No Money Down Real Estate: The Question’s Not Whether it Works, But Whether It’s a Good Idea


I’ve noticed that while everyone seems to want to know HOW to buy without money, hardly anyone wonders whether that’s a good idea in the first place. Personally, I believe that just because you can do something doesn’t mean that you should, and as it relates to buying with no money down (NMD), this is a conversation that must be had. So let’s talk!

How to Purchase Real Estate With No (or Low) Money!

One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.

Click Here to Download

Some Say No Money Down is Not Investing

Many of my friends will tell you that no money down, by its very definition, is not investing. They say that investing is a function of putting capital to work to produce more capital, and the notion of getting into the game without any money is simply not investing.

While this logic has merit, specifically as it relates to paper markets, I cannot agree to it simply based on my own experiences. The real estate market is inefficient, and one of the utilities of an inefficient market is that it is possible to diverge from the accepted norms. While it may be true that NMD doesn’t conform to the classical definition of investing, if there were a place to do it, it’s the real estate market!

And then there’s my experience. Yes, many of my friends have more properties than I do, and yes, many have more money. But the fact is that my life, be as it may, is quite a bit more comfortable than vast majority of people, and my ceiling is nowhere near being reached. And since I had nothing when I started, and therefore had to do all of my deals with no money down, I simply disagree with the assessment that if you have no money, you have no business in real estate.

For sure, without money you have to work harder for less, and it will take you a much longer time to accumulate either cash flow or wealth, but it’s possible.

And on the other hand, mind you, I have seen more than once or twice folks invest a lot of money and lose big. This is to say that when investing wrongly into the wrong asset, having money is not any kind of savior!

In short, in real estate, having money is not a guarantee of success — and not having money is not a guarantee of failure!


So Should You Invest in Rentals if You Have No Money in the Bank?

And the answer is it depends!

I am going to try and underscore some of the basics here. This is not a good idea for everyone across the board. There are some attributes that must be present in you if you are going to try and embark on this NMD journey. If you are missing some, success is still possible but will be more difficult. Here we go.

Related: A Realistic Look at Starting Out in Real Estate Investing With No Money

What Is a Better Option for You?

I have to lead with this simply because if NMD is the only thing you can do, then it’s the best thing you can do, period. Beggars can’t be choosers. A small piece of the pie is better than no desert. What other cliche can you think of? They are all true!

This was me, by the way — a classically trained fiddle player who was given a diagnosis of Multiple Sclerosis and told the wheelchair was in a not-so-distant future. Talk about starting with nothing. I decided real estate — which required brains, tenacity, and money — was the best avenue because I had two out of the three. Indeed, I had the brains, and I wasn’t going to quit because I couldn’t, and I figured not having money was the most easy to overcome problem. I was right!

Look, real estate is an inefficient market, which means that anything goes. If you’ve identified rentals as the best way for you to try and secure your family’s financial circumstance, then in the absence of any better solutions, do it! Which brings me to the first caveat…

What’s Your “Why”?

I respect real estate — a lot!

My balance sheet gets bigger every month because my tenants pay my notes for me. And then there’s cash flow. And then there’s the fact that my effective tax rate is in single digits — it’s not an accident.

I’ve got no money in my real estate. Everything is 100 percent financed.

Sure, it’s a cliche, but it happens to be the only constant in real estate — I wanted to give up many times. Guys, I’ve been at this for over a decade, and the nonsense I’ve seen people do. Low-lives. Freaking losers. Scum of the Earth. I don’t like real estate. Let me say that again — I do not like real estate, and I wish I didn’t have to do it.

But nobody I know who succeeds in real estate, specifically NMD real estate, does so because it’s easy. This is a full-contact sport, and you’ll see things that will make you doubt humanity. If you don’t have a clearly defined reason for why you should take the punches and get up, then, well, you won’t get up. So, what is your “why”?

How’s Your Credit?

I know you don’t have any money in the bank, but how’s your credit? It takes money to buy rentals, and if you don’t have money, you’ll have to borrow. Why would someone lend to you — can you be trusted to make the payments? Is your credit good?

Understand, 100 percent financing is most often achieved with a blend of different types of money, which often involves long and short-term money. Remember, short-term money has to be paid back, and most often this is done with a refinance of some sort. How’s your credit? Can you go to a bank and do a refinance?

Related: Why Investing With No Money Down Might Be a Terrible Idea (& What You Should Do Instead)

Understand, when underwriting a deal, you must remember that how you get the money in is less important than how you get the money out. And getting the money out oftentimes involves credit. So, how’s your credit?

But at the end of the day, while credit is important, bad credit can be overcome, while bad math cannot, which brings me to the next point…


Are You Good With Math?

Seriously, this is going to be a short paragraph. Stay out of real estate unless you’ve got the math down. We tell stories with numbers when it comes to rental properties, and when doing nothing down deals, the margins are slimmer and there is much less room for error. You must be able to read and interpret numbers well, period.

Do Cost Benefit Analysis

Lots of people are turned off to trying anything new for fear of making a mistake. It doesn’t help that I am honest with folks about the risks involved, especially when 100 percent leverage is used. I do what I can to forewarn folks against rash decisions!

