Ignore Your Bank: Buying Commercial Property With No Money Down is Possible

Commercial real estate investors are busier than ever before, but with many sellers now demanding soft deposits of up to 15% of the purchase price, investors with no liquidity (or out of pocket cash) should learn how to buy commercial property with no money.

The payment of this soft deposit, also known as a ‘good faith deposit’ or ‘earnest money’, poses real problems for real estate investors who face difficulties with the following:

  • Getting accepted for short-term loans by traditional lenders with strict criteria
  • Raising enough cash to fund the deposit
  • Accessing funds tied up in other properties

The US commercial real estate market is soaring, with Mordor Intelligence projecting a 3.5% CAGR between 2023 and 2028. This means requests for soft deposits and down payments are also growing, but strong inflationary pressures and a high cost of living are threatening investors’ ability to get ahold of these funds.

If you’re one of them, you may feel like that investment opportunity you’ve been craving is slipping from your grasp.

Does it mean that all hope is lost, or that only the financially liquid can survive?

The short answer is “no”. Investors with little to no liquidity can also benefit from the thriving commercial real estate market by learning how to buy commercial property with no money down.

In this article, we identify some of the strategies that investors willing to think outside the box can use to build a solid and profitable commercial real estate portfolio even with no soft deposit or down payment.

[Do you have a list of properties you would like to invest in but don’t have the cash to pay the soft deposit on them? Sign up for Duckfund for low-cost, quick, and flexible soft deposit financing that you can trust.]

1. Rent/lease to own

One common option that does not involve a down payment is a lease-to-own arrangement.

Here, your lease agreement will include a purchase option that you can decide to trigger during the lease term. In contrast to a standard lease, a portion (or all) of your monthly payments to the property owner will go into paying down the property’s purchase price.

With this arrangement, you can either occupy the property (if you need it) or sub-lease it to another person to raise the monthly payments you owe to the property owner.

According to popular real estate expert BiggerPockets, lease to own also provides you the opportunity to test the water and evaluate whether the property is right for you or not. If it is, you can purchase the property; if not, you can just walk away.

However, this arrangement can also have its downside.

For example, most lease-to-own arrangements will require the payment of a non-refundable option fee. Also, the amount that goes into the downpayment for the property may be non-refundable as well. Similarly, there are lease-to-own agreements where the buyer will be responsible for maintenance, repairs, and the payment of utilities for the lease term.  

2. Seller financing

Seller financing is an arrangement where the buyer makes monthly payments for the property to the seller instead of taking out a mortgage with a bank, credit union, or another financial institution.

The main catalyst here is that the seller prefers a monthly payment for the house instead of a lump sum. They may wish to avoid tax from the property sale or because their financial situation demands a monthly source of income. It could also be a way to sell the property faster or for a higher (cumulative) price – i.e. through a higher selling price and/or interest rate – than possible with an outright sale.

More relevant to our topic is that the seller can waive the requirement for a down payment (and closing costs) and factor it into the purchase price or interest rate. Yet, while this provides an opportunity to purchase commercial property with no down payment, it means a higher monthly payment than a traditional mortgage.

According to BiggerPockets, getting this deal done will often require that the seller retains a right to foreclose and repossess the property in the event that the buyer defaults, much like with a mortgage lender.  

how to buy commercial property with no money

3. Cash substitutes

The seller might also be willing to collect something valuable in lieu of the down payment.

If you have any unused properties – cars, appliances, furniture, etc. – that might be valuable to the seller (because of their circumstances), then you can propose using them as a replacement for the down payment.

Similarly, if you are a service provider, consider if the seller might be in need of your skills and then offer it to them in exchange for the down payment. You might be surprised at what deal you could strike.

4. Seller-provided down payment

Another option is convincing the seller of the property to help you make the down payment on the traditional mortgage out of their pockets.

But, why would the seller agree to this?

Well, like seller financing, it provides an opportunity for them to negotiate a higher purchase price for the property, which means higher monthly payments for you.

For example, suppose the commercial property’s market price is $1,000,000 and the bank is requesting a 10% down payment. To enter into an agreement where they pay the down payment on your behalf, the seller could increase the purchase price to $1,200,000.

In this new scenario, the seller will give you $120,000 but instead of $1,000,000, they will now receive $1,200,000, which in the end leads to a $80,000 profit ($1,200,000 - $1,000,000 - $120,000).

The downside of this arrangement, as said above, is the higher monthly payments you will have to make due to the higher purchase price.  

5. Government-backed financing

Government agencies support SME financing either directly or indirectly. With the former, they create agencies that grant loans to SMEs that meet certain eligibility criteria. Real estate agencies can explore such programs in their locales.

The latter approach often involves government agencies partnering with financial institutions to provide funding for small businesses. This typically involves the government agency partially guaranteeing the loan, thus giving the financial institutions more incentives to grant such loans.

An example of this latter approach are SBA loans, which are available to SMEs in the United States.

The uniqueness of SBA loans is in the fact that the government, through the Small Business Administration (SBA), partially guarantees it. This makes it less risky from the viewpoint of the lender since the government will repay a portion of the loan if the small business owner defaults.

