Our first flip with "No" money down....at least none of our own

[David D'Errico]

So..... I just want to share how my partners and I got stared here in Louisville, KY flipping our first house. There are many creative ways to fund and finance real estate deals. So for those out there with no money for a down payment or no money for the rehab costs, here is what we did. 

3 financial roadblocks to getting started : 

How to fund the purchase of the flip

How to fund the rehab

How to fund the down payment

So for the purchase we sought out an investor friendly local bank and asked about what type of rehab loans were available to investors. Well River City bank had one that would allow us to borrow 80% ($88k) of the purchase price ($110k) on an interest only ( 7% APR) six month note, due at the end of the six month. Which meant we would have no monthly mortgage payment to worry about for holding costs.

Rehab-They would have also lent up to 80% of the rehab cost and we could have rolled it all into one loan, but that would have required a larger down payment from us. So we decided to use credit cards to pay for stuff as we needed it. It was a mix of interest free cards, non interest free, and 0% cash advance checks from one of my partners' banks. We did come out of pocket for some of the rehab.

Down payment- $22K We initially intended on using a HELOC, but the paperwork fell through and that wasn't available. So we quickly looked into trying to get an unsecured line of credit from a different local bank. They easily loaned two of us 10k and 12k (@10% interest) without many questions asked and it was available almost immediately. The remainder of the money we needed for the assignment fee to the wholesaler came out of pocket

And yes 10% interest is high, but not as high as some hard money or private lenders and there were no other fees. Plus once the HELOC was available about a month later we paid off the lines of credit, which had a lower interest rate.

Purchase of the house- financed

Rehab costs- mostly financed

Down payment - financed 

So while there was of course money required for a down payment, we didn't need to use our own money up front. Instead we were able to finance the down payment with a LOC. We did however have to come out of pocket along the way to pay for material or labor here and there, but that was well into the flip not up front. So you might be able to get started with little or no money down but, that doesn't mean you can do the whole thing without any of your own cash.

I know this is kind of a long post, hope I haven't lost everyone. But I wanted to share how you we got started to encourage others to do the same. Some of the methods we used may not be available to everyone or may be to risky for some (credit cards) but find a way to make it work. We are in the final stages of closing and stand to make about $35k total. Comment with creative ways you have made deals happen or with suggestions on what we could have done better! 

[Xavier Randall]

@David D'Errico great post! My wife and picked up a 4 plex in Middle GA near a great university. We got it for $80K. Put down 10% and did a seller finance at 6% I/0. Getting a conventional loan would've cost us at least 25% down on a non-owner occ. The financing we negotiated was the equivalent of 5% fixed for 30 yrs. We got an additional personal loan from Discover to complete the rehab. Just last week we interviewed 3 property managers who all said they will easily rent for $600-$650. The ARV was valued at $135K. The rent from 1.5 units will cover our monthly cost of approximately $700/month. If you're out there, sit down and map out your goal and find a way to pull the trigger on a good deal. You gotta get off the sidelines. I know people who still waiting because they're listening to the wrong people. A mentor told me once you get the 1st one it becomes clearer that building a rental property portfolio is the way to residual streams of cashflow. The true definition of an asset is an investment that makes your money.