Having said that, there is a cost to doing nothing and a risk associated with that. For example, if you have no money in the bank, two kids, and a dead-end job, there certainly is downside to doing nothing! The risk of simply remaining on the same trajectory is that you will end up in a place that you won’t like or be proud of.

So is the risk of doing nothing greater than the risk of doing something? Is the risk of trying, making a mistake, and losing money greater than doing nothing and ending up with nothing without ever having given yourself a chance at achieving something better?

If you are in a good job with growth potential, retirement accounts, and benefits, you have something good to potentially look forward to — and something to lose. In this case, it comes down to who you are and whether you think it’s a good idea to continue working for “the man.” But at the end of the day, you have something good going, which should give you a moment of pause relative to getting into real estate and introducing additional risk into the equation. It may still be worth it, but you have to think carefully.

On the other hand, if you’ve got nothing good going on, why even bother thinking? You’ve got nothing to lose! Get into real estate any way you can, and don’t think twice about no money down — if you learn how to do it right (and I can help with that), NMD can work well!


Everyone wants to know how to buy with no money down, but few people ever wonder if it’s something that is a good idea in the first place. In some cases, absolutely — while other times it may be a terrible idea. Hopefully, this article has given you a few things to consider.

Investors: Do you choose to invest with no money down? Why or why not? What are your thoughts on this discussion?

Leave a comment below, and let’s talk.

About Author

Ben Leybovich

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


    • Ben Leybovich

      So, Darnell – are we to extrapolate that while in order to do NMD stuff you have to know your stuff, if you’ve got money you don’t have to know your stuff? lol – buying from folks who feel this way is how I get my best deals 🙂

  1. Marshall M.

    Ben, interesting article. By mixing short and long term capital, I’m assuming you have the seller carry a note and you also use hard money to fund your down payment with a regular mortgage funded by a bank or private lender of some sort. Out of curiosity, how do you find mortgage lenders that are comfortable with this?

    • Ben Leybovich

      Marshall, I’ve only done 1 owner-financed purchase ever. Also, I have yet to use hard money – other money is easily available 🙂

      As to financing the down-payment, your options are as follows:

      – Partnership with the other parties bringing equity to the deal
      a. Democracy (simple LLC)
      b. Limited Partnership (Reg D private placement syndication)

      – Debt
      a. 2nd position
      b. 3rd position
      c. bridging of debt via equity (cross collateral, substitution of security, blanket notes, etc.)

      As to how I find people to play along – I ask very carefully 🙂

  2. David Greene

    I like the thought that just because you could, it doesn’t necessarily mean you should.

    Wasn’t it Jurassic Park where we learned the disastrous consequences of meddling?

    Interesting enough, it was a mathematician in the movie who realized this…

  3. Jerry W.

    There is a lot of truth in your article. A truth that many choose to overlook sometimes. I have bought several no money down properties. The margins are extremely tight. Due to the fact I currently have a good paying day job I could afford to even have a slightly negative cash flow for the first 5 years. Property 1 was bought for $100K. Bank loaned $80K and seller carried 2nd mortgage of $20K at 2% with annual interest only payments and 5 year balloon. Note was a 15 year amortization at 5%, payments of $632 per month, and rent of $750 per month. I was able to fix the property up prior to closing and have had less than 30 days vacancy for over 5 years. I was planning on refinancing in 5 years and paying off the second as I would owe $59,646 after my 60th payment, and I could refinance back to $80K again, thus making payoff 20 years total of negative cash flow. I had to add about $100 per month to keep up with taxes, insurance and maintenance. Repairs come out of my pocket. Due to an income from another property I offered a buyout of the note at a reduced price early and will have it paid off in 7 more years. If I had paid $20K down and financed the property for 30 years my payments would have been $429 per month and I could have broken even, but I like a quicker payoff. The other deals are similar but with even more expensive properties. Five year balloons force you to use 15 year financing so you can pay off the 20% the seller financed on the 5 year balloon payment. Short term loans mean negative cash flow on these deals.
    I got a very nice house that is better than the rest of my rentals. If I had paid the 20% down I may have bought cheaper and financed for longer, or I would simply not have bought it. You can go broke very easy if all your properties cash flow this bad. You can make money on $60K rentals in my town, but not on $100K or higher priced houses. I can buy a cheaper cash flowing property with paying 20% down. The no money down makes it very hard to cash flow in my area.

    • Ben Leybovich

      Jerry – the problem here is not owner-financing, but that the deal’s not good enough. The statement “had I financed with 20% down I would have broken even” – that’s like saying – had I traded dollars for cash flow, my cash flow would have been better…

      Folks very often miss this, both in terms of NMD and syndications – there are just acquisition methods. These have nothing to do with the validity of what you are buying – they are just ways to facilitate the purchase. Whether you pull the trigger or not is a function of how good the deal is, and that’s a function of buying under intrinsic value with strong value add – same thing we always talk about…

  4. Charles Ayanleke

    I have been doing this since 2004.
    Long enough to know NMD is the easiest path to a heart attack when a stress test occurs.
    Stress tests are
    1.Extended Vacancies
    2.Unplanned Increase in expenses
    (County decides to raise property taxes significantly and cuts margin even deeper,instance premium hikes.)
    3.Cash crunch~your baloon is due and suddenly no one is refinancing.
    Think 2009.
    Some risks are reasonable.
    Others are fatal.

