How to Finance Flipping Houses

House flipping involves purchasing a home with the intent to generate income, after the rehabilitation of the building. Television shows have recently caught wind of the trend; which has resulted in an onslaught of house flipping programs. The trend leads to a glamorization of the process. While flipping a house seems like a way to get rich quick, new flippers can get derailed while attempting to finance the flip.

Suggestions

1. Seek a business partner to invest with you. Place an advertisement in the classifieds, and speak with your friends, to see if anyone wants to partner-up. Choose someone you trust, as you don't want to end up losing. Gather a small group of partners, if possible. More people generates more financing, but it also means more people to reap the rewards.
2. Apply for a bank loan. Bring accurate income statements and information on all of your equity investments -- including stocks and other property -- to the bank, when you apply. The bank wants to give you a loan, but you must prove you can pay it back. It is likely that the bank will only finance 75 to 80 percent of the value of the home. You still need to prove to the bank that you have access to the downpayment.
3. Approach private lenders for quick cash loans. Private lenders often offer significant amounts of cash, but expect the return quickly. The interest rate is often quite high, especially in relation to conventional bank loans. Explore this option only if you can quickly rehabilitate the home and make a speedy sale. You may also try a private loan from a close friend or family member.
4. Obtain a second mortgage on your current home. Depending on the price of your home, and the one you wish to flip, a second mortgage can provide the funds for a downpayment, or the entire purchase priceRehabilitate the house on your own. Save money, by not hiring out for things like plumbing, electrical and paint. Ask friends for voluntary assistance, and take classes at community centers, to learn tricks of the trades.
5. Used restoration materials as often as possible, rather than purchasing new items. Save money where you can during the project to fund the actual home purchase, until the flip is complete.

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