Get Money to Buy Houses Without Being Rich

TLDR
You do not need the pile of cash many beginners think they need. The source covers five paths: FHA plus DIY, FHA plus 203k, hard money, private equity, and partnerships. For a first deal, it favors FHA or a partnership.

Table of Contents

The Five Metrics

Every funding strategy gets rated on the same five things:

  1. Cash needed. How much out of pocket.
  2. Bankability. Credit, debt to income, and what a bank wants to see.
  3. Skills required. Sales, sourcing, project management, or construction.
  4. Risk. How bad it hurts if things go wrong.
  5. Work ethic. How much sweat it takes.

These are Ross’s relative scores for the five examples in this lesson. They are not lender approvals, universal risk ratings, or substitutes for the terms of a real loan or partnership.

I started buying houses in 2011 in my early twenties with very little money. Since then I have bought hundreds. I have personally used all five of these. Here is how they stack up.

1. FHA Plus DIY

This is how I bought my first house: an FHA loan from a bank, 3.5% down in his example, and renovation work I did myself. Treat the figures below as the comparison Ross used in the lesson, not a promise of current loan terms.

  • Cash: 3 of 10. On a $200,000 house, the 3.5% example comes to $7,000. You still need a reserve on top.
  • Bankability: 7 of 10 in Ross’s comparison. He explained credit, debt to income, the condition of the house, and primary-residence occupancy as lender checks. Confirm the actual requirements and payment with your lender.
  • Skills: 2 to 3 of 10. You buy a livable 80s-finish house and DIY floors, paint, hardware, cabinets, landscaping.
  • Risk: 2 to 3 of 10 in the source’s relative ranking. Ross’s reason was that the home also replaces the place you already pay to live; that does not remove ownership, renovation, or financing risk.
  • Work ethic: High. You are swinging the hammer.
Pro Tip
For the plain FHA example, Ross looked for a livable house with dated finishes that he could update while living there. The 203k example below can cover a rougher property when the approved plan will make it livable. Let the lender apply the current program and property rules.

2. FHA Plus 203k

Same FHA loan, with a 203k rehab piece bolted on. The bank gives you money to do the renovation on top of the purchase price. I did this on my second house.

  • Cash: A little higher because 3.5% is now on acquisition plus rehab. On a $200,000 buy plus $50,000 rehab, you bring about $8,750 instead of $7,000.
  • Bankability: 7 of 10. Same credit and debt to income requirements, a slightly higher payment means you need a slightly higher income.
  • Skills: 4 to 5 of 10. In Ross’s loan, the funded renovation scope went to an FHA-approved contractor and his bank supplied a list. He still did DIY work outside that contractor’s scope. Program rules and eligible work depend on the loan and current lender requirements.
  • Risk: Low in Ross’s comparison because it is also the primary residence. The larger payment and managed renovation still add real risk.
  • Work ethic: Medium. You are not swinging the hammer, but you are project managing for the first time.

Ross used this for a roughly $60,000 renovation and says he botched the project management. That admission is the lesson: financing the rehab did not make him ready to manage it.

He also got this FHA loan after a job move qualified his situation. That is his experience, not a catch-all loophole. Read HUD’s current FHA Single Family Housing Policy Handbook and have your lender apply it to your facts before you count on another FHA-insured mortgage.

3. Hard Money

Hard-money lenders focus heavily on the deal and the after repair value, but the source’s shorthand should not be read as a promise that borrower credit, experience, liquidity, or guarantees never matter.

  • Cash: 2 of 10 in the source’s example. A $150,000 purchase plus $50,000 of rehab is $200,000 all in. At the 70%-of-ARV assumption Ross used, a $300,000 ARV supports $210,000. Two points on a $200,000 loan is $4,000 up front. A real lender may size and price the loan differently.
  • Bankability: 1 to 2 of 10 in the source’s comparison. That means the deal carries more weight, not that underwriting disappears.
  • Skills: High. You need a real deal at a real number. You need to write a scope of work. You need to manage contractors. Hard money is a fire hose. It does not turn off until you sell or refinance.
  • Risk: High. The recording used rates around 12% to 15%. The exact current quote may differ, but the interest keeps running until you sell or refinance.
  • Work ethic: 7 to 8 of 10. You have to source a real deal off market, because MLS deals do not have room for hard money math.
The Fire Hose
Do not treat hard money as easy money. Ross’s warning is that the high monthly interest does not shut off while a project is delayed, and a new borrower may have no other cash to tap. Gain the knowledge and experience to control the deal before you turn that hose on.

