By Greg Herlean
Over the past decade, throughout the United States, people have struggled to keep their jobs and their houses. Whether you’re a student just out of college or you’ve had financial problems due to unemployment or underemployment, you probably flinch when you see your credit score. As a result, you might have written off the idea of becoming a real estate investor. After all, how can you qualify for loans to buy and rehab houses when you couldn’t qualify for a mortgage to buy your own house? Honestly, it’s actually a lot easier than you might think.
Talk to Potential Investors You Know
If you have a lead on an incredible flip property, all you need is the money to make this deal happen. Put together a proposal that shows market values of comps in the area, what you need for rehabs and closing costs, and what the after-repair value (ARV) will be on the property. Show them that you’re serious about this deal and that you know what you’re doing. You may be surprised who’s willing to invest with you, even if it’s your very first flip.
Partner With Another Investor
If you’re new to real estate investing and you’re unsure of how to get funding, you might want to consider partnering up with someone who has a little bit more experience. Attend a few real estate investment club meetings and get to know other flippers who do what you want to do. Once you’ve built a relationship with one or more of these people, offer to partner with them and to put in most of the sweat equity if they’ll take care of the majority of the funding.
You can also combine these two tips into one. Approach a more experienced house flipper about partnering with you on a great deal that you can both profit from. At the same time, approach a potential investor in your family, in your circle of friends, or whom you know professionally. This way, you’ll only have to ask your investor for half of the rehab costs, and you’ll be showing your flipping partner that you’re really dedicated to making this work.
Hard Money Loans Are Based on the Property, Not Your Credit
If you don’t have the connections in the real estate world to make either of those approaches work, you can always apply for a hard money loan. Unlike regular mortgage loans, when hard money lenders decide to approve or deny a loan, they look at the value of the property and its potential, not your credit score.
As you make successful flip deals and build your reputation in the business, you’ll have an easier time convincing investors to trust you with their capital. You’ll also have an easier time working with other flippers when you find a deal on a larger rehab, and you may even be able to get lower interest rates on your hard money loans and private loans, too.
The key to all of this is really just to get started and keep going. You may have to take a higher interest rate or a smaller percentage of the profit margin on your first few flips, but these deals will help you grow your business and give you more experience as a house flipper. As you go, you’ll gain both expertise and capital, so you’ll be able to make bigger and better flip deals on your own or with an investing partner in the future.