    You don’t have to do a hundred deals a year or multimillion dollar deals with a gazillion equity partners whose names you can’t even remember to be successful in real estate.

    This is not the stock market.
    It’s designed for you to get rich.Slowly.

    • Ben Leybovich

      Charles – the fact that this is not the stock market is precisely what gives us the advantages of value add and principle pay-sown. For example:

      I bought a 6-unit in 2011 for $200,000 – 100% financed. Appraised value is $275,000. Current balance on note is $158,000 – only one note on this deal today. Is it worth $275,000 – I don’t care. It’s certainly worth more than $158,000 that I owe, which means if I needed to get out – I could. My interest adjustment is in 2 months, and it’s going down from 6.5% to likely 5%, thus providing me with $2,000/annum more CF.

      Now – was this a home-run? No, it was not. It was a fair deal that put some equity on the balance sheet, and some CF on the income statement. Tenants are paying it down, and will continue to do so, unless I sell.

      The point is – what would have I gained by putting 25% down? I would have bought $50,000 of equity – which would have been necessary for safety for a non-value add asset, but such as it was…nice, but whatever… And in terms of CF, the down-payment would have saved me from having to finance $50,000, which would have offered and additional $3,500/annum, or so. This would have been nice, but considering that in 2011 it was either take the smaller piece of the pie, or eat no desert at all, I took a smaller piece of the pie. NMD is for folks with brains, but not a lot of money…

      Thanks so much for reading!

      All of my acquisitions look like this. Always with significant upside in rents and equity, which is the absolute key to NMD!

  5. Hey Ben,

    I have heard you on multiple podcasts and admire your grit! You have been doing well for the position you were in when you were getting into real estate; I believe that is something to boast about!

    The only concern I have with no money down is the risk in getting multiple rentals with this strategy and the market making a hard correction, and you (or anyone using this strategy) are sitting holding the bag. How do you, yourself, guard your investments against this happening? I look at someone like Dave Ramsey, even though his situation and predicament was very unique for the circumstances; he had that happen to him with a lot of skin in the game, and ultimately filed for bankruptcy.

    Glad you are writing great blogs!


    • Ben Leybovich

      Peter – thank you!

      The mitigating factor is that I never buy anything without extreme value add component. In other words, if I pay $200,000 its’ because the thing is worth $275,000; if I pay $375,000 it’s because the thing is worth $450,000.

      The $200,000 acquisition was a 6-unit – my current balance on the note after 5 years of hustle is $158,000. The $375,000 was the 10-unit – my current balance on the note after 3 years of hustle is $362,000. The 6-unit is appraised at $275,000 and I am shopping to sell. The 10-unit was appraised at $450,000. Obviously, in both cases I can sustain a market decline if need-be. But, more importantly, both cash flow nicely. And in terms of safety, if I need to get out, I can get out…

      NMD only works if there is a tremendous value add component.

      Makes sense, Peter?

  6. Christa Shook

    Thank you, Ben, for writing this Blog! I am brand new at this. My husband and I are currently trying to close on our first multi-family, rental property. We are borrowing off of the equity in our home to do this. Last night we received a copy of our appraisal report and it is almost 100k less than what I thought it was going to be. I woke up this morning thinking, what else can we do, because there’s no way that we are not pursuing this. My husband is the primary provider and was injured last year. His surgeon told him that he is permanently disabled and will not be able to continue in his line of work, construction. We have four kids and a future to worry about. So that is my “why”. This blog really helped me see that one disappointment or a “no” in real estate doesn’t really mean anything other than we need to start getting creative.

  7. Eric Bilderback

    I always enjoy your glass is half empty humor. No money down is difficult and makes most deals tough. But as you said for a guy in a dead end job with two kids and no serious career opportunity I believe it is the best way to create wealth. I appreciate how you explain your circumstances and admire the “tenacity” it must have taken fight through it and build wealth for your family. My own opinion is that for everyday people stuck in their dead end jobs, and raising kids should purchase a rental even if they have no money down. In the long run it will give them a lot more freedom, even if it is only one rental. My guess is you disagree but I believe in real estate as long term investment even if you buy at the market price.
    To my point, I cannot stand the attitude (and I believe is encouraged) that lets people be a victim of their own circumstances. The hell with that! We can’t all be millionaires but if you are willing to sacrifice now you can build a better life, and have something to pass on. So be smart about the risks you take and keep your fingers crossed.

    • Ben Leybovich

      Eric – you say “No money down is difficult and makes most deals tough” – that’s right. But you know why – because the deals aren’t good enough to begin with!

      I like your attitude, specifically the bit at the end about keeping your fingers crossed. Yes – a lot more of this is luck, and outside of our control, then most of us are willing to admit!

      Doesn’t mean we don’t work like dogs. Just means we know we are not as much in the driver’s seat as it would seem…

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