Mortgages & Creative Financing

Personal Properties: Creative Financing for the Real Estate Newbie

Expertise: Landlording & Rental Properties
23 Articles Written

As an active BiggerPockets Forum member, I see TONS of new investors wondering how they can get started in real estate with a great salary but no assets or savings. Honestly, I bet if we searched for the most popular title you would see "No Money Down."

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Heck, one of BiggerPockets’ own even wrote a book on that subject. While there are tons of additional great books, podcasts and forums posts on this subject, many people ignore the simplest, the easiest 0%-5% down.

Related: No Money Down Real Estate: The Untold Dangers Every Investor Should Know

Personal Properties

I know this is controversial, and there are many different camps on this philosophy. I have seen a lot of articles on why not to buy houses as personal properties, but I wanted to give my two cents on why I am a believer in this being the most “valuable” type of borrowing.


  • Lower Down Payment & Interest Rates: If you buy a house as a personal property, you can put 0-5% down, and pay .5-1% lower in an interest rate. I know when we were running the numbers a year ago, we even noticed that this lower interest rate has reduced our payments close to what a 20% down payment and higher interested rate equate to!
  • Tax Savings: Depending on your tax situation, being able to declare your mortgage interest off schedule A of your taxes could have a great benefit.
  • Lock in Potential Depreciation: Once you own in a neighborhood, if it appreciates, you are able to experience this appreciation. While the same is true if the market falls, if you have an "exit" plan of being able to rent your home out, this becomes much less of a worry.
  • House Hack: If you own the house, it is a lot easier to sublease. We have had many friends who have lived rent free by simply putting up with roommates. They have had other people paying for their mortgage and "house expenses" while they are building other baskets!
  • Easier Ability to Purchase: There are TONS of programs for first time home buyers or even home buyers. We have had a much easier time qualifying for our personal homes versus the ones we buy as investments from day one.
  • Ability to Get Your Foot in the Door: We got started at 23 and 25. As corny as this sounds, getting started in the traditional way, buying our first house, we got to learn a lot. Let's just say Home Depot was on first name basis with us. So now when things go wrong we have a good idea about what is going on even if we hire the handy man instead of doing it ourselves!
  • Higher Leverage Possibility: Since personals have less of a required amount down and tend to be more "lenient" (again bank dependent), it is easier to buy a lot more house, a duplex, or fourplex to leverage and begin your real estate career. While it definitely is not always a great plan, if you have ways for others to pay off your mortgage (house hacking, multi-family, etc.), it can be an awesome asset.

While there are lot of negatives to this strategy, there are also many myths!


  • Waste of Money: We have bought in areas where our mortgage payment was less than rent, so someone else ends up paying. That’s not even taking into account the role that taxes or appreciation plays.
  • You Need 20% Down: I see a lot of people comment that you should have at least 20% down before you buy a house. Many more mention refinancing. Personally, we try to do a loan ONCE. Therefore, instead of pulling money out, only buy once with as little down as possible. This way, when we move on or have roommates, someone else is paying our mortgage.
  • You Have to Hold Long Term: Many people buy personals and move on when their life requires it. Upgrading due to an increase in your family, moving to a new location, etc.
  • Smaller Profit Margin: For me this is a no duh! Of course, if you put less in the house, your mortgage is going to be higher and therefore your cash flow is going to be less. On the other hand, this means you are going to have less paid into the house and that your tenant will be paying off your asset (which is my ultimate goal). This is why I look at “cash on cash” returns. So my profits are based on what I put into the home!

Related: 3 Strategies to Protect Your Personal Residence

Buying personal properties is by no means the answer for EVERYONE. There are definitely some downsides, so go into it with your eyes open. Remember the crash of 2008!

That being said, we stumbled upon this because we didn't know better, and honestly, it has been one of the biggest assets. Don't get me wrong; we have advanced to the pure rentals, so it's not the "solution." For us it was an amazing starting place and allowed us to learn a lot, while only "gently" being thrown to the wolves.

How did you structure your very first real estate deal? What did you learn? What would you have done differently?

Don’t forget to leave a comment below!

