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Marcy Case Study #3: No Money Down Real Estate Investing

by Brandon · 20 comments

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This article is part three in an ongoing case study happening in real-time. You can find part one here and part two (with photos) here.

One of the most common questions I get asked is “How do I get started investing in real estate with no money?”

Perhaps you’ve wondered the same.  According to Google, “No Money Down” is searched over 50,000 times each month! Some gurus have made their entire career platform off the “No-Money Down” niche, charging hundreds or even thousands of dollars to learn how to buy real estate with little or no money out of pocket.

Today, I’m going to show you one way to do it free.

I mentioned several months ago that I bought my own personal house without any money out of pocket and actually received back almost $9000.00 at closing for repairs (click here to read that post). I’m still in the process of remodeling the home, but it’s coming along nicely.  However, this home was my own home and I am doing many of the repairs myself.  While I hope to have substantial equity in this home when I finish, it’s not really an “investment” in the normal sense of the word.

How then do I invest in real estate without using any of my own money?

What To Do About Marcy

In part one of this series, I discussed the various options I had for Marcy. I had found the deal and put it under contract, but had not decided entirely what to do with the property. Generally, it’s not a great idea to find the deal without a plan. However, I did have a plan – I just had several different ones. Those options were:

  1. Wholesale It: I could simply sell this home to another. I have two people lined up already that are interested in buying the home from me. Most likely, I would make several thousand dollars from simply “assigning” the property over to one of these people. Additionally, I would probably be hired later to coordinate the remodeling of the home as well (using my contractor contacts)– resulting in more income.
  2. Flip It: I could simply buy the home with a hard money lender and flip the home.
  3. Buy-N-Hold: I could add this home to my rental pool, assuming I’ll sell it someday in the future. This option is the most difficult, as I currently have too many mortgages in my name and loans are getting almost impossible to get from the banks for me, which leads me to my final option:
  4. Add A Partner: If I want to spend $0 to make this deal happen, another option I have is to add a partner to the deal and use their income/down payment/credit to buy the home. Technically, I could either flip or add this to my rental pool using this option. The down side of this technique is that I am forced to give up an equity stake and part of the profit to another.

I believe I could be successful at any of the above options, but one option above provides the highest return for the least amount of risk. As you can probably guess from my introduction to this post, I am going to go with option 4 – adding a partner with the goal of a “quick sale” but converting the flip to a rental with a 30-year fixed mortgage as a back-up plan.  I’ll discuss later why I chose this option, but the major tenants of this deal are:

  1. I will assign my deal to my business partner AND myself. Originally, I offered on the house using the name, “Brandon Turner and/or assigns” which allows me to either add a person to the deal or simply sell the deal to whoever I “assign” it to (check out Case Study #1 for more information on assigning deals). In this case, I added my partner to the deal. My partner, named “Bob” is a friend who I have known for many years.  When you add a partner, you cannot simply add anyone and think they add value to the deal. The main point of a partner (in the way I am using him) is to gain the ability to get a mortgage refinance (I have too many mortgages to qualify anymore!) A partner must have several key characteristics in order to use them in the way I am about to:
    • Access to Cash: Obviously, if I am going to use a partner to help finance the deal, that partner is going to need money. While ideally the partner should have all the income needed to buy the property, they only need as much as will be required by the deal.
    • Good income: In order to qualify for a future mortgage (in case we need to refinance it), a bank will require the borrower to have a stable and substantial income.
    • Good credit: Additionally, the partner needs to have good credit in order to qualify for a mortgage.


