Can I Start With No Money or Credit? Is Flipping Legal? - by David Whisnant

This is a critical article to read if you have a strong desire to be a real estate investor, but do not have any savings or income to operate on a conventional playing field. Remember that to get a loan from a lender, all you need is cash OR credit. Thus, if you have some money in the bank, or a 401(k) with some money, lenders will loan you money even with poor to marginal credit. If you have excellent credit, you can get a loan with no money in the bank. Thus, you only need credit OR cash to get loans. Remember that after your first deal, you will have filled that requirement, as you will have cash. (Dont blow that first $30,000 in a BMW!) The hard part is learning how to do that first deal, and we teach you multiple ways to attack that problem that avoid making embarrassing or confusing offers.

If you have neither credit nor cash, and still want to operate on a conventional playing field where you get loans for properties and pay all cash with no crazy no money down TV seminar type offers, I have great news for you -- Hard money lenders. Most hard money lenders could care less about you or your credit. They look to the property as their security. If you dont pay on the loan, they know that they can turn around and sell the property for enough to get their money out. We go into more details on this in the full course. We will give you a system to track these lenders down in your town in our Full Course, will loan based on the property. If you strike a good deal, they will loan 65% of the value of the property in renovated condition.

Thus, if you find a home that is worth $100,000 fixed up, and you can buy it for $60,000, the lender will give you 65% of the fixed up value of the home, or $65,000. $60,000 of that will get you into the property for no money down, and the extra $5,000 can be used for closing costs and/or repairs. You can then flip this property to another investor for cash, or rehab it yourself for maximum profits. The great thing about these loans is that you can typically close within 7 days. The only drawback is higher fees, but lets face it, a few extra points on the loan to close is still cheaper than having a partner.

I started with nothing and leveraged credit cards to get into my first house, so starting with nothing is something that I know about personally.

A point on flipping: We have received questions from students as to whether or not flipping is illegal. It is not. What IS illegal is taking a property, getting false appraisals through corrupt appraisers, and over-financing the property with corrupt lenders. Once the property has had tons of cash pulled out, the corrupt group would then walk away and pocket the money. The lender would be left holding the bag. That is not what we are about. Owning a property for a short amount of time and reselling is completely legal, and the basis on which this economy is built. There is nothing wrong with owning something for a brief period, using your skills to find a buyer, and reselling that property. People do this every day in the stock market. Car dealers do it every day with cars that they buy and immediately wholesale. The word flipping has attached to the illegal activities that you have probably read about in your local papers, but owning for a short time, is not and never has been illegal.

The only problem that you will have is convincing the appraiser that the property you bought last week for $100,000 is now worth $130,000. In a worst case scenario, your buyers lender may require several appraisals to verify the increased value.