5 Ways to Buy a House with $2,000 or Less

by | BiggerPockets.com

Me – Do you want to buy a house, either to live in or as an investment?

You – Yeah!!!

Me – How’s your credit?

You – A prolonged sigh…

Me – Do you have 20% cash for the down-payment?

You – No…tears start coming on…

Me – Do you have any savings?

You – $2,000 is all I‘ve got to my name.

Rules of Engagement

In this article I am making the assumption that the buyer (you) has bad credit, which means that a short-term refinance will not be possible.  Thus, I will only consider options which would allow you to get into a house with at least a 5 year horizon, which should be enough time to either sell for a profit or to improve your credit enough to be able to refinance.

I will not be discussing houses that you can buy for $2,000 using your credit card – only houses that are worthwhile to own; only houses that you would want to live in yourself if need be.  Just cause it’s cheep – don’t make it good!

Many of you know from listening to Podcast 14 that I do not do very many deals – perhaps one or two per year.  Partially this is because I buy almost exclusively undermanaged multiplex properties which take time to bring into good working order.  But also because I pull the trigger exclusively on those deals which accommodate a very creative financing package that requires me to contribute very little money to the purchase.  Those kind of deals don’t come along every day, which reflects why I do so few deals.

I tell you this because even though every technique I am about to discuss is doable, do not expect to find it easily and everywhere.  In this article I am not talking about building a business model, only how to buy 1 house.

Also, I am assuming that you do not have 100k of cash stashed under that mattress, nor do you have a primary residence in which you own significant equity that you could bridge via a HELOC.  If you have one or both of the above items, you don’t really need to read any further – write a check and buy a house and be done J.  However, if you got nota, then keep reading…

Related: BP Podcast 014 : Cash Flow, Creative Finance, and Life with Ben Leybovich

Lastly, I will not be discussing techniques such as Taking the Deed subject to underlying financing (Sub2) or wrap mortgages.  Most conventional mortgages include the Due on Sale and Acceleration clauses which comes with a possibility, be it a slight one, that the underlying lender will accelerate the pay-off.  I do not feel comfortable advocating these techniques for this reason.

And with this, let’s dig in.

1. Owner-financing

The best game in town has always been and will always be owner-financing for several reasons.  As a generalization it would not be wrong to say that when dealing with an owner in lieu of an institutional or even a private lender – everything is negotiable, including the price, down-payment, interest rate, amortization, monthly payment amount, and everything else.

Also, all of the qualifying standards put forth by Fannie Mae, Freddie Mac, and the primary originators are not in play with owner financing.  This means that while the owner will want to know your credit score, he will likely be a lot more understanding of the blemishes that may be there.  And as to down-payment, you need to understand the following:

Owners sell on contract by and large because they’ve tried but could not sell for cash.  Specifically with single family residences, it is not wrong to say that the owner will usually choose to participate in financing only as a last resort, having tried everything else.  This means that you, the buyer, have more negotiating power than you’d think…

Thus, owner financing the house with $2,000 is possible and even probable if you find the right deal, and by that I mean the right owner.  Don’t believe me?

Here is something I found in my e-Mail in-box not too long ago:

Hey Ben,
(I) secured my first deal within 3 weeks! I found a private seller desperate to relocate and she agreed to seller finance the ENTIRE purchase price. And get this: at 0% INTEREST! I will pay $300 per month for 5 years for a total purchase price of $18,000. NO BANKS INVOLVED. I have the property rented out for $600 per month and I am looking for my next deal…

WOW!!!  How many of those do you need to be in a different place in life?  Good job dude – you know who you are!

Now let me ask you – do you think the MLS is the best place to find owners willing to play the bank?  Hint – that’s not what he did and it sure isn’t what I do…just saying.

Related: How to Invest in Real Estate with No Money

2. Private Money

If owner-financing is out of the question, and in the absence of a line of credit, the next best thing is to finance the acquisition fully with private money.  The question is this – if someone has significant capital sitting in the bank drawing 0.2%, why wouldn’t they chose to lend it to you at 5,6,7 or even 10 percent?

