How to Fund a House Flip Without Being Rich

TLDR

In Ross’s example, a conventional loan required about $100,000 from the buyer, a commercial loan about $52,000, and hard money about $20,000 after points and interest. The result depended on the deal and the lender.

Table of Contents

• The Example Deal We Will Walk Through
• Option 1: Cash
• Option 2: Conventional Mortgage
• Option 3: Commercial Bank Loan
• Option 4: Hard Money
• Option 5: Private Money
• Option 6: The Private Hard Money Lender
• How to Find These Lenders
• The Deal Is What Gets You Close to Zero
• FAQ

The Example Deal We Will Walk Through

This lesson started with a viewer asking how rich you have to be to buy houses. I was not rich when I started. I could not even get a credit card. The lesson was to learn which lenders fit a flip and what each one costs.

One deal, compared through every lender type. Numbers are simple on purpose.

The question for every lender is the same: how much of my own cash do I bring to the table?

Option 1: Cash

You need $260,000 in the bank. Most people do not have that. Skip.

Option 2: Conventional Mortgage

Ross used a conventional mortgage from a regular bank as the first loan example. In his comparison it had the lowest rate, the most borrower tests, and the slowest close.

The example assumes the bank funds 80% of the purchase price. It does not fund 80% of the whole project in this model.

You also have to pass every bank test. Credit score, credit history, cash reserves, monthly income to cover the payment. And most house flips do not happen on the slow timeline of a conventional close. The house you want to buy is gone before your bank is done.

Ross’s conclusion was that this can fit a primary home but requires too much cash and time for his ongoing flip model. A real quote may differ from this example.

Option 3: Commercial Bank Loan

Same bank, different product. Not backed by the government, so the bank is taking the risk. They still run you through every test and sometimes make them harder.

The upside is they lend on total cost, not just the purchase.

Still a lot of cash to bring every time. And the slow close is still a problem. Good product for established investors with repeat banking relationships. Not great for a first flip.

Common Mistake

Assuming a bank will treat your flip loan like your primary home loan. They will not. The product, the rate, the timeline, and the cash required are all different.

Option 4: Hard Money

Here is where the math changes. The hard-money example is sized from after repair value, not just project cost. Ross also points out that banks tend to avoid houses that are not livable at closing, while hard-money lenders specialize in the rough houses flippers plan to repair.

Ross describes a 65% to 75% ARV range and uses 75% for the lesson. On a $350,000 ARV, that is $262,500. It is an example, not a lender promise.

Our total all-in cost was $260,000. The hard money loan covers the whole thing.

The catch is the price of the money.

That is a real cost. It shows up in your profit. In this example, Ross said the borrower would still bring around $20,000 out of pocket. He then explained that buying the same house for $180,000 instead of $200,000 could potentially reduce that requirement, depending on the lender.

Run the full picture on our example:

Ross rounded the example to roughly $40,000 in projected profit after using about $20,000 of the borrower’s cash.

His reason for paying the higher financing cost was to keep more cash in reserve for the problems that come up on flips. That choice lowered the projected profit.

Option 5: Private Money

Private money lenders are individuals who invest because they trust you. Ross’s examples include relatives or several people each putting in part of the money.

Rates are usually better than hard money. Terms are whatever you work out. And they do not put you through the gauntlet the bank does.

The downside is the relationship risk. You are taking the money and the construction risk, and the people lending may not understand every way a flip can go wrong.

For a new flipper, Ross would not start here. He says to consider it only after you have enough experience to show that the trust is earned.

Private money is cheap capital with expensive relationship risk.

Option 6: The Private Hard Money Lender

This is the lender type Ross wants a newer flipper to seek out. It sits between a large hard-money company and relationship-based private money.

A private hard money lender is usually an experienced investor who is now lending out their own money or money from a small group of accredited investors. They specialize in lending to flippers. Many of them still flip themselves. They know the business inside and out.

What you get:

• Rates in the hard money range
• Terms that can flex with the deal
• A lender who actually understands what you are doing
• A built-in mentor who wants you to succeed

Why would they want you to succeed? Because if you fail, their money is tied up in a bad deal. Their business depends on finding flippers they can trust. You showing up prepared is exactly what they are looking for.

Why the Relationship Matters

The rate can still be high. The added value in Ross’s example is a lender who knows flips, wants the deal to succeed, and may become a mentor as trust grows.

How to Find These Lenders

Ross’s path for finding them is local networking.

• Local real estate investor meetups
• Facebook groups for your local market, search “[your city] real estate investors”
• Ask every flipper you meet who funds their deals
• Go to a local REIA meeting, introduce yourself, say what you are working on

When you meet one, tell them you have been studying, show them a deal you underwrote, and ask what they look for in a borrower. Then bring them a real deal that fits their criteria. That is the whole game.

The Deal Is What Gets You Close to Zero

The lender alone does not create a zero-cash deal. Ross changes one number in the example: instead of buying the house for $200,000, buy it for $180,000. That extra room may let a lender cover more of the project and financing costs.

Different lenders handle draws, points, interest, leverage, and cash back in different ways. The $180,000 example is the mechanism Ross used, not a promise that every lender will fund it or that the borrower needs no reserves.

This is the elephant in the room at the end of the lesson: none of the funding math works without a strong deal on the front end. If you overpay, you bring more of your own money no matter what the loan is called.

FAQ

What credit score do I need for hard money?

Ross does not give a minimum score. He says most hard-money lenders he worked with did not pull credit, some did, and they still wanted to see that the borrower had some cash. Requirements depend on the lender.

How fast can hard money close?

The source says conventional banks can take weeks and that flip deals often require a faster close. It does not provide a hard-money closing timeline.

What is the difference between points and interest?

Points are a one-time fee at closing, calculated as a percentage of the loan. Interest is the monthly cost of keeping the money. Hard money typically has both. On a $262,500 loan at 3 points, you pay about $7,875 at closing plus monthly interest during the hold.

Can I really get into a flip with $0 out of pocket?

Ross’s illustration drops the purchase price from $200,000 to $180,000 so the deal has enough room for the lender to cover more. He does not promise zero cash, waive reserves, or define one policy for all lenders.

I am just starting out. Which lender should I use?

Ross preferred networking to find a private hard-money lender with real investing experience. He did not guarantee a reasonable rate, instruction, or fast close for a beginner.