Hard money lenders are everywhere. Google “hard money lender” in your city. They want to lend. That is how they make money.

4. Private Equity

Raising money from accredited investors. I have done this, but only after a decade of flipping and a pile of rentals under me.

  • Cash: 1 of 10 in Ross’s example because outside investors provide the capital.
  • Bankability: No bank loan in the structure he describes; the investors and legal documents still impose their own requirements.
  • Skills: Very high. You are selling a vision to people putting real money in.
  • Risk: Low in cash. Very high in relationship capital. You are risking your reputation and other people’s money.
  • Work ethic: 10 of 10. You better be earning every dollar.
Dumb Mistake
Raising money before you have a body of work. Friends and family may trust you before your experience supports the risk. The source says to build experience first; it does not set a universal number of flips or years.

Some people try this without experience, and Ross says he has seen it go badly. Get legal counsel to write the contracts correctly; that is not contract advice Ross gives. The ownership, control, repayment, default, and exit terms have to be resolved before money changes hands.

5. Partnerships

This is my favorite strategy for beginners if you cannot do one of the FHA plays.

The partner is not your buddy who also wants to flip. Partnerships work best when they are opposites. Find someone who has done this for a long time, owns a lot of real estate, and is tired of doing the hard stuff. Tired of sourcing comps, tired of walking houses, tired of chasing contractors who do not answer the phone, tired of listing and babysitting a sale.

You bring the work. They bring the money.

  • Cash: 1 of 10. You bring very little.
  • Bankability: 1 of 10. Your reputation is your bankability.
  • Skills: Starts low. This partner is probably also a mentor. Over time your skills grow and eventually you bring the deal-finding knife and they bring the butter.
  • Risk: Ross rates the working partner’s cash exposure as low and reputation exposure as high. The actual agreement can add capital duties, guarantees, and legal liability, so read the deal you are signing.
  • Work ethic: 10 of 10. Whatever it takes, with a smile.

How to find these partners: real estate meetups, Facebook investor groups, local networking. Be patient. You are building a reputation first.

You Still Need Reserves

Low cash does not mean no cash. I still use these strategies today because my goal is to keep my own cash out of deals. That lowers my risk and lets me do more deals.

It does not mean empty bank account. Reserves should be as high as you can get them. Things come up. A contingency fund is what keeps a bad surprise from becoming a catastrophe.

Skills are the real currency. In this lesson, skills are knowledge plus experience. You get knowledge from videos, books, and articles like this one. You get experience by taking action before you feel fully ready.

Skills compound. Cash does not. Focus on the thing that keeps growing.

FAQ

I have no cash, bad credit, and no experience. Where do I start?

Partnerships are Ross’s preferred beginner path when the FHA paths do not fit. Look for someone who has done this before, owns a lot of real estate, and is tired of the hard project work. You bring that work; they bring money and experience. This still requires clear deal terms and trust, not just enthusiasm.

Is FHA only for first-time buyers?

The source names a job relocation as one circumstance that can make another FHA loan possible. It does not establish a family-size exception or a catch-all loophole. Verify current eligibility with the lender before you rely on it.

How much cash should I have in reserve on my first flip?

Ross does not give a month count. He says reserves should be as high as you can possibly have them because issues do come up. Build the reserve from the real loan payment, taxes, insurance, utilities, project risks, and your own obligations instead of copying an invented universal number.

Should I borrow more than I need?

The source does not tell you to borrow extra just because a lender will provide it. Build a realistic scope and contingency, keep reserves, and compare that need with the cost and terms of every borrowed dollar. With hard money, the fire-hose warning applies to every delay.

When’s the right time to take on private money from people I know?

Ross waited a decade, after flipping houses and owning many rentals, before he raised this kind of money. He does not turn that personal history into a universal year count, but his bar is clear: do not start here; first build enough experience to be genuinely good at the work. You are risking other people’s money and your relationship with them.