How To Flip Houses With No Money & Bad Credit in 2023
Even if you have no money and/or bad credit… you can still find and flip homes in 2023. Here’s how!
Flipping houses when you’re starting out with no cash and bad credit can feel like an uphill battle.
But, in 2023, not having startup capital or not having the greatest credit in the world isn’t what holds new investors back.
Instead, what actually holds people back is not being able to find properties that make sense -- and knowing how to identify which properties actually make a good deal.
In this guide, we’re going to show you exactly what to look for, so, even if you have no cash and no credit, you’re still able to unlock great deals -- and secure funding for them.
We’ll show you what those deals look like, why they make such a great deal, and 7 different ways you can use to learn how to flip houses with no money and bad credit in 2023.
Before we get into the strategies, though, let’s answer the biggest question of them all…
Can You ACTUALLY Flip Houses With Bad Credit & No Money?
We’re not going to beat around the bush and tell you that starting out with no credit is some sort of advantage as a new investor.
Because having a great credit score WILL, in fact, make your life easier when it comes to investing.
A good credit score is NOT the end-all, be-all of flipping houses.
In 2023, there’s so many options available for securing funding for your deals that simply having bad credit is no longer a limiting factor for your success.
While not having a great credit score does remove you from some of the more traditional funding options, like personal loans and mortgages, there’s still other options available.
Since you’re going to want to have that funding lined up BEFORE you start searching for deals -- in order to move on them quickly when you find a truly good deal -- check out some of the guides below.
They will help you get creative with your financing without utilizing your credit score or requiring you to put any of your own cash into the deal upfront.
Keep in mind, though, that since you have bad credit and will be putting zero cash into the deal upfront that the terms on these loans and funding sources won’t exactly be advantageous to you.
They will, though, help you get your first deal done so you can put your profits back into your next deal and secure better funding sources in the future.
So, yes, in 2023, you CAN actually flip houses with no money and bad credit.
The key here, though, is making sure you’re finding good deals that make sense so it’s easier to secure that funding -- and you know you can turn a profit on the deal once it’s done.
Which brings us to our next point…
There’s A Few Things To Consider When Flipping Houses
With house flipping, many new investors think the money is made after the house sells.
But that isn’t the case.
The money is actually made when the deal is initially done.
Being able to secure the property for a great deal will determine how much money you’re actually able to make once you account for the fees and expenses that go into getting it flipped.
For instance, just securing the deal will have costs associated with the loan.
Then you’ll also need to take into account:
- Paying the taxes on the property, itself.
- Homeowners insurance while you own the property.
- Keeping the utilities on while you’re flipping it.
- Supplies and materials for the renovations.
- Contractor fees for work you can’t do yourself.
- Permitting fees.
- Realtor fees when it comes time to sell.
And, then, when you sell the property you might be subjected to capital gains taxes if you flip the home within a year of purchasing it.
Each of these expenses will cut into how much profit you’re able to generate when you sell the property and need to be accounted for BEFORE you actually sign the papers and secure the deal.
To give you a breakdown of what that can look like so you know you’re not getting in over your head on a property before you take ownership of it, check out the guide below:
That guide will help give you a good idea of the costs involved with flipping so you know how much money you’ll need to put into a deal -- and how much you can afford to secure the deal for while making a profit.
Then, when you have a grip on how to turn a profit BEFORE you secure the deal, you can start getting into the strategies for actually securing those deals in the first place.
7 Strategies For Flipping Houses With No Money & Bad Credit
This is where the rubber meets the road.
Each of the strategies below are perfect when you’re starting with no cash or credit.
Depending on your unique situation, one may work better for you than another but it’s worth exploring each of them to figure out which one makes the most sense.
#1 - Partnering With An Investor
For most new investors, especially those strapped for cash and credit, partnering with an active investor is one of the best ways to get your first deal done.
These investors bring their experience to the table so you’re able to learn what to do (and what not to do) but they also have cash and credit available to help secure your first deal.
If you have a solid work ethic, are hungry for success, and are willing to do the heavy lifting while the investor you partner with guides you along the way, it’s worth the time involved to find the right partner.
To get started, check out our guide on finding the right real estate mentor in your local market.
#2 - Using Private Lending
If you’re unable to find an investor willing to partner with you to help get your first deal done, you can also use a variety of different creative financing options to help fund the deal.
You have quite a few options available.
From tapping into equity that you may have built up in your home, to tapping into your IRA or 401k if you’ve built one up, you may have more money available than you realize.
Or, you can work with private lenders by putting property you own up for collateral.