  2. I will use “private money” to finance the $60,000 acquisition of the home.  I have secured private money at 12% interest with no points or fees. I have used the term “hard money” often, but I will actually be using “private money” to buy this home.  While very similar, there are subtle differences between the two. Hard money is usually a person or business who loans money based on the value of a property (see “Loan Sharks of the Real Estate Industry” for more information on hard money). Private money, in contrast, is usually someone known to the borrower who lends based on the value of the property and the relationship between the two.  Private money is not easy to find, especially if you are a beginner. It requires trust based on experience. If you don’t have experience it’s difficult to have trust. For a great article on how to raise private money, read Arthur’s post on BiggerPockets titled, “Raising Private Capital: How I Raised $50,000 Over Dinner” or Clay’s article on BiggerPockets titled, “How to Raise Private Money Anytime, Anywhere. Even Over Chicken Wings!
    Obviously, if you don’t have experience or access to private money, you may need to use hard money (with the higher points/fees). In this case, you simply need to get a better deal. For example, if your hard money lender charges ten points (10% fee) on a $60,000 loan – you need to make sure you account for that $6,000 fee in your calculations.
  3. My partner will supply all the repair money, closing costs, and holding costs.This will amount to roughly $25,000 total. Often times, you will find partnerships where the partner supplies ALL the costs (including the acquisition costs) and then the deal is split 50/50. While I believe this type of partnership is ideal, it is not necessary. Don’t rule out that there may be many individuals around you who can help you but don’t have hundreds of thousands of dollars just lying around. In fact, that partner may just have $20,000 or $30,000 or even a home equity line of credit they can use. Keep options open and examine every possible solution.Additionally, my partner will fund the holding costs from beginning to end. This means I do not have to stress about coming up with the payment each month to the private lender or make the payment for utilities, taxes, insurance, or any other parts of the deal. Bringing the repair money and holding costs are not the only aspect you need to be aware of when choosing a partner.
  4. I will manage the flip – from beginning to end.My partner is primarily a “silent partner” in that I am the voice over what gets done and what doesn’t. I will hire the contractors, keep the project moving forward, and manage the bills and finances of the flip.
  5. We will split the profit at the end 50/50%, including all the holding costs.  Some may suggest this is being too generous to my partner (Seeing as he is only supplying the repair money while my contacts brought the private money). However, I believe a partnership is not simply one deal, but a relationship that may bring many deals. I want my partner in this deal to do well and to see the power real estate can bring. Perhaps in the future he will be a partner in a larger investment, or perhaps not. Either way, I want to be more than fair in every business deal I do. Reputation is one of the most important traits that guide an investor, and I’d rather be accused of being too generous than too selfish.
  6. Plan B:  The biggest mistake most house flippers make is not having a contingency plan in place. The most important reason for adding on a partner to this deal is for the security I feel in case the house will not sell. My “Plan B” is to simply refinance the home into a typical 30 year fixed mortgage and hold the property until the market improves. The market in my area is still very unstable and in case the market drops further,  I will be able to simply refinance the home, rent the home (making cashflow each month), and sell it for profit in the future. In actuality, holding this property for the long term is the best way to build long term wealth, so if the home sells for what I want, I win. If not – I win.


Why I Am Giving Away 50% of My Profit

Do you agree with my choice? It doesn’t really fit what the “Gurus” say and I am losing 50% of my profit. However, I believe this choice is the smartest for a number of reasons.

No Money Down: As I mentioned above, I wanted to buy this home with no money out of pocket.  While it may seem contrary to how I run my business, I am a large proponent for paying off debt (I’m a huge Dave Ramsey fan!) I prefer to use my cash to pay off student loans and to have a large cash reserve to prepare for unforeseen circumstances.  If you are looking to flip a house but it would take every bit of cash you have – don’t do it. It’s far better to add a partner than risk not having money to cover your own finances.

No Holding Costs: By adding a partner, I will no longer be responsible for the monthly payment to the lender, the taxes due, the insurance, or any other holding costs that can accrue. Often times, house flippers end up failing because of the holding costs involved. Holding costs are often underestimated (I’m guilty of this one! Thank you Joe for pointing out that my holding costs were much too “best case scenario” rather than “worst case.”)

Less Risk: If you’ve been with me for a while, you will know that I am not real keen on “flipping.”  I consider the “fix and flip” one of the most dangerous types of investments and despite the popularity – should generally not be taken on by first time investors. The beauty of option 4 is that I have a partner who can convert this home to a long-term fixed mortgage easily (more on that later). This will lower the risk of not making a profit to almost nothing.  To me – the elimination of risk is totally worth losing 50% in equity.

For You: Finally, the last reason I wanted to go with option 4 is for you. I wanted to show my readers on that it is possible to invest in real estate without using any money out of pocket and without any added risk. I hope you’ll use this case study to add an option to your own future investment strategy. Every deal is different and it is my hope that by following this case study you will expand your thinking as to what is possible. Investing in real estate with no money is possible if you structure the deal right.