Well, there are many reasons why they would NOT, all of which you’ll find out as soon as you start asking.  But, you should know that the main reason why they are not going to give you the money is because you are a dummy – you don’t know what you’re doing – you think real estate game is sexy and fast like your high-school girlfriends.   Private lenders flat out don’t trust you…Harsh?  Oh yeah – but honest.  Get educated and give people a reason to take you seriously!

3. Private Money & Owner

OK – let’s say you are in fact able to find someone who’ll give you the money, but because you are such wildcard, they do not want to give you any more than 60% of the purchase price.

In this case, you could structure the deal whereby the private lender gets a note and mortgage (deed of trust) in first position, while the owner takes back a note in second place.  This technique will allow you to close many more opportunities than straight 100% owner-financing, because done the owner can only finance the equity he owns.  Therefore, 100% owner-financing requires you to only look for free and clear properties.  However, bringing the private money into the deal allows you to cash out an existing mortgage with the owner financing whatever equity he owns.  This is not easy to put together, but it certainly can work with under $2,000 out of pocket.

4. 50/50 Partner

One of my philosophies in real estate and life in general is:


With this in mind, to make the deal attractive to an equity partner, why not give the money guy 50% of the deal?  As a partner, as opposed to a lien holder, however, the money will have a voice in the deal, thus remember to choose your partner carefully, and remember the following:

Money is an amplifier.  It brings out and exaggerates what is already there.  When dealing with a good and honorable person, money entering the equation will make them even more so.  The opposite, however, is also true!  Be wise as to who you chose for a partner; often enough the profit is just not worth it!

5. Lease-Option

This is not a favorite tool of mine for the purchase of real estate for many reasons, which is a subject for another article.  However, if there is no possibility of owner-finance or private money, then in lieu of doing nothing at all, a lease-option can get the job done.

Let’s say that there is just no way that you can convince this owner to participate in financing with $2,000 – he wants more money down, but you simply don’t have it and have no access to it.  Here’s what you do:

A lease-option involves two separate contracts – a lease, and an option.  The lease contract is just like any other lease whereby you gain tenancy.  The option contract, just like it sounds, gives you the option to purchase the house during a certain period of time (option window) and at specific price.  As part of the option, you will be needing to pay an option consideration fee, which is usually non-refundable, but typically not excessive.  Thus, $2,000 may be enough to get this done.

Now – an option does you no good unless you have a way of exercising this option.  At the end of the option window you must be able to pay off the seller.  But, it gives you time to work on your credit, and to bank some money toward the down-payment.  It’s not a good way in, but it is a way…


I am sure that there are 50 more ways to get into a property, but hopefully this is enough to get you thinking in the right direction.  Before I finish, I want to address the issue of that $2,000 down-payment.  There is a reason I used this figure – $2,000.  I believe that it is achievable for most people!  I am going to get your mind going in the right direction by asking you a set of questions.  But, I won’t provide the answers – that’s on you…

  • Do you have $2,000 in the bank?
  • Are you living on a budget?
  • Can you put away $30/week for a year and a half?
  • Do you own stuff that you can sell to generate $2,000?
  • Do you have a family member that you can borrow from?
  • Do you own a boat that you can sell?
  • Do you own a vehicle free and clear or have significant equity in? You don’t have to sell…
  • Do you have a credit card? (Be very careful with this one!)
  • Can you pick up a part –time job for a while?
  • Etc.

I never said this game does not require sacrifice – It Does!

What do you think? What’s the cheapest you’ve ever paid for a property? Or which strategy above do you wanna try? Leave your comments below.

Photo: stevendepolo, David Gallagher

About Author

Ben Leybovich

Ben Leybovich has been investing in multifamily real estate since 2006. His area of expertise is creative finance. Ben works extensively with private as well as institutional financing. Ben the author of the Cash Flow Freedom University and creator of a cash flow analysis software CFFU Cash Flow Analyzer.


    • Mark – I AGREE!

      I did not pose the question whether one should buy a house with only 2k in the bank – perhaps not. But could it be done – oh yeah…

      A lot of newbies complain about not having money. This one is fir them 🙂

      Thanks for reading and commenting Mark!

