It is entirely possible to purchase commercial real estate with no money down, Cody Davis, a 21-Year-Old shares how he already purchased 30 units with no money of his own, with seller financing, following up, and asking for it.

Tell us a little bit about you.
I'm a real estate agent based out of Tacoma, Washington. I'm 21 years old and got licensed shortly after getting out of high school. I was in college for my first quarter and ended up meeting with a gentleman who happens to own a real estate brokerage, and he owns Blackwell real estate in Tacoma. He invited me in to check out the firm. I met with him through Facebook, because I had made a post online talking about how I wanted to get a duplex. I got my real estate license, and started learning about multifamily.

How many properties do you have right now?
Right now I'm at 30 units, got two twelveplexes, a sixplex, and I'm looking at expanding that out a little further this year.

And how much money did you use to buy these properties?
I had no money of my own in the deals and I had to come up with money. The zero down isn't quite true, because it takes money but doesn't have to be your money. So I had to come up with $125,000 for each twelveplex, that's 250k. And $90,000 for the sixplex, they were all seller financed. So they were lower down payments, but it was no money on my own.

Let's view how to do seller financing in detail, and how there are zero excuses for not owning real estate with no money of your own.
The first thing that you have to really know and get familiar with are the numbers. If you don't know how to illustrate numbers in a clear, concise manner, it's really hard to raise capital, at least I have found that. And it might just be because I'm younger, or that people want me to be sharp, but really in business, you should know your numbers regardless. And and so I tried to figure out how do I illustrate something really clearly. I devoted a couple of weeks to really mastering Excel and learning what I needed to do. And if you can show cash flow in a clear, concise manner, it gets really easy to look at these deals. This is the second twelveplex I ever bought, it was an off market opportunity. The expenses are really low, so I got it for $680,000. They wanted $120,000 down, and it was about $5,000 for closing costs. So I raised $125,000. But more important than the money or the numbers that I was looking at, and I knew for a fact that they would finance $560,000 in first position at 6% fully amortized. The monthly payment on that was $3,400 every month.

My taxes and insurance, these are the adjusted numbers, when you buy something, usually the taxes are going to go up. I got taxes updated, and insurance estimates for what I expected they were going to be after I bought, it was about $608 a month. Utilities, I looked at the last 12 months, and it comes out to about $937 a month. I know those are my constants, and now I've variables that I can add in. But just looking at what I know is going to be there, I've $7,560 in income. And then I've about $5,000 in expenses, meaning that on this opportunity it was about $2,600 a month in cash flow, I measure based on cash flow appreciation, depreciation, debt reduction, that's how you look at an overall investment. But when you're starting out with no capital, appreciation doesn't pay the bills. You have to find cash flow 100% of the time. And that's always my focus. So I had $2,600 a month for maintenance, management and then paying the money that I borrowed.

The $3,300 is the monthly loan payment to the first loan. That's just the $560k at 6%. I also borrowed $125,000 to 12%. Since we have 12 months in a year, it makes it really easy to do the math, it's 1% a month. I managed the deal myself in the beginning because I had to from a cost perspective. I'm put this in the management section at $1,250 a month in expenses. Instantly, my cash flow goes down to $1,334 a month. So that was now a new constant. That was another mortgage. I'm also going to have maintenance items. And I was looking at how do I make the deal work versus how do I kill the deal. I was trying to find ways to make it make sense. I wasn't going to put any maintenance there until I did a property inspection. I wanted to really see what I was working with. Because the type of property that I bought, for everybody that lives there, it's their own little community, and they all take care of it. So I walked through and there were little things, but my average expense every month since I bought it a little over a year ago sits around $400 a month. And there's no landscaping because it's all gravel and cement. It's very low maintenance.

This has been about what I have made every month since I bought it with no capital down, about $900 a month positive cash flow, because I signed a piece of paper. Granted, this was also the day one income, this does not include getting rent. So today, it's a little closer to $8,000 a month in income. When I looked at this deal, I said, Okay, it's going to cash flow, I'm going to get paid to wait. And as I turn units, which I have, I know I can re-rent these for $800. Over time, I can get the income up to where the deal makes a lot of sense. I can put it into bank financing, and wipe out the original mortgage. Eventually, I can afford to put it into full time management where I don't have to worry about it. This deal by itself cash flowed from day one just for a signed a piece of paper.

How did you convince the seller to carry the first loan, and also how did you find the $125,000 second loan?
As far as convincing the seller, this is the first time I've ever worked with him and ever spoken to him, so I had to learn about his story. I met up with him and I asked him how he got started. He started out with a sixplex, it was his very first property. He bought it for $90,000 around 2004. But he bought it with 10% down, that was $9,000, he traded nine grand for a sixplex, he lived in one of the units, the owner financed for him. He wanted to buy the land next to it, but he didn't have the $2,000 to buy it. This was all of his money. And today, he has a handful of properties. He is doing brand new developments, single family communities, apartment buildings.

I just went through and asked him how he did it, what he started with, what his thoughts were on how to get started. He said, you need to find someone who will