Small businesses who qualify can use the SBA 7(a) loan to purchase land and buildings. However, though the SBA does not impose any down payment requirements, the lender within the SBA network may impose one. “Because the bank or lender is providing the loan, they’re in charge of the requisite down payment amounts for an SBA 7(a) loan,” according to the SBA. “There’s no strict down payment amount set by the SBA or any other institution, but lenders often request 10% or more for higher-risk businesses.”

What’s more, you can only use SBA 7(a) loans for owner-occupied property (i.e., 51% occupancy or higher). Nevertheless, BiggerPockets suggests that small businesses can refinance the loan down the line and then convert the property to an investment property.

Yet, despite the advantages of this method, it’s far from certain that you can find lenders in the SBA network who are willing to waive the down payment requirement.

6. Traditional bank loan and online lenders

Another option for those learning how to buy commercial property with no money down is to take out a traditional consumer loan. Note that this is a different loan from a mortgage itself – it’s for the downpayment that the mortgage requires.

Also, a real estate investor can take a traditional bank loan to finance the soft deposit required by the seller.

However, bank loans are often difficult to access (especially without a good credit score) and this difficulty applies to small businesses as well, as there are many reasons for denying small business loans. Even when the application is successful, the process can be extended (due to due diligence) and interest rate can be exorbitant.

Though online lenders (especially P2P lenders) can be a more accessible option, the interest rate is still often very high. Also, many of these lenders are either unregulated or partially unregulated which makes them risky options. They may impose onerous loan terms, for example, and use unconventional methods to recover loans.  

7. Subject to current mortgage

Instead of looking for a down payment to finance a new mortgage, you can take over the old mortgage that the property owner (seller) is currently servicing.

This is often an option when the seller is in a bad financial situation and can’t continue payment or they have lost interest in the property and are not willing to fork out more mortgage payments.

Since this is an existing mortgage, you won’t need to pay any soft deposit.

The challenge with “Subject to” arrangements is that the original mortgage might have a due-on-sale clause which “requires the borrower to repay the lender in full upon the sale or conveyance of a partial or full interest in the property that secures the mortgage,” according to Investopedia.

8. Real estate license

Getting a real estate license is another option. With a real estate license, you can find good commercial property deals and also source investors who will be willing to invest in those deals.

As a professional, you will be able to charge commission for the deals that you help make possible (just like a real estate agent). And with these commissions, you could accumulate the funds you need to make a down payment for the property.

Nonetheless, getting a real estate license might not be an easy venture and connecting buyers and sellers may be an even more challenging task.

9. Partnership

If you are fortunate enough to have a friend or business partner who is liquid, then you can also consider partnering with them to purchase the property.

This method can, however, become very complicated. The first challenge is structuring the partnership. Do you collect the down payment from your partner and repay them later while your name alone remains on the mortgage deal ( effectively becoming a loan)? Or do you take out the mortgage in both your names with an assigned formula for sharing the monthly repayment?

Even when you have purchased the property, you still have to decide who does what regarding the property management, how the property will be disposed (sale or lease), and which profit sharing ratio will apply.

Again, this process can become extremely complicated, leading to unnecessary legal tussles down the line.

10. Soft deposit financing

Soft deposit financing is a system where financial institutions provide a soft deposit loan for real estate investors. These institutions are typically fintechs with streamlined application processes and a quick release of funds.

Because of the uniqueness of their approach, these financial institutions are able to advance soft deposit loans without requesting for a credit report (or worrying about credit scores). Below is a typical soft deposit financing process:

  • The investor successfully applies for soft deposit financing
  • The financing company creates an LLC and a call option agreement between itself and the borrower.
  • It is this LLC that signs the commercial real estate purchase and sale agreement and wires the soft deposit to an escrow account.
  • If the borrower decides to continue with the deal, they will wire the soft deposit back to the financing company, after which they will possess a 100% stake in the LLC and take control of the purchase and sale agreement.
  • If the buyer decides not to go forward with the real estate deal, the financing company will annul the purchase and sale agreement and recover the deposit amount from the escrow account.

With this unique system, you can consistently gain access to the soft deposit you need to register an interest in a property of your choice and acquire a purchase option in it. Consequently, you can buy commercial properties of choice with no money down.

Duckfund is one company providing such soft deposit financing for real estate investors. It has a smooth and fast application process that takes just two minutes. Applicants will be approved within 24 hours (no credit reports required) and funds are released within just 48 hours.

how to buy commercial property with no money

Also, Duckfund charges a 2% monthly interest rate, one of the lowest in the industry when compared to many lenders, which typically charge a percentage of the purchase price. With Duckfund, you can work on multiple commercial real estate deals at the same time even when you don’t have money.

[Are you ready to close more commercial real estate deals even when you don’t have the required soft deposit? Sign up for Duckfund’s soft deposit financing and get the cash you need within 48 hours.]


  • Most real estate sellers now require a fully refundable soft deposit as a sign of commitment from potential buyers. Also, mortgage lenders continue to demand down payment.
  • Illiquid commercial real estate investors have had trouble purchasing properties of choice because of these requirements.
  • The US commercial real estate market has huge potential going forward. Tapping into this will require that investors learn how to buy commercial property with no money.
  • There are various options that real estate investors without their own money can explore to build their portfolio and close as many deals as possible. Soft deposit financing is one example that’s becoming more popular.
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