By popular demand! One good scenario for property purchases when there is no down payment money is probably the most asked question in my repertoire.

The truth of the matter is that hard money lenders want buyers to have money in the deal when they buy a property. There are precious few exceptions to the rule and the resulting loans are very costly. Here is an option worth considering.

If the seller and buyer are interested in working cooperatively, and the property has a good deal of equity in it, the following scenario may work.

Seller takes on an operating partner and prepares to bow out of the property by becoming a silent financial partner. The seller adds the future buyer to the deed of the property with the agreement that the new person will be the hands on manager of the property. The partners refinance the property. The silent partner takes cash out from the refinance. This serves as the new partner’s equity payment.

The operating partner “works” the property and makes the monthly loan payments. When the operating partner is ready to refinance the property, by prior agreement, the seller’s name is taken from the deed and the operating partner refinances and pays off the balance owed to the seller.

If the buyer / operating partner defaults, the seller / financial partner can, per provisions in their agreement provisions to take over the property again. In that event, the seller will have the option to remove the operating partner from the deed, take over payments for the loan, locate a new buyer and sell the property or let the property default.