House Flipping 101: Investors
Each month we are providing a brief tutorial describing the steps it takes to successfully flip a home. In our first step, we described how important research is to determine the basics on house flipping, your geographical areas and the economics of your local market. This month we bring you Step 2: Investors. Finding investors is a great way to fund your house flipping project.
House flipping is expensive. Each step of the way costs money. However, it is possible to flip a house without using your own money. In fact, investors often view real estate as a lucrative opportunity, especially for those interested in immediate profit. Perhaps you do not have the funding on hand to flip your first home and have been intending to seek out investors. If this is the case, there are a few ways to go about finding investors. Money is everywhere; you must know where to look for it.
Network for Private Lenders as Investors
Speak with family members and friends to discuss your plan towards flipping real estate. Consider utilizing a private money lender. This can be basically anyone! They are regular people who are looking to invest disposable income in different ways. House flipping provides a faster and higher percentage of return on investment over traditional investment practices. A private money lender will likely be agreeable to sit down and discuss your project with you. Be sure that you have a plan and know to explain why you have a better opportunity to invest their money.
Find real estate investment clubs (most meet monthly and welcome attendees). Find these clubs and associations to meet with real estate agents, private investors or other individuals who specialize in real estate flipping. In addition, don’t rule out your local chamber of commerce. The contacts you obtain may be able to provide referrals for local investors such as small business owners or known private lenders.
Reach out to a local mortgage broker or banker. Sometimes they receive information about lending opportunities for investors and can help you seek out and filter trustworthy investors for your project.
Find a Partner
Another option is to partner up with someone who has money. While the investor has the funds; you do all the work, splitting the profits equally. This is a great way to quick start your flipping business. The partnership can be completed on a deal-by-deal scenario and can be anyone – a family member, friend, business partner, small business owner, real estate investor and so on. Again, a business partner can be found at a local real estate investment group. Long Island has our own real estate investment group with frequent events.
Mix and Match
Especially relevant, get creative with your funding! Maybe you have funding for a portion of your project; a friend has funding to invest in another third of your project and a private lender will invest in the final third of your project. There are so many ways, sources, and possibilities to fund your project. As we said earlier, money is everywhere. Find it and get creative!
You’ve done your research…you have funding for your project…next month, we are finally going to gather a team of professionals to have in place for when you find and are ready to actually begin your project!