  1. Hey Ben. I would caution people about your advice “with at least a 5 year horizon, which should be enough time to either sell for a profit or to improve your credit enough to be able to refinance.” This is a risky way to think, in my opinion, because it involves predicting the market, which as we all know, is unpredictable.

    I’m a perfect example. I bought a nice 3/2 in Indiana right before the market tanked there in 2007. Now it’s been a great cash flowing property for all those years, and I bought with a buy and hold strategy, so not really concerned about appreciation any time soon. In that time, my mortgage has been paid down a bit over $4500, however, that home now is still technically underwater. There’s no way I could sell or refinance even if I wanted to.

    Five years, in some markets, is not enough. So please be very careful if you think this is an exit strategy, and make sure to have another one (or two) just in case.

    Also, in scenario one, that guy is breaking even according to the 50% rule. With next to no reserves, he could find himself in a world of trouble very quickly if something major happens.

    Great article, and I especially love the owner financing method, but just wanted to point out a couple of danger areas I can personally relate to. Thanks!

    • Sharon – I agree!

      I think that a high level of sophistication is necessary to play around with balloons. My point is NOT LESS THAN 5, though a lot of other things have to be right in order to consider this.

      However, if you only have $2,000 in the deal – what will you loose if you can’t cash out? Beggars can’t be choosers 🙂

      Thank you so much for commenting!

      • Hey Ben. Well if it were only me that wasn’t going to benefit, I’d agree. But if I can’t live up to my end of the deal with an owner finance or prom note, others will lose, and I could end up getting sued, having worse credit than when I started, etc.

        So I think going in with the mindset of finishing what you started is a better way to do it. And I think the best way to do that is to have multiple exit strategies, one or two of which don’t depend on the market acting favorably on your behalf.

        Then, if the market isn’t cooperating, everyone is still whole and my reputation is intact. I can always buy another house; I can’t buy another reputation. IMHO 🙂 Thanks!

        • LOL Agreed –

          I have worked and continue to work with 5-year balloons extensively Sharon. To my knowledge – I’ve always performed. Reputation is everything in this world

          Thanks for posting 🙂

    • Sharron, I believe you bring up a fantastic point. Investors should not count of appreciation. The thing is that appreciation is only have of the 5 year equation. Setting up your financing in such a way that you will pay off a significant amoumt of the balance in 5 years so that you take appreciation out of the equation. I learned that lesson early on and now ammortize for no more than 15 years. This provides me many more options 😉

  2. Steve Johnson on

    I’ll be referring back to this article on the ways to finance. As a new investor I use the excuse of not having the funds and I’ve got to start figuring out the ways I can defeat the mindset and get the money.

    • Thank you Steve – I am glad this helps.

      Keep an eye out next Tuesday. I have an incredible article planned on creative finance. Its over 3,000 words – epic. If you liked this, you’ll enjoy that.

      Also, check out my website for a lot of in-depth stuff 🙂

  3. Another good post Ben! The cheapest I got into a deal was using the Lease Option method. The house was at almost a break even point, about $10k of equity, worth $200k, and the homeowners needed a bigger house (having increased their family size by 2 over 3 years). Working with them and their bank, I set up a 5 year sandwich lease to free up the house payment so they could qualify for the bigger home and not have double payments. The bank treated the original home as a rental for them. I agreed to give them $2500 for option payment that was contingent upon the receipt of an option payment from a tenant/buyer. So I didn’t have to come up with any money of my own and used the tenant/buyers. The T/B put down $10k, I paid the $2500 to homeowners, minus $1300 in holding costs, and made $6200 on Option Payment. After management fees, i make $150 a month cashflow and increased the sale price to $210k, and the homeowners are giving me $300 credit a month towards purchase price for each month paid on time.
    Granted, Lease Options are not “easy”, they are time consuming to setup, but if you prequalify your tenant/buyers (I treat the home like it was mine, would I put this person in it and still feel comfortable) and have your contracts setup, they can definitely put you in a position for less money and not having to deal with banks for financing. As an afterward, you may be tied to a property for several years using this method, make sure your ready for that kind of commitment.

    • Love it Roy – thanks for sharing!

