Premiere Plus Realty Co.
Jennifer Johansen, Premiere Plus Realty Co.
Email: [email protected]

A Beginner's Guide to Funding Your House-Flipping Business

by Jennifer Johansen 10/03/2021

Photo by Tima Miroshnichenko from Pexels

Having the cash-on-hand to buy a dilapidated house and renovate it into a profit-generating dream home takes much of the financial strain off a house flipper's shoulders. But what about that hard-working person who possesses the skills and expertise but lacks money?

Does the mere fact someone doesn't have the cushion of a large bank account prevent them from building a successful fix-and-flip business? Not necessarily.

Although people who enter the industry with cash to spare may have an easier go of it, everyday Americans can roll up their sleeves and leverage a wide range of financial resources to launch a start-up enterprise. These are ways a determined individual can create an opportunity for themselves with little cash-on-hand.

Negotiate A House-Flipping Deal

People in the construction and real estate sectors gain valuable experience about the methods and costs associated with house flipping. That knowledge can prove a valuable asset in business. Upstart house flippers can reach out to people with investment capital and broker a deal. One or more parties usually put up the money, and the other sees the project through. It may be worth considering entering into agreements on a house-by-house basis. As the person with the industry knowledge, forming an LLC or other corporation type could limit your freedom once you have cash-on-hand.

Consider Hard Money Lenders

These resources typically charge high-interest rates, as well as points, for relatively short-term financing. They generally offer borrows more flexibility and larger sums than traditional banks. A hard money lender may provide a house flipper with all the funding necessary to make the initial purchase, complete all the renovations, and bring the property to market. Some form of collateral usually secures the loan. In the house flipping sector, the lender may place a lien on the property to ensure it can recover the investment. From the upstart house flipper's perspective, that can seem fair given you gain an opportunity to launch a business.

Work Directly With A House Seller

This can be a type of backdoor into the house flipping world. Look for blighted buildings that could bring a hefty profit if restored. Ask property owners to do a walk-through and develop a cost estimate of potential rehabilitation. Evaluate that number against the anticipated resale price and craft a proposal. If the numbers make sense, you could offer your renovation knowledge and sweat equity. The property owner would be responsible for financing the costs out of pocket or borrowing against the house's equity. The seller probably understands fixer-uppers languish on the real estate market and rarely bring a decent return. But when the house has been renovated, you can split the profit and move on to the next project.

Crowdfunding Can Launch A House-Flipping Career

This practice involves groups of people pooling small amounts of money to invest in projects and businesses. These non-traditional lenders earn interest on the money and enjoy wide-reaching flexibility about how its deployed. Persuading people to invest in your venture usually requires a concise business plan that demonstrates a secure return on investment. Although crowdfunding efforts can be time-consuming, they deliver an opportunity to get into the house-flipping sector without significant cash-on-hand.

About the Author

Jennifer Johansen

Jennifer is passionate about the Real Estate business, and has been involved in related family businesses in construction, architectural millwork, and finance for 20 years. She and her husband relocated to Naples, from New York, 10 years ago, although her family has owned property on Marco Island since the 1980's. She has a Bachelor's Degree in Psychology and a Dual Master's Degree in Counseling and Education. She has acquired many necessary skills that are useful in Real Estate from being in the field of Counseling for many years. She holds the belief that building rapport is vital to helping her clients have a positive experience, while achieving their goals. She is very thorough and detail oriented, and has formed many close relationships with professionals in related fields, such as law, title insurance, home inspectors and other contractors. She aims to offer concierge- level service to her clients at every price point. When time permits, she enjoys spending time with family and friends. Having grown up on the South Shore of Long Island, and enjoying her summers on Fire Island, she loves any activity related to salt water, boating and the beach. Additional hobbies include gardening, art, and studying nutrition, wellness and naturopathy. She is knowledgeable about Naples and Marco Island Real Estate, in estate areas, golf/gated communities, and waterfront properties. She is a member of The Naples Board of Realtors and Marco Island Area Association of Realtors.