Final Thoughts

I am set to close at the end of next week. In the meantime, I’ll be busy getting my insurance set up, setting up the legal framework of my partnership, establishing the bank account we will be using, and getting bids from the contractors I’ll be using.

So what do you think?  Let me know what your thoughts are below!

About Brandon

has written 199 Awesome posts in this blog.

Brandon Turner (G+) is the Senior Editor and Community Director and owner of He is also an Active Real Estate Investor (Flips, Apartments, and Buy-and-Hold), Entrepreneur, World Traveler, Third-Person Speaker, and Husband. Come hang out with him on Twitter!

P.S. looking for hard money loans in California? Be sure to check out my friends over at They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

P.S. Looking for more real estate investing knowledge? If you are interested in a top-notch course to help you understand the nuts and bolts of creative real estate investing, I would like to recommend Ben Leybovich's Cash Flow Freedom University. Ben is a close friend and has been my trusted adviser for years. He's a smart guy and CFFU is pretty awesome. The course is waitlisted, but while you wait for an opening Ben will send you tons of FREE content. Seriously. Click here to check it out.

(yes, that's an affiliate link!)

{ 20 comments… read them below or add one }

Joe August 30, 2012 at 5:09 pm

Do you and Bob have the same exit strategy? I am assuming both of you are okay with buying, fixing it up and selling it.

After you’ve completed this project, I’d like to see some analysis on whether option 4 yielded a greater return than option 2. I understand being risk adverse, but what is the cost of that strategy? For example, if the hard/private money cost (interest, points, etc) was $10,000, and the partner cost (50% equity share) ends up being $30,000, I am no so sure that option 4 is the best scenario. Basically, is the risk worth the loss of $20,000 in potential profit? Each person is different but it will be interesting to see how this plays out once you liquidate the property.

PS – any future partners needed?


Craig August 30, 2012 at 5:23 pm

Thanks for the great article. I am getting ready to do the same kind of 50-50 split with a partner where he writes the checks and I managing buying, rehabbing and renting. How would you write up an agreement so everything is understood by both partners? How would you title the houses?


Brandon August 30, 2012 at 5:56 pm

To be quite honest, I’m not entirely sure how I’ll do it on this one. I usually do an LLC, with an operating agreement to define roles and such. My partner is a good friend – which is also all the more reason to have EVERYTHING in writing. “Officiality” probably doesn’t matter as much because of our friendship, but being in writing is SUPER important for our friendship’s sake. I’ll let you know how we move forward in the next few days and after I talk to my attorney.


Brandon August 30, 2012 at 5:53 pm

Bob and I are on the same page. We are actually considering placing the home on the market to sell and at the same time advertising for a renter (with really high, almost absurd standards) and see what happens first. In truth, I’d rather have some extra cash now (I want a new car…) , but waiting for the future is a smarter move for wealth building.

I agree- option two is probably a much higher yield. And I definitely will do a comparison at the end (remind me if I forget!). You hit the nail right on the head saying, “is the risk worth the loss of $20,000 in potential profit.” For this project, I’ve chosen yes. However, that’s largely because of where I am in life. I have another flip waiting to sell and my market is really unstable. For others, in other markets, it might not.

As for future partners – I’m always interested in those conversations!


Joe August 31, 2012 at 5:04 am

Let’s email off line.

Also, I can forward some sample agreements/forms so that you can start a forms database.

Email me.


Adam August 31, 2012 at 4:00 am

Well, one way to have so many partners that you have to reject most of them would be to advertise a 50/50 split where he puts up a few grand and you do the work. Sign me up.


Brandon September 2, 2012 at 3:12 pm

I do pick partners pretty carefully, because there is such a high chance of problems! Good partnerships are great, but bad partnerships are the worst!


Jason August 31, 2012 at 5:55 pm


Brandon…Thanks for the great article and I really enjoy reading all your articles.

Quick question regarding on point #5, “We will split the profit at the end 50/50%, including all the holding costs.”

When you say we will split the “profit” 50/50, does this mean that you will pay back your partner all the cash he puts into the investment (rehab, closing/holding costs, etc), BEFORE splitting the remaining profits? Or are his cash contributions pari-passu to your sweat equity?

Also, since he is putting up cash, have you considered giving him a preferred return before splitting profits?




