If You Can’t Make it in Real Estate Without Money, You Can’t Make it With Money

by | BiggerPockets.com

To get conventional financing as an investor, many deals require a large down payment. Hard money lenders even require substantial down payments. Financing is a difficult challenge for many investors.

So how do we do real estate deals?

Real estate is an ‘Other People’s Money’ business, plain and simple. You do not need your own money to do deals.  Let’s look at this example deal.

100K Value
80K Purchase
250 Cash Flow
15K Down Payment
65% LTV after down payment

To do this deal, the lender requires 15K down as they will only go to 65% LTV. A down payment investor will lend in 2nd position, but only up to 65%. So your lending falls through. What is the problem here?

Is it the lender? I think not. The problem here is that the deal is not good enough to get 100% financing. This deal cannot be done unless you have money. But if you do have money, you are doing a deal that is 80% LTV. What if holding, rehab costs and/or selling costs increase? What if the market goes down and/or you cannot sell for enough to break even? You lose.

If a deal is not good enough to do it without any of your own money, then it is not a good enough deal.
Savvy investors should walk away from the deal above.  That deal should be purchased for 65K using none of your own money not 80K using your own money.  Many in high priced areas should look at a different strategy and/or different market.

Finding the Best Deals Should Be Your Priority!

What needs to happen is investors need to master finding the best deals. If you cannot do a deal using 100% of other people’s money then you have not mastered finding great deals. Therefore, if you can’t make it without money, you can’t make it with money.

Photo: Alex E. Proimos

About Author

Ryan is the founder of Real Return Real Estate™ , a company focused on buying property at extreme discounts, selling and renting with cash flow.


  1. Hey Neil, Happy New Year! You should never do a bad deal. As investors we must set strict criteria and only do incredible deals. Incredible deals can be done with none of your own money. The best investors find the best deals. If you have to put your own money into a deal to make it fit your criteria, then the deal is simply not good enough.
    .-= Ryan Moeller´s last blog ..Cash Flow Duplex =-.

  2. Hey Ryan,
    Thanks for the clarification.
    I totally agree with you that one should never do a bad deal.
    I also agree that incredible deals can be done with none of your own money.

    I feel that good deals can still be done by putting one’s own money in.

    Example: One of my buy and holds that I have, I put in my own savings as the down payment. It was the first deal that I ever did, as a result, I did not use OPM, I just used my savings. This turned out to be an incredible deal, and still is today. The ROI is excellent.

    Onwards and Upwards,
    .-= Neil Uttamsingh´s last blog ..Canada’s Most Versatile Investor =-.

  3. Hi Ryan,

    In My area of California, REO properties are getting Multiple Offers. Value 220K going for 150K.The Bank DOES NOT want to see proof of funds letter.They want to see a Bank Statement with the Offer showing actual funds. Some people are offering 20K over asking price. Any thoughts on how to deal with this?



  4. Farok, I live in San Diego and exactly what you state occurs all of the time. Often properties worth 220K will get bid up to 200K or even current value with all the competition. The LTVs and cash flow are no where near good enough and I am not finding multiple exit strategies. Lots of risk if the numbers do not make sense. I am not investing in CA right now, I invest in OH where rent-to-purchase ratios are at or near the highest in the country.

    My thought is to target a different market and pick one strategy where the numbers make great sense and you can cherry pick from tons of deals that have multiple exit strategies. Then master your strategy and that market and duplicate over and over.
    .-= Ryan Moeller´s last blog ..Cash Flow Duplex =-.

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