Bartering labor for property

3 Replies

I was offered to buy a rental condo in my area for $40K from an older friend of mine (probably a $5K discount from its value).  While I only have about 25K to start my investing career, I thought of an interesting way to potentially acquire the rental property...

My friend owns and operates a relatively large landscaping company in our neighborhood.  I too own a smaller landscaping business, and we've worked together in the past.  I thought what if I offered to pay him 20K for the property up front and in addition, I could work off the remaining balance by providing x amount of hours of labor over the next 2 landscaping seasons.  This would not only allow me to acquire the property without paying interest on a loan, but it would also create a more solid business relationship with an already great mentor in the industry.

Has anyone attempted something similar to this?  And is this idea crazy?

@Brandon Craig

Hi Brandon I'm going to be the first response here and the 'wet noodle' of sorts.

Firstly, get your credit working for you.  If you want to delve into the investing world, based on what you've shared- this is critical.  We don't have the full picture here but if you're married and present well to banks as a 'package deal' (say with your wife) then I might modify some of what I write below.... But if that's the case, provide more of that info and I think you'll find more useful thoughts from people... 

Once you're deemed credit worthy by lenders you can start using leverage which needs to be used VERY carefully but is also extremely powerful.

I personally do NOT recommend that someone with a trades or self employment 'life track' as you are describing is best suited to buy a first house with cash, and for instance use your time to fix it up.

Few reasons here:

  1. Firstly, often the kinds of 'cash deals' available are ones that can to generalize tend to be more cash flow type properties (as opposed to equity properties).  My strong opinion is that an equity property is a better fit for most people for their first purchase (cash flow still needs to be there but you should be looking for low time/maintenance type stuff with good school systems where you can sit back and let your payments do the work for you)
  2. These kinds of deals tend to be more time intensive.  While you may be able to stretch the time at first, this doesn't work indefinitely to scale (ie what's your next step)
  3. If you don't figure out the financing part of the equation (ie your credit etc) then you'll be stuck waiting a LONG time for cash flow to get you to the point where you can do something after this kind of deal....
Originally posted by @Jim Goebel :

@Brandon Craig

Hi Brandon I'm going to be the first response here and the 'wet noodle' of sorts.

Firstly, get your credit working for you.  If you want to delve into the investing world, based on what you've shared- this is critical.  We don't have the full picture here but if you're married and present well to banks as a 'package deal' (say with your wife) then I might modify some of what I write below.... But if that's the case, provide more of that info and I think you'll find more useful thoughts from people... 

Once you're deemed credit worthy by lenders you can start using leverage which needs to be used VERY carefully but is also extremely powerful.

I personally do NOT recommend that someone with a trades or self employment 'life track' as you are describing is best suited to buy a first house with cash, and for instance use your time to fix it up.

Few reasons here:

  1. Firstly, often the kinds of 'cash deals' available are ones that can to generalize tend to be more cash flow type properties (as opposed to equity properties).  My strong opinion is that an equity property is a better fit for most people for their first purchase (cash flow still needs to be there but you should be looking for low time/maintenance type stuff with good school systems where you can sit back and let your payments do the work for you)
  2. These kinds of deals tend to be more time intensive.  While you may be able to stretch the time at first, this doesn't work indefinitely to scale (ie what's your next step)
  3. If you don't figure out the financing part of the equation (ie your credit etc) then you'll be stuck waiting a LONG time for cash flow to get you to the point where you can do something after this kind of deal....

 Jim, thank you for your response.  I'll admit this post came partly out of frustration after a recent meeting with a mortgage lender.  I realized I may struggle a bit with receiving my first loan (due to limited 2 year proof of income) for the type of duplex property I really want to pursue.  But since then I've done more research and learned there are much better solutions, using creative financing.  I also may be underestimating the ability of the excellent lender I'm working with to make something happen for me.  

I agree that I could much better devote my time to obtaining the equity type of property you mentioned. And finally, after considering the area of the condo my friend owns, I realized that it may attract undesirable tenants.  

So I have since abandoned this unwise investment of my limited capital and time.  I am learning much more about the power of leverage, especially when starting out.  But thank you for your input and confirmation that this is not a deal I should pursue!

Way to get creative @Brandon Craig . I'd approach your buddy with a 30% down payment and have him owner finance the rest (w/no earlier pre-payment). Might have to educate him on the benefits & tax advantages of owner financing but worth the shot. 

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