Brandon September 6, 2012 at 9:22 pm

Hey Jason,

Yeah, I am going to pay him back the costs that he put into the investment before splitting the profits. I know it’s not always done this way, but being a close friend makes me feel best to do it this way. Thanks!


Training Real Estate Pros September 5, 2012 at 4:36 pm

So would a young person with no so much money invest in real estate? Is it possible to invest in real estate without using my money or using the banks money? If so how can I practically do that?


Brandon September 6, 2012 at 9:20 pm

It is definitely possible to invest without any of your own money – regardless of age. I’m proving it in this case study, actually! For more info, check out:


Training Real Estate Pros September 7, 2012 at 1:09 pm

You said check out something. Do you have a link Brandon?


Brandon September 7, 2012 at 10:07 pm

ha! Oops, it got deleted (weird!?) Check out:

and also keep following this case study. I’m attempting to do the whole thing without using any of my own money! We’ll see how this goes!


Mike Surgenor September 10, 2012 at 7:16 pm

Brandon…I really enjoyed this article and want to share it with my investment club on Facebook. My experience is from years ago and while trying to get “up to speed” I am sharing my learning experience with others in the area via FB. Anxious to go through other articles you’ve done.


Brandon September 20, 2012 at 4:49 am

Thanks Mike! I appreciate the nice feedback!


Alex September 14, 2012 at 10:54 am

Brandon, I just finished reading the whole 3 series about Marcy, this is a great piece of advice and an excellent case study too. Obviously, too many questions comes to my mind, but let me pick just a few.
1) When you bid with your name”and assigns”, is this a different legal entity you created or a wording that can be added to incorporate your option as an individual to assign the property?
2) As I noticed in your financing strategy; does it’s better to obtain private money accepting to pay a substantially higher interest rate, but saving those points and fees that banks used to charge? How does this private loan is usually amortized, typical mortgage pmts (p&i) or just monthly interest?
3) Marcy seems to be located in a rural area where prices tends to be lower than in urban communities. I have kept my searching on those middle class communities, do u think it is a good idea to spread my searching to those urban communities?
4) I do agree with you a 100% about bringing a partner is the best idea in this case, but how do u manage the relationship to not only put nothing into the transaction but not paying anything on a monthly basis? I just want to know what kind of approach I should use to accomplish that? Splitting all costs seems to be the most logical reasoning.
5) What kind of legal structure you will use to acquire the property and formalize your partnership with Bob? An LLC or just a partnership?

Thanks again for your readiness to share your experiences with us.


Brandon September 20, 2012 at 4:40 am

Hey Alex, lets see:
1.) I think it’s just wording that means I can either keep it or sell(transfer) my interest. Most banks do not allow this, but real sellers won’t usually care. Not sure if this answered your question, so let me know!
2.) The type of financing really depends on your exit strategy. If you are going to flip it quickly (in a few months or less) Private/hard money might be a better option- but generally I’d always prefer to take traditional bank financing as long as I could! Private money/Hard money is typically higher interest (12-18%) and often with hefty fees (3-10% added to the loan), and the payment is typically interest only. Again – these are just typical answers, but every private/hard lender is going to be different.
3.) Marcy is in a small town, about thirty miles outside Olympia, Washington (the capital -where prices are super high). I like those suburb areas a lot because rent is still fairly high but prices aren’t astronomical.
4.) Although I didn’t bring any cash – I brought my experience, my private lender, my construction crew, and my expertise to the table. That’s how I was able to approach it. If you don’t have those things yet, either figure out what you do have or start building those things!
5.) I use LLC’s.

Thanks for the questions Alex! Hope this helps!


Krrish Group October 16, 2012 at 11:43 am

I have been following your blog for may days.. I really appreciate you sharing your knowledge with us!


Affordable residential properties Gurgaon November 20, 2012 at 7:05 am

Thanks for such a nice idea.


Chuck Norris' Beard April 27, 2013 at 5:27 pm

“I want to be more than fair in every business deal I do. Reputation is one of the most important traits that guide an investor, and I’d rather be accused of being too generous than too selfish.”

I really like this attitude! One of the reasons that I’ve been hesitant to get into real estate investing in the past is the fear that I’d have to be a heartless, greedy business man to succeed. It’s cool to see that it’s possible to do well while still being a good person!


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