Elizabeth Colegrove is a passionate "buy and hold" investor who specializes in turning her once-negative transient lifestyle (Military) into a positive lifestyle. She self manages her entire real e...
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    Brian Gibbons Investor from Sherman Oaks, CA
    Replied over 5 years ago
    Hi Elizabeth Colegrove Man, nice article but creative real estate gets a bad rap! I buy houses, cash or terms! Low cash offer, 2 terms offers. Avoid banks. That is how I learned, not to fill out 1003 mortgage apps. First deal was in 1986, Bought Hard money, fixed it, no personal investment, sold it rent to own in 6 months for appraisal price. Got a check for $16,000. That was annual income for me. Some people need the traditional route, Some people like creative non bank route. Learn how to avoid banks, find a problem seller, not a problem house, offer a creative solution.
    Matt Rosas
    Replied over 5 years ago
    Great info. Practically no money down works too. When you guys moved and get another did the bank need twice the income to take on the additional payments? At what point did they credit the rental income..6 months..2 years..when it was on the tax return? Thanks
    Matt Rosas
    Replied over 5 years ago
    Great info. Practically no money down works too. When you guys moved and get another did the bank need twice the income to take on the additional payments? At what point did they credit the rental income..6 months..2 years..when it was on the tax return? Thanks
    Skip Lucas
    Replied over 5 years ago
    Hi- Your technique is ok if you want to only have a few properties and if you can stay out of jail, which a calif woman was not able to do. She abused the intent of the system. This was when there was a 10 property fnma limit, and now its 4 properties for loans that the lender resells. There needs to be some substantial time between the purchases, and a mortgage underwriting guideline for most lenders is that the new , or next house, mortgage must be higher than the first one. Another option is to do zero down purchases with hard (or private) money. No number of property limits. You need to purchase at 60-65% all in with repairs of arv. If holding, come back with a no seasoning refi and if you bought it right, pull out all your cash and use it to do it again. I think its more powerful than tying money up. And its an infinite return. This is more difficult in some area like Calif due to high market values. You will make more money on one deal, as compared to maybe 10 other lower profit deals. And have more cash flow on one, and less management issues. Cash flow should be 300 plus a month. Use 4 and 5 bedroom houses to get more. My experience was to rent good properties and locations to avoid the horrible tenants. You may have a nice niche tenant arrangements with the main tenant living for free if no one complains. Here, you cannot have more than 2 unrelated people in the same house. Keep the tenants happy and they wont complain. Good luck to you on your journey. Skip
    Elizabeth Colegrove from Hanford, California
    Replied over 5 years ago
    Skip – I appreciate you taking the time to comment. It seems my point wasn’t clear. I am NOT advocating breaking the law, honestly EXACTLY the opposite. My point was simply that another great way to get started is personal properties. Something that is overlooked. It usually ties up little capital due to the small downpayment and can even be almost free if you have other living with you (roommates/house hacking) and paying your bills. As I stated in this article, this is a “Starting place”. We have advanced to buying pure properties with 20-25% down as we wish to expand quicker than our. That being said personal was a great way for us to get started at 23 when we were just getting started and new nothing! Thank you again for your response.
    Skip Lucas
    Replied over 5 years ago
    Hi- I totally agree that a first house experience is invaluable. It was a very smart move tom look into it. I do not , however, agree with putting 20/25% down because it ties up too much money and hinders buying more unless one has an unlimited supply of cash. Some do this to lower the payments, but if you buy right, you can have both lower payments and great cash flow. Plus the return no investment is usually poor when tying up money. You can find great deals and not tie up much. Just be picky. You may even have infinite return by having no money tied up. Friends wont believe you, but that’s ok. Skip
    Minh Le Investor from San Jose, CA
    Replied over 5 years ago
    Nice article. I agree with Skip. If one wants to build his/her portfolio, being able to buy at 65% to even 75% ARV is the fastest way to grow. Of course, deals are not as abundant as they were during the Great Recession. However, discounted deals are still out there. One just has to work a little harder.
    Roger Vi Investor from Everett, Washington
    Replied over 5 years ago
    Love reading your articles Elizabeth, keep up the great work! Just wanted to chime in and say I went the same route and agree 100% with the benefits you see from 0-5% down on your first home. I went 3% down on a single family home as well for a primary residence. While this is no doubt the biggest expense and debt I have ever had, the experience has changed my life. I bought my first full rental (4 unit) about 18 months later. The 18 months with my single family home allowed me to 1) find better financing 2) accurately predict expenses without guessing ( i had already done or hired them out myself for my SF) 3) shop for homes better (I can better recognize the problems I don’t want to deal with). It’s true, the numbers suck for most single family homes as rentals and mine is no exception. However, the small price tag and down payment has allowed me to make a much wiser decision when it came to buying my rental with a higher price tag and higher down payment. There are some things that books and mentors just can’t teach you.
    Taheem Bellz from Atlanta, Georgia
    Replied over 5 years ago
    I think you are totally on point, that’s my entry strategy into the real estate investing world. If anyone have any hiccups that then can advise me to look out for,it be greatly appreciated. I just think as a newbie investor starting out with a multifamily and being able to live free is a wining solution . Not only you can use o.p.m. But the cash you save from whatever rent you were paying before the first investment gives you capita to invest into another Multifamily.
    Erin E. Realtor from Goodyear, AZ
    Replied over 5 years ago
    We are currently attempting to house hack right now! We bought our first home a couple years ago, a HUD foreclosure, with a VA and we’re currently hoping to pick up a short sale with a VA also. Our challenge will be refinancing our current house after our offer is accepted on the short sale and get the refi to close in time to free up our VA entitlement. We’ll see what happens!
    skip lucas
    Replied over 5 years ago
    Hi- Just don’t tell the tenants that you own the place or you will lose privacy. I had this occur, with a tenant who complained about EVERYTHING including a floor squeak. Ok, wrong tenant, his first place and not like his parents home. I could not be seen or he would run out and corral me! I had to come in the back door late at night. Tell them you are the manager. If your living there, you don’t want him angry at you Tell him youll check with the owner and make the “owner” the bad guy. You can still do an owner occupied loan for low down, and put it in a trust after you take the loan. Lenders allow that. Put it in a trust so your name does not appear. Its best anyway for asset protection.
    Don Alberts from Frankfort, Illinois
    Replied over 4 years ago
    Elizabeth and others thanks for the good points and strategies. GBY Don
    Cameron Davis Investor from Austin, TX
    Replied almost 3 years ago
    No mention of the PMI what is pissed away every month when you don’t make a down payment of 20%?
    Adam Horowitz Lender from Fort Lauderdale, FL
    Replied over 2 years ago
    Elzabeth, great points! My favorite was “get your foot in the door”. I read that 95% of wannabe REI are on the sidelines for years hoping for the great white whale of a deal that will make their dreams come true. Your approach is safe, logical and helps folks to build their practical knowledge base that cannot be earned reading BP