How Much Money do you Need to Fix and Flip a House?

Fix and flipping homes can provide a great income, but it almost always takes money to make money. You may hear stories of investors fix and flipping homes without any of their own money, but these investors are usually very experienced fix and flipping or they are giving up much of their profits. Hard money lenders can allow investors to complete a fix and flip with less money, but hard money lenders are very expensive. Using a partner or private money can also reduce the amount of money an investor needs to fix and flip, but you may have to give up a percentage of the profits or be very well established to use these techniques.

For more information on my fix and flips, rentals properties as investing strategies check out my complete guide to purchasing long-term rentals.

How much money does an investor need to fix and flip using hard money?

I talk a lot about using hard money to fix and flip in this article. There are many hard money lenders and they each have different terms and conditions on their loans. Some hard money lenders claim they will allow an investor to buy, renovate and sell a fix and flip without any of their own money. However, most hard money lenders will only give these terms to an experienced fix and flipper with a proven record of success. The hard money-lender will require some money from the investor if they are just getting started or a share of the profits. The hard money-lender will also want to make sure the fix and flip will be profitable and keep a very close eye on the project for any new investor.

If you are using a hard money-lender, I would count on needing at least 20 percent of the purchase price of a fix and flip for repairs and down payment. Some hard money lenders may require more or less depending on the deal and the investors experience. You may be able to get the hard money-lender to fund most of the deal if you share 50 percent of the profits. Remember a hard money-lender is very expensive; 3-5 points and 12-15 percent interest is not uncommon.

How much money will you need to fix and flip with a partner?

I know many fix and flippers who use partners to help with the funding of deals. I used to work with my father on our fix and flips; he would fund the deals and I would do most of the work. I see many fix and flippers who will find deals, repair the homes and sell them, but need a partner to help pay for the fix and flip. A 50/50 split is very common in these deals when one partner puts up the money and another does all the work. This may seem like an unfair split considering one persons doing all the work, but without the money the deal could not be done.

This is one way to get started fix and flipping, but giving up 50 percent of the profit is a big deal. I explain why saving and using more of your own money to fix and flip will make you more money here. I think the goal of a fix and flipper is to save enough of their own money to start paying for down payments and repairs on houses. When you give up 50 percent of the profit, it is hard to save enough money to start funding your own deals.

With a partner it is possible that you could complete a fix and flip without any of your own money, but you will make much less. Instead of making a $30,000 profit on a house, you would only make a $15,000 profit.

How much money will you need to fix and flip with a bank?

It is not easy, but it is possible to fix and flip using bank financing. I use a portfolio lender to fund my fix and flips and they are awesome. They give me 75 percent of the purchase price and charge me 1.5 points on my short-term fix and flip financing.  Instead of the 15 percent a hard money-lender would charge, my lender charges 5.25 percent interest.

My lender does not fund any of the repairs, but some portfolio lenders will. Every portfolio lender has different terms and guidelines on how much money they will lend and at what rates. I have to put down 25 percent of the purchase price and pay for repairs on each fix and flip. That can add up to $45,000 to $60,000 on a $100,000 purchase, depending on how many repairs are needed. That seems like a lot of money, but by using my money I save thousands on the interest rate and points a hard money lender would charge. I also get to keep all the profits since I have no partner. I don’t use all my money to pay for these expenses, because I use private money as well.

How much money do you need to fix and flip with private money?

Private money is an investor’s best friend if you can find the right person with the right terms. Most private money comes from someone you know; a family member, a friend or a business acquaintance. Many people are looking for a way to invest their money and get great returns without much risk. Investing money into a fix and flip business can achieve high returns without much risk, depending on the situation. A brand new fix and flipper is going to be more risky than an investor who has completed 50 fix and flips. Real estate can also be used as collateral for private money to give the lender more assurance the money will be paid back.

Because there are different levels of risk involved with every deal and each lender expects a different level of return, terms vary greatly with private money. I am able to pay 8 percent interest on my private money, because I am a very seasoned investor and I offer great collateral to my lender. Other private lenders may expect 10 percent or even 15 percent interest on their money based on the risk. The hardest part about getting private money is finding someone to lend you money. You can’t be afraid to ask around to see if anyone you know would be interested in lending you money and getting higher returns on their money in the process.

With private money it is possible to get started fix and flipping with no money out of your own pocket. It may be hard to find a lender that will fund your entire deal, but it is the best route for fix and flipping with as little of your own money as possible and still keep the profits you make.

For more information on how to fix and flips homes including how to find properties, how to finance them, how to repair them and how to make the most money fix and flipping, check out my book Fix and Flip Your Way to Financial Freedom.  The book is  available at Amazon as a paperback and eBook

In order to fix and flip a home, you are almost always going to have to use some of your own money or split a large chunk of the profits with a partner. In order to make the most money fix and flipping, I think a combination of bank financing, private money and your own money is the best route to take. It is hard work saving and building up enough money, but well worth it in the end. Buying a house, fixing it up, and selling it takes a lot of time and risk. I want to be rewarded with the most money I can for taking on that risk.


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