Overview of 3 Ways to Fund Your First Real Estate Deal Without 20% Down
In this Real Estate Rookie episode, Ashley Kehr and Tony Robinson break down three practical ways beginner investors can fund their first real estate deal without needing a traditional 20% down payment: hard money loans, seller financing, and partnerships. The main message is that rookies often sit on the sidelines because they assume they need a large pile of cash up front, when in reality the right financing strategy depends more on the property, the deal structure, and your current resources than on a fixed down payment rule.
Key Funding Paths Discussed
1) Hard Money Loans
Hard money is a short-term, asset-based loan designed for investment properties that may not qualify for conventional financing.
Best for:
- Fix-and-flip deals
- BRRRR projects
- Distressed or unconventional properties
- Situations where speed matters
Why investors use it:
- Easier approval than traditional bank loans in some cases
- Can close quickly, sometimes in a week or less
- Focuses more on the deal than on the borrower’s W-2 income or debt-to-income ratio
Tradeoffs:
- Higher interest rates
- Points and lender fees
- Often requires reimbursements after work is completed, not all cash upfront
- Can become expensive if rehab takes longer or costs more than expected
Ashley’s warning: She shared a difficult hard-money experience where poor communication, unclear fees, and title issues delayed closing. Her advice: vet the lender carefully, understand the process, and know exactly what’s required to get funded.
2) Seller Financing
Seller financing is when the seller acts as the bank, and the buyer makes payments directly to them instead of borrowing from a traditional lender.
How it works:
- Buyer and seller negotiate terms directly
- The seller may receive a down payment, then monthly principal and interest payments
- Terms can include a balloon payment, where the remaining balance is due after a set period
Why sellers may agree:
- They don’t need all the cash immediately
- They may want to spread out tax consequences
- The property may be hard to finance through conventional means
- They may be willing to accept terms that help them get their desired sale price
Why buyers like it:
- More flexible than bank financing
- Can require less money down
- Terms can be customized to fit the deal
Example mentioned: A guest named Kimber structured a seller-financed deal with a smaller down payment and a five-year balloon, giving her time to renovate, improve the property’s value, and later refinance or sell.
Important note: The hosts emphasized that seller financing should be fully documented in writing, including payment method, balance tracking, and year-end interest reporting.
3) Partnerships
If you have the deal and the skills but not the capital, a partnership can be the missing piece.
Best for:
- Investors with strong deal-finding ability but limited cash
- Larger deals that are too big to do solo
- Rookies who want mentorship or shared experience
Good reasons to partner:
- You have a great deal but not enough money
- You want to take on a larger asset than you can handle alone
- You want to learn from someone more experienced
Bad reasons to partner:
- Fear or lack of confidence alone
- Hoping the partner will do all the work
- Entering a partnership without understanding your own goals or strategy
Key mindset shift: Tony and Ashley stressed that the capital partner is not automatically the “better” partner. The deal finder often creates most of the value by sourcing, managing, and executing the investment.
Structure tip: For rookies, a simple 50/50 split is often the cleanest starting point, though the exact terms depend on the deal and who is contributing what.
Notable Takeaways
- You do not need 20% down to get started in real estate investing.
- The best funding strategy depends on the deal type, property condition, and your own financial profile.
- Hard money is useful for distressed properties and fast closings, but it comes with higher costs and more risk.
- Seller financing can be highly flexible and creative if the seller is open to custom terms.
- Partnerships are ideal when you have the deal but need capital or experience.
- Rookies should focus on finding the right path for the situation, not forcing every deal into the same financing box.
Practical Advice for New Investors
Before using hard money
- Ask about all fees, points, and interest terms
- Clarify the funding and reimbursement process
- Confirm who your point of contact will be
- Build in extra time and budget for delays
Before negotiating seller financing
- Understand the seller’s motivation
- Be prepared to negotiate:
- Down payment
- Interest rate
- Balloon period
- Amortization schedule
- Put everything in writing
Before forming a partnership
- Know your strategy first
- Be honest about what you bring to the table
- Don’t partner just because you’re scared
- Accept that your first deal may not be perfectly “fair” if it gets you started
Final Thought
The episode’s core message is that rookie investors have more options than they think. Instead of waiting until they have a huge down payment, Ashley and Tony encourage beginners to look at creative financing, seller-driven terms, and strategic partnerships as real paths into their first deal.