How to Flip Houses With No Money Down: 5 Best Ways in 2024

Galina Velgach's Photo
By Galina Velgach Updated August 29, 2024
+ 1 more
's Photo
Edited by Steve Nicastro

SHARE

House flipping is a common type of real estate investment in which you buy a house (usually a physically distressed home) to renovate and sell at a profit. Many investors start out with house flipping, typically gaining knowledge about the current market and buyer trends.

It’s also reliably profitable: the typical flip earned about $72,000 from January to March 2024.[1] With rising home prices and mortgage rates, however, house-flipping has declined in recent years, and the number of homes flipped fell by 29.3% in 2023. Given the risk, you’ll need careful planning, market research, renovation skills (or trusted contractors), and a solid strategy to be successful.

One of the main challenges of house flipping is the initial, up-front investment: the down payment. Good news, though — it's possible to flip houses with little to no money down. First-time home buyers, in particular, have access to various financing methods.

» Ready to start flipping houses with little to no money down? Connect with an expert investor-friendly agent through Clever and get started today

How to flip houses with (little to) no money down

StrategyBest for investors who...
Buy a live-in flipAre new to house-flipping
Request seller financingDon’t qualify for traditional loans
Partner with investorsEstablished house flippers or experienced contractors
Find private-money lendersEstablished house flippers
Use a hard money lenderDon’t have other options — not recommended
Show more

How does house flipping work?

Determine your budget. Most investors use the 70% ARV rule: pay no more than 70% of a property’s after-repair value. So if you think you’ll sell a house for $200,000, start with a budget of $140,000 (70%), minus the estimated repair and carrying costs.

Find the right property. You’ll want to find a home that needs repairs significant enough to earn an extra profit when you sell, but not more than you can afford to within a few years.

Depending on how you’re financing your investment, you may need to live in the house for up to three years.

Renovate, either yourself or using contractors. Then, sell the property!

» MORE: How to Flip Houses for Beginners

Buy a live-in flip

⭐️ Best for: First-time investors

Pros

  • More financing options
  • More control over renovation

Cons

  • Slower returns
  • Potential penalties

A live-in flip is straightforward: you move into the house that you plan to renovate, usually remodel it yourself, then sell it for it profit. If you have the funds to make monthly mortgage payments, but you’d rather put the down payment toward flipping the house, then financing it with a government loan can set you up for success.

Many government loans charge minimal down payments, though you’ll have to meet stringent restrictions. Some can even be used together. You’ll have a variety of financing options if:

  • You’re a first-time home buyer (or haven’t owned one in at least three years)
  • You plan to live in the home you’re flipping (i.e., it’s your “primary residence”)

Federal loans — such as FHA, USDA, or VA — charge down payments as low as 0–3.5%. You’ll need to meet strict credit and debt standards and pay additional insurance costs.

» FIND: Fannie Mae and Freddie Mac Investment Property Loans

State and local programs provide forgivable loans to cover your down payment or closing costs. They’ll usually require you to live in the house for 2–3 years or repay the money. Make sure you account for that possible penalty if you have a plan to sell within that period.

A live-in flip can offer you a simpler entry to house-flipping practices and the tax benefits of carrying only one mortgage. In addition, living on the property will give you a better idea of which features need to be improved than visiting once a week would.

Also, live-in flips might prevent you from paying capital gains tax when selling. If you live in the home for at least two years, you might be able to exclude up to $250,000 of your profit from capital gains tax ($500,000 if you're married).[2]

On the other hand, you should also be prepared not to see any returns for a few years. Not only will the loans require you to remain in the house as your primary residence, but taking on the bulk of renovations yourself can also take longer than using contractors.

Request seller financing

⭐️ Best for: Investors who don’t qualify for traditional loans

Pros

  • More control and flexibility
  • Faster closing
  • Fewer fees

Cons

  • Lack of protections
  • Obscure pricing and expenses

With seller financing, you would pay the mortgage directly to the seller, who keeps the title until the loan is repaid — similar to a sublet. This could be ideal if you don’t qualify for a traditional mortgage because of poor credit or high debt.

» LEARN: How seller financing works in real estate

Once the house is flipped and sold:

  1. You use the proceeds to repay the remainder of the mortgage.
  2. The original seller transfers ownership and title to the new buyer.
  3. You pocket the difference.

Using a promissory note, you and the seller still agree on loan terms like interest rate, repayment schedule, and down payment. Take precautions by hiring an attorney to review your promissory note, clarify the terms on who’s on the hook for what costs when the house sells, and line up a Plan B for if it doesn’t.

The main benefit to seller financing more control over loan terms. You could not only negotiate to forgo a down payment or closing costs, but you can tailor terms to make the option appealing to the seller — such as higher interest rate.

However, you’re taking on much more risk if the flip doesn’t go as planned. For one, you won’t have the same protections as a traditional mortgage and won’t be able to refinance. You also won’t have the guarantee that you’re paying a fair market value.

