It is difficult to buy and resell a home for a profit in a relatively short amount of time. This process, known as flipping, is even more difficult without a down payment. The key to flipping a house without an out-of-pocket down payment is to find investors who are willing to finance the deal and split the sale proceeds. You also must buy a house relatively cheap so that you can make renovations and still turn a profit. Even in an appreciating housing market, completing a flip at minimal cost means knowing what to look for in a fixer-upper.
Step 1
Look for someone who has disposable income to invest. Talk to people in your social and business networks. They may know of investors interested in real estate and they can put you in contact.
Step 2
Hire an attorney to draw up a partnership agreement after you find an investor. Establish that you want to buy a house to flip and that your partner will provide the cash to purchase with no down payment required. Include in the terms each partner's role and responsibilities. For example, specify that you will invest the time and labor to rehab the property and that the two of you will split the profits when the property sells. Clarify in the partnership agreement how often you will report the progress of the flip to your investing partner.
Step 3
Find a house to flip. Tax sales, bank-owned foreclosure properties and estate sales offer opportunities to buy homes at discounts, or lower than market value. You can pinpoint auctions through newspaper ads, online searches and through local real estate agents.
Step 4
Inspect the condition of the property. You can't always inspect the interior of a property before a real estate auction, however, if possible, do so before the auction date. You can complete repairs faster on a house that needs minor, cosmetic repairs. Fixer-uppers usually are sold "as is," therefore, you should have it checked out by a certified home inspector or licensed contractor before placing a bid or offer.
Step 5
Set the list price. This should cover the money paid for the home and renovation expenses. Yous should also price the home high enough to cover the time and work you put into the project. Unless you sell the home "for sale by owner," add in the cost of real estate commission fees and all closing costs. Consider, too, that if you own the home for less than a year, profit from the sale is a short-term capital gain which is taxed as ordinary income.
Tip
Attend events where you are likely to meet people who work in real estate or are interested in real estate investing. Your local chamber of commerce, a local real estate investment club and other community organizations are practical places to start.
When setting a list price, you or your agent must be familiar with the area’s market conditions, comparable home sales, housing inventory, and the strength of the local economy, which all contribute to home prices and profitability.
When calculating resale price, remember that time is money. You will have to pay property taxes, homeowners insurance, utilities, and other maintenance costs until the flip is complete.