Probably the largest obstacle to successfully flipping a house isn’t so much locating and renovating the property, but more simply coming up with the necessary money to make it all happen.

We’d all love to have the option of simply paying cash for an investment property but the vast majority of us don’t have that much free cash lying around, especially when first starting out. That’s a great goal to shoot for, as paying cash lets you boost your profits and turnaround time by avoiding mortgage application and processing fees, but it’s just not a viable option for most investors.

The best bet for most flippers getting started as far as financing goes is to go the mortgage route, as far as borrowing the money to buy those house. This eats into your bottom line as far as profits (especially if you have to make multiple mortgage payments) but that’s a necessary evil at the beginning stages, and hard to avoid.

One nice thing about flipping is that you’re typically holding the property for a short period of time (usually less than 6 months), so you can consider a wide range of mortgages, from traditional 30 year mortgages to interest only mortgages, ARMs, even 40 or 40 year mortgages.

You’re also typically not as concerned about the actual interest rate, either, as your goal is to make very few actual payments (if any). That’s not to say you shouldn’t shop around for the best interest rate, just that you shouldn’t be scared by a high rate if it has other obvious pluses, such as requiring 0% down payment. If you later decide to hang onto the house as a rental or until the market improves, you almost always have the option of refinancing.

Like any loan, you’ll have to qualify for financing. If you’ve got little income and terrible credit, don’t expect lenders to fall over themselves to give you money to try to flip a house. I haven’t encountered this personally, but apparently some lenders require higher down payments if you’re looking to buy an investment property, as opposed to a loan for your primary residence.

Avoid any shenanigans as far as trying to wrangle cash back from sellers under the table, after inflating the purchase price. It’s tempting for flippers to try such things, as in a perfect world your loan would also include money for the projected repair costs, so that your out of pocket expenses were close to $0, but sadly, that ain’t the way it works.

While it’s legal and acceptable to increase the purchase price to cover some or all of your closing costs, most lenders don’t allow you to inflate the price in order to increase the loan amount to also include repair money.

If you can’t pay cash and have terrible credit and otherwise can’t get a standard loan to finance a flip, pretty much your last resort is a hard money lender. These are essentially investors and smaller companies that cater to the desperate (often people trying to avoid foreclosure at all cost) who don’t mind paying very high interest rates.

For flippers, though, a hard money loan isn’t that terrible an option, for reasons covered above. If you’re only going to hold the property for a few months, the fact that the interest rate is 15% doesn’t really matter to you. Hard money loans typically require much less paperwork and can be done quickly, as they often don’t involve verification of income, great credit, etc.