Outside of working with a private investor, it’s worth exploring the options you may have at your disposal before you start exploring other strategies on this list.
#3 - Finding A Hard Money Lender
Now, if you’ve exhausted the first two strategies, working with a hard money lender is always an option.
Instead of using your cash or credit to secure the funding for the deal, you’ll use the deal, itself, as collateral for the loan.
If the property you’re wanting to invest in shows promise, a hard money lender will give you the funds needed to secure the property -- in exchange for higher-than-standard fees and interest rates.
With shorter terms on the loans, though, you’ll need to make sure you’re able to purchase the property, quickly perform the renovations needed, and then flip it before the interest and fees eat up your profits.
To explore this strategy, check out our guide on finding hard money lenders to work with.
#4 - Wholesaling (Or Reverse Wholesaling)
As a new investor, the wholesaling (or even reverse wholesaling) strategy is one of THE best ways to get started if you can’t access cash, credit, other investors, or want to avoid working with a hard money lender.
This strategy has helped more beginner real estate investors get their start and find real success in the business model than just about any other strategy available.
With this strategy, instead of flipping the house, itself, you’re actually only flipping a contract.
You’ll locate the properties and secure an assignment agreement on them. Then, you’ll locate investors willing to purchase the property and flip that agreement -- with a small markup on your end.
To give you an example, let’s say you find a property and the seller agrees to sell it to you for $100,000 but the property is actually worth $200,000 after renovations.
You can then resell that agreement to an investor for $110,000, putting the difference in your pocket, while the investor gets a deal they’re able to turn a profit on.
This is a great way to get started flipping houses with no cash or credit -- and, if you’re interested in learning more about it, check out our guide on wholesaling.
#5 - Doing A Seller Carryback (Or SubTo)
A “subject to”, SubTo, or seller carryback deal involves you finding sellers with active mortgages who are looking for a bit of financial relief.
This relief could be due to facing a foreclosure, needing to move but not being able to afford their new home, or various other situations that can cause pressure in their lives.
With this strategy, you’ll agree to make the mortgage payments for the owner, so you aren’t utilizing your credit score, while being able to fix up the property, rent it out, or even flip it down the road.
The SubTo strategy does tend to be a bit more involved and advanced but it’s worth exploring and understanding how it works in case you come across a great opportunity.
To learn more about the strategy, you can read our guide on “Subject To” investing.
#6 - CrowdFunding / CrowdSourcing
If you’ve heard of websites like GoFundMe or Kickstarter, you’re already familiar with the crowdfunding and crowdsourcing strategy.
With those websites, entrepreneurs ask the public to invest in their projects so they can secure the funding needed to develop new products or services.
In terms of real estate investing, crowdsourcing and crowdfunding acts the same way -- you’ll ask people in your immediate network, friends, family, colleagues, etc, to invest in your projects.
Then, once the deal is done, you’ll repay their investment back with a small return.
The key to making this strategy work, though, is making sure you have a good deal lined up BEFORE you start asking them to invest.
#7 - Live In Flip / BRRRR
One strategy that many new investors are tapping into is the BRRRR strategy, or live-in-flip.
BRRRR, short for “buy, rehab, rent, refinance, and repeat”, lets you purchase your first (or next) home using something like an FHA loan with lower initial requirements.
FHA loans typically only require 3% to 5% down and can work with credit scores as low as 580, making it a great loan for first-time homebuyers who may be dealing with a lack of cash and imperfect credit.
With this strategy, you’ll secure the loan to purchase a property that you’ll live in for at least 12 months, fixing up the property while you’re actively living in it.
Then, when the time comes, you’ve repaired your credit, and have more cash on hand, you can refinance the property, pull out the equity you’ve built up, and pour that equity into your next property.
Rinsing and repeating again and again while you build up your investment portfolio.
To learn more about this strategy, check out our guide on the BRRRR real estate investing method.
How To Find Houses To Flip In 2023
The next step in getting started flipping houses with no cash or credit is finding people who are motivated and willing to sell you their property.
When they’re eager to sell their property, chances are it’s because the property is in need of repairs, they’re facing financial pressure, which means it’s easier for you to get a great deal on the home.
To start finding motivated sellers and understanding exactly who it is you’re looking for and why they’re motivated to sell their home to you, read our guide on how to find houses to flip in ANY market in 2023 (cheaply and easily).
What you don’t want to do, though, is let the belief that starting out with no cash or credit will actually keep you from becoming a successful real estate investor.
With the strategies we’ve laid out in this guide, and our guide on finding motivated sellers, you have everything you need to get started and find success as a brand new investor.