the whole enchilada if they’ve got the money! If they’ve got great credit, they can help secure a lower interest rate or qualify for a line of credit themselves to use for the deal.
This benefits you because you get the money you need for the deal. It helps them because they don’t have to do anything and get a fantastic return on their money!
With this particular strategy, they will loan you the money as if they were a bank. That’s why it’s called a “debt partner” since they’re financing the loan, and you pay back the agreed-upon interest—whether that’s all at once or month by month.
DEAL PARTNER – EQUITY
This is the same as the previous one: you’ll find someone to partner with on this deal who can provide cash, good credit, or both!
The difference is that instead of loaning you money, they get repaid by having equity in the deal. For example, let’s say that they lend you $10,000, and you agree to split the profit 50-50 (that’s a pretty standard split, especially for a new investor). Then upon resale, let’s say there is $50,000 in profit. Your partner gets the $10,000, so the debt is squared off. Then you split the $40,000.
You get $20,000 for doing the hard work of finding, rehabbing, and selling the property. They get $20,000 for being your partner! It’s a great deal for them in around six months; they risked $10,000 and got back $30,000. If that works out, that person will be itching to partner up with you again.
FORMAL BUSINESS PARTNER
This is pretty similar to having a deal partner, but this is a more formal agreement. You’re going to set up an LLC with the expectation that you will be doing several deals together. Together, you can find money using any sources we’ve talked about, or it could be that they have money and you have the desire to do the flip yourself!
You’re likely going to be splitting the profits 50-50 in this arrangement.
CREDIT CARD FINANCING
I first heard about this strategy from a friend who had somehow picked up a ton of properties in a short time, even though I was pretty sure he didn’t have money sitting around for that! And when he told me it was from credit cards where he got 0% interest. I thought it was, at best shady and, at worst, illegal. It turns out it’s neither, and it’s just a fantastic strategy for getting money!
Do you know those credit cards that come in the mail that offer 0% on new purchases for 12 months? You can apply for the next one of those in the mail, and now you’ll have access to money that you don’t have to pay interest on! You are borrowing money, of course, but the goal would be to flip the property before you owe any interest to pay your debt off from your profit.
The issue with this version is that you might not be able to use credit card purchases for many things you need to buy, like cash-to-close and paying the Title Company. You’d be able to use it for rehab purchases, though.
The souped-up version of this is working with a broker to get you a 0% interest advance on your credit card. It will be slightly more expensive, but the broker can help customize a solution for what you’re looking for. You’ll also get “clean” money (okay, now that sounds shady) that you can use however you need. It won’t be money from a credit card; you’ll have actual cash from the broker.
Typically you’ll pay a one-time origination, and the 0% usually lasts around 6-24 months. Most of my borrowers finish deals in about six months, so if you can secure a 9-12 month time frame, you’ll likely have your profits before you need to pay any interest on the credit card advance.
Let me reiterate something I said earlier because it’s essential:
Don’t walk away from a good deal because there’s a little more cash-to-close required than you have sitting in your bank account. It’s painful to see a property with $50,000 in profit potential go to waste because an investor can’t find the $10,000 to make the deal work!
The more creative you can get with your financing, the more deals you’ll be able to do. For example, if you might not have the credit score right now to get a line of credit, and you’re having trouble finding a partner, just wholesale the deal! That’s why learning these financing strategies is incredibly important and profitable.
Maybe your credit’s improved enough to get a line of credit, and you use that for your next deal. Then your brother mentions something about real estate investing (because you’ve mentioned before that you have a successful flip or two), and he wants to partner up with you on your next deal! You walk away with $5k or so, and then perhaps the next deal you find requires $5k cash-to-close, which you already have sitting in your bank account!
I like to say that you’re stepping over quarters looking for dollars. You should be picking up those quarters, too! There’s no reason to learn one strategy and stick to it no matter what—especially if you’re only trying to find deals that qualify for a 100% financed hard money loan.
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