5 Real Estate Strategies When You’re Short on Cash 

Every commercial real estate (CRE) investor or developer has been liquidity-strapped at one point or the other. This might result in difficulty making earnest money deposits or even down payments for a property of choice.

However, those who know how to buy commercial property with no money down can continue to build a profitable portfolio even with temporary liquidity constraints.

In this article, we consider five financing strategies to explore when you can’t make a down payment for a mortgage.

1. Seller financing

Seller financing in CRE is an arrangement where the seller acts as the mortgage provider instead of the bank or other financial institutions. In this case, the buyer makes monthly payments to the seller instead of a financial institution.

If you are a dependable developer or investor with a good track record, the seller might even be willing to overlook down payments. However, this will usually mean higher interest rates or a shorter repayment period.

Zero-down seller financing is also common when the seller is eager to offload the property, for whatever reason.

2. Cash substitutes

Sellers are generally more flexible than financial institutions institutions so they may accept cash substitutes for the down payment in seller financing.

These can be in the form of unused cars, vehicles, equipment, and furniture that they might find valuable.  Some may also accept high-value watches, art, or collectibles, or even professional services.

3. Seller-provided down payment

In this case, you will still be seeking mortgage financing from a bank or other financial institution. However, the seller will be providing the down payment that will unlock the financing to purchase the property.

Usually, this would mean a higher purchase price. So, instead of repaying the seller in the future, the amount would have been included in the new purchase price. In other words, all future monthly repayments would still be made to the bank. But since the purchase price is higher, this will be reflected in higher monthly repayments.

4. Government-backed funding

The Small Business Administration (SBA) has two programs that CRE developers and investors can explore. These are partially government-guaranteed offered by financial institutions in the SBA network.

Though the SBA itself does not request a down payment, the lender giving out the money will usually request it.

5. Rent-to-own leases

Here, the lease agreement will include an option to purchase the property. To this end, a part of the monthly lease payments will go towards paying down the property’s purchase price.

This purchase option often comes at a fee (option fee), but this will usually be lower than the down payment that financial institutions will require. If you can afford an option fee but not a down payment, this can be a good alternative to explore.

However, since this is an option to buy, you can walk away from exercising it down the line. In most cases, though, the amounts you have paid towards the purchase price would be non-refundable.

Even with all these solutions, you still need to make an earnest money deposit. In fact, you need it to get into the room where conversations about how to buy commercial property with no money down can take place.

You can secure earnest money deposit financing through a platform like Duckfund.

With Duckfund, you can complete an application in a few minutes, get the money to an escrow within 48 hours, and enjoy discounts on the financing fee beginning at the fourth month of due dilligence.

You can also pursue multiple deals at the same time and even propose higher EMD rates when you are targeting competitive properties.