Creative Down Payments

"Creative Down Payments" by Chuck Sutherland

Tags: down payment, residential real estate


In "Creative Down Payments", Chuck suggests that it doesn't take cash to make a down payment. Options include real property, building supplies, financial instruments, professional services, trade credits, personal property, or anything of value. He explores several strategies for accomplishing this technique. My notes are as follows:


* House as a Down Payment


"A House is a marketable commodity" and as such it can be traded and the equity in the property can become the down payment. This is useful when you have a property that doesn't meet your investment criteria, but might help out the seller. See book for example.


* Land as a Down Payment


Land has value, but you might not have a buyer, so why not use it as a down payment. If the seller rejects the offer, you could make the purchase contingent on selling the land with seller financing (payments made to the sell of the property you are acquiring). You could also use the land as collateral on a seller financed note. See book for details.


* Professional Services as a Down Payment


If you are in the services business, this is particularly useful. Say you are a house painter. Trade painting services for the down payment from the seller. The Deed can be held in escrow until the services are performed. Maybe this will work for flight instruction!


* Additional Collateral for Down Payment


Also called cross-collateralization, you satisfy the lenders concerns about the lack of a down payment by offering up an additional property.


* Borrow a Property as Collateral for a Loan


This is the same as above except it isn't your property. Bring in a partner willing to put up their property for a share of the profits.


* Deposit Money to Obtain Loan


Banks will loan you money if you deposit money in their bank. If one party to the transaction has a large unrelated cash deposit, moving them to the lending institution could help to secure the loan.


* Borrow a CD to Get a Loan


This is the same concept as above. Negotiate with a small bank to bring long-term deposits into the bank. This helps reduce the banks risk. It also increase the yield since the bank loans the money back to you at a higher interest rate.


Chuck Sutherland works as a consultant in these types of deals. Chuck's website is


Biggest Takeaway: The more collateral you have the easier it will be to obtain loans. You just have to be creative in how you put the deal together.


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