When it comes to buying properties, the average person is going to use cash to fund these transactions. This is an understandable impulse. Even if it takes the buyer a long period of time to save their money, this is still the best way to go in most instances. Otherwise, any number of issues could occur along the way.
With that being said, there are still other solutions that can be utilized. It is time to take a closer look at the three best ways to find an initial house flip. This helpful guide is designed to make the decision-making process easier for those who have never been through these types of processes in the past.
1. Friends and Loved Ones
Sometimes, it can be tough to come up with the necessary capital for an initial flip. The property may be perfect but without the funds, the purchase cannot take place. That is what makes friends and family members so important in these instances. Whether the money is being provided by a close friend, a sibling or a parent, take a closer look at who is able (and willing) to assist.
Beginner house flippers do not always have the ability to handle these purchases on their own but that sh ould not preclude them from making them. In order to secure funding from friends and loved ones, a split of the profits should be offered. There is nothing wrong with this strategy but it does come with one major caveat that must be noted.
A failure to repay a friend or family member could put a serious damper on the relationship. Even the closest relatives are not going to take kindly to the loss of thousands of dollars. Bear in mind that these types of favors should not be asked for unless the flip is something that the buyer strongly believes in. No money should be lent on a wing and a prayer.
2. Meeting With Hard Money Lenders
Those who have yet to accumulate their own capital will definitely want to take the time to meet with various hard money lenders. These are the lenders that can provide the necessary funding for those who are struggling to provide the capital for their very first flip. Hard money lenders are not always the best choice for those who are looking to be the captain of their own ship.
On the other hand, those who are just getting started will benefit from these types of lenders. These lenders are not going to offer awesome deals to those who do not have a lengthy track record. If there are no historical statistics to support the applicant, the hard money lenders are typically going to be more reticent to offer funding.
This is not a deal breaker, though. Even those who do not have their own capital can still present an offer that is worth considering. Hard money lenders are often willing to take a chance on first time home flippers if they can present compelling information that inspires them to take a risk. Hard money lenders are also more likely to buy into the person than the plan and this is important to remember as well.
3. Utilizing Capital That Has Already Been Accrued
This is the final frontier, so to speak. If an initial flip has presented itself and there is no funding to be found elsewhere, it is time to look within. While it may take longer to accrue the necessary capital and the initial flip may not be available any longer, there is nothing wrong with starting a savings account for any and all future flips that are going to present themselves.
Finding a first flip can be tough and funding a first flip is even tougher. That’s why this process favors those who are willing to get tough and become as resourceful as possible. In order to fund this purchase with our own capital, certain sacrifices are going to have to be made. Say goodbye to dining out, shopping for new clothes and all of the traditional creature comforts that have been known to drain the wallet.
Hard money lenders and family members can be helpful but there is nothing wrong with stacking money without their assistance. Ultimately, a purchase like this one is more satisfying when no one else is offering the funding. It may take awhile to save the necessary funds but once this step of the process is complete, there is no one left to answer to (or share profits with)!
Those who are looking to fund a purchase of this nature will certainly benefit from the aforementioned advice. We hope that this guide served as a helpful primer and provided the necessary information for an initial house flip. Agree or disagree? And be sure to check your initial flip’s numbers using the best real estate investment software on the market!