How to find seller financing properties

Search the keyword "seller financing" on Zillow, Redfin, or other home-buying sites. Try the terms owner financing, owner-backed mortgage, hold a note, owner carry, and seller carry as well.

Find homes listed "For Sale By Owner." FSBO sellers typically want to avoid paying extra fees and commissions, so they may be more open to a non-traditional financing arrangement — especially in a slow market.

You can also try word of mouth and personal referrals. If you keep in touch with former landlords, you can tap that resource to learn about potential sellers.

Partner with investors

⭐️ Best for: Experienced flippers or contractors

Pros

  • Smaller up-front investment
  • Less risk
  • Greater network
  • Bigger projects

Cons

  • Not accessible
  • Potentially smaller returns

Partnering with more experienced investors can be appealing for house flipping because you can pool resources and share risks while investing less money (or none at all) up front.

Breaking into a real estate investing group (REIG) can be harder for a first-time flipper, however, if you don’t have a track record to promote. Experience as a contractor or with significant, high-profile DIYs can reveal your ability to flip a house successfully.

In addition to being a safer investment (since you’re spending less and sharing risk), partnering with investors offers a major benefit to house flippers: longer-term security. Not only could you get access to bigger flipping projects, but you can also develop a network of investors, contractors, and other professionals to open you up to more projects in the future.

At the same time, a smaller investment could also mean smaller returns. You might be willing to accept that for a first-time flipper, but make sure your balance sheet supports it as a long-term sustainable strategy.

You can find partnerships with private investment groups or on crowdfunding platforms — such as Arrived, CrowdStreet, Fundrise, and RealtyMogul — or with other house flippers.

Find private-money lenders

⭐️ Best for: Established house flippers

Pros

  • Better rates and terms
  • Faster cash out

Cons

  • Surprise fees
  • Inconsistent down payment
  • Fewer protections

A private lender is any individual or privately owned company that finances your flip with short-term loan, and established lenders are popular among career house flippers. Private lenders might not help you meet your goals if you're just starting out.

» RELATED: Gifting Real Estate to Family Members

As with conventional loans, you’ll still have to qualify for a private loan based on your financial background. But private lenders will also put more stock in your track record as a house-flipper when they set your loan terms.

Most private-money lenders will require:

  • A down payment of at least 10%, which will eat into your profits if you’re trying to minimize up-front costs
  • A steady house-flipping record during the past year
  • The property to be for investment only, so you wouldn’t be able to finance a live-in flip

Privately owned lenders also pose another set of other risks. While you might have more leverage than with a large financial institution — e.g., potentially negotiating no down payment in exchange for a faster loan repayment — you may also come up against less vetted, sometimes predatory lenders that are counting on you to fail. Protect your investment with a real estate attorney.

Real estate networking events host experienced flippers, lenders and investors, realtors and other professionals. You can meet them to build connections, ask questions, and feel out different markets until you find one that works for you.

Use a hard money lender

⭐️ Best for: Investors with spotty financial profiles or who need short-term emergency funds

Pros

  • Fast approval and funding time
  • Fewer financial requirements

Cons

  • High up-front cost and interest
  • Short payback period
  • Potentially insufficient loan amount

Hard money lenders provide fast capital, charge high interest rates, and require high down payments. However, considering a hard money loan as an alternative to qualifying for a conventional loan may pose more risk than it’s worth.

Hard money lenders like Ideal Capital Solutions and Do Hard Money provide shorter-term loans than banks. However, while private lenders look at your financial history, hard money lenders underwrite the actual property and typically take it as collateral.

» MORE: Hard money loans: How they work, plus alternatives

The advantage to a hard money loan is that you’ll typically get approved and the funds quickly, often within a week, even poor credit history. But for most investors, the risks tend to outweigh the benefits.

In particular, you’ll often have to:

  • Pay a down payment of more than 20%, which is higher than a conventional loan
  • Pay higher interest and underwriting fees
  • Repay the loan within a year, unlike a mortgage
  • Put up the house you’re flipping as collateral, which puts the investment at greater risk

While a hard money lender might not be the best choice for financing a house flip, it might work as a bridge loan. For example, if your flip needs an unforeseen last-minute repair that doesn’t fit your budget, a hard money loan could give you the cash needed to finish the remodel.

More types of hard money loans

  • Balloon loans
  • Second or third mortgages
  • Multi-property blanket loans
  • Fix and flip financing
  • Owner-occupied

» COMPARE: Best No Money Down Hard Money Lenders

Related reading

Article Sources

Authors & Editorial History

Our experts continually research, evaluate, and monitor real estate companies and industry trends. We update our articles when new information becomes available.

Better real estate agents at a better rate

Enter your zip code to see if Clever has a partner agent in your area
If you don't love your Clever partner agent, you can request to meet with another, or shake hands and go a different direction. We offer this because we're confident you're going to love working with a Clever Partner Agent.