      Lease/Options are definitely a tool to be considered. The deal you just told us about definitely showcases why! But, they are tricky. Before doing them, people need to really understand the anatomy of a Lease/Option, which most do not.

  4. Hey Ben, thanks for writing an article just for me (did you look at my credit report?). I am excited where I am right now and am just wanting to learn everything. I am now debt free and am able to put away $400 a month. My goal is to spend the next 6 months saving and taking that time to learn everything I can. Thank again for the article.

    • LOL Susan,

      I am just a mysterious kind of a guy – it’s why you like me 🙂

      In your question you’ve hit the nail on the head. It is in fact difficult to know where to look for these seller. My perspective on this is that I don’t look, rather I make myself easy to be found. I discussed this in another article: https://www.biggerpockets.com/renewsblog/2013/04/23/real-estate-deals/

      Yes, we can define who it is that may be interested and market to them directly. I mean it is easy to understand that the seller must have equity in order to owner-finance, right? And it’s not particularly difficult to figure out who does and doesn’t have equity. It is also easy to note that they must be in some sort of distress, and to market to them.

      However, that’s like throwing wet noodles at the wall to see what sticks. Wouldn’t it be better if they came to you instead of you having to look for them?

      Thanks for reading and commenting Susan!

  5. Ben, Per option 1 you made mention of MLS not being a good place to locate owners to play the bank where exactly is a good place in your opinion? What techniques do you use to locate such owner?

  6. good job explaining this in simple terms Ben. You are 100% correct about the private money and when I first started down that road I would not consider it until I thought I was educated enough and had a well thought out plan to execute so my lenders would take me seriously.
    Thats what is so great about real estate! So many ways to be creative and make it happen.

    • Hey Mike,
      This barely scratches the surface – you know this 🙂 I have an article planed for next week that cracks the door a but more – over 3,000 words…I must be nuts!
      I have not had a chance yet to listen to you schooling Brandon and Josh – looking forward!

      Thanks so much for reading Mike and for the comment!

  7. Ben,

    Now if an investor wants to just get in the deal and do Owner financing and wants to turn around and sell the property to not pay monthly payments Is this legal or is it just a matter of sturcture the paperwork that sells you are allowed to sell. Since most time investors are puting a tenant buyer in and gettina a hefty down payment from them and then in 1-5 yrs having that tenant buyer get a loan to purchase the house out right.

    • Hey Jacob,

      If your Option is assignable, then you can assign it with proper language in the paperwork. If you have a land-contract, which is a sale contract, you can sell at a higher price by simply closing and immediately re-selling (double-closing). Need to know what you are doing, as with everything…

      Thanks for reading and the comment Jacob!

  8. Rafael Misla on

    This one is something I could use to buy the house I am currently living in. (been renting here for 4 years) Hopefully I could talk to the owner and work something out along these lines. If not just find a private money lender and work it from there. Thank you for the valuable information!

  9. Xavier Randall on


    You’ve confirmed my initial thought process of acquiring a property, especially with the combination of private money and owner financing.I’ve talked to some 1st Trust Deed lenders about it. Instead of SFR’s, i’m more interested in finding that right multi-family deal to have some cash flow to build upon. Please email me some resources of where to look for those where the owners are a little more motivated.

  10. Steuart Wright on


    This is a great article and just the advice I needed to hear! I’m 25, I live in Brooklyn, I’m a soon to be RE investor with almost exactly $2000 saved to start with(a little more). With that said I have a question. There is a detached garage on the end of my block that has been sitting vacant and decaying for as long as I can remember. It has three double doors and I’d imagine it could fit 3 cars inside and considering we have to move our cars everyday for street cleaning, parking would be a great convenience that I think people would be willing to pay for. Now, I’m considering offering to purchase the garage with owner financing since I don’t have a lot of money. Would I need to find a lawyer to draft a contract? Would this be a wise decision in your opinion? I’d love to get your thoughts. Thanks!

    • Watson,

      Perhaps you are right. But on the other hand, my experience tells me that when people say “things can’t or shouldn’t be done” it’s because they themselves can’t do them…just a thought man

      Thanks for your comment!

  11. Great content Ben!! As an aspiring landlord I’m a huge fan of your stuff, especially creative finance articles like these. If I have a seller who is trapped under a heavy mortgage is there still a way to finance the deal without the banks? I’d hate to let the deal go by because I can’t qualify for a loan.

    • Hi Mary and thank you so much for following me here.

      The short answer is that where there is a will there is a way. You could take the house Subject to Existing financing (Sub2); you could do an Option or a lease with an option; you could do a Master Lease, although that’s less common in residential SFR; you could use hard money – at least in principal; you could use private money, etc.

      Keep in mind that while these techniques are all possible, a lot of them would trigger the Due on Sale and Acceleration Clauses in the mortgage, so be careful.

      Have you been to my website? If you sign up for my newsletter, you’ll be able to download my eBook “20 Ways to Buy a House with $2,000 or less”. Perhaps you can find something there that works 🙂

      Before I finish, can I ask why you want this particular house? What about it makes so much sense?

      Thanks so much Mary!

      • Haha Ben, I’ve forgotten to correct you. I know it’s confusing, especially without a picture but my first name is Abbott, Mary is my last name.

        Actually I have subscribed to the newsletter, I didn’t know about your Ebook but I’ll download it ASAP. At this point in my career all info is good info!

        The house is being sold by my mother, and all repairs will be done before purchase (which will be about 40,000-50,000 below market). I know that with the heavy mortgage this probably sounds like a better flip than buy and hold, but i’d prefer to own the house for a long time because I grew up in it and I love the neighborhood. I’m not going to lose money on the deal out of sentiment, but I think it holds potential to help me in both my REI career and personal goals.

        Also thanks for your response!!

        • I am so sorry about the confusion with your name Abbott! I didn’t know 🙂

          The reason you didn’t get the eBook is likely because I had a different one at the time you signed up for my newsletter. I made this switch about a week ago or so. Let me know if you can’t get to it, and I’ll be happy to email you a copy.

          As to the house, if I may offer several thoughts:
          1. Do not confuse personal goals with investing – this can be dangerous indeed. Helping your brother and owning this property may well be something that you must do whether it makes financial sense or not.

          To be honest – I still don’t see it. 40k of equity means almost nothing in my world. Equity is here today, gone tomorrow – it’s not a measurement of investment return, unless you can flip the house which is not something you want to do.

          Can you Cash Flow it? Income – Expenses = Money in your pocket. Will it work? How much money will it put into your pocket?


        • Ben, I tried to get the new ebook the other day, and I just realized it never did show up in my email. Can you send it to me too? I’ll PM you my email. Thanks!

  12. Great article! I now have decided to look for a portfolio with 75 sfh, or 30 duplexes that will avg 20k a unit. I will put down a 10% downpayment with avg rental for 2bd is 650. I can pay off the entire portfolio within 5 years for a great cashflow but will negotiate a 10 year note if possible.
    Now my next questions are, how do I find portfolios for sale?
    Stepping in the shoes of a seller, what time length to accept payments is more beneficial tax wise, 5 or 10 years?

    • Hey Justin,

      1. I don’t care where in this country you are – $20,000/unit is not likely to generate anywhere near $625/month; perhaps $450-$475, and at that you are talking slum-lording my friend 🙂

      2. Portfolios come up all the time – find a good realtor. We have one right now in Lima
      3. Time frame depends on seller’s circumstance. Tax considerations is but one element that’s at play. But, on an installment sale the seller pays cap gains for the recovered principal and ordinary income tax for the interest. So, the longer ams put smaller pieces of recaptured principal within any given year, and as such longer time frame would seem better. But, again – there are many other elements at play here.

      Thanks for reading Justin!

  13. Tim Chasteen

    Ben you are a very logical and conservative guy, I like that a lot. All I’ve been hearing about lately is doing subject-to’s and wrap around mortgages to leverage capital. It seems that you are strictly against these strategies. I like your no-nonsense approach. Are the advocators right in stating that the odds of the due-on-sale clause triggering is so minimal that it shouldn’t even be worried about?

    Are there ever times when you do use those tools? Do you have to be able to get out of them relatively quickly?

    Thank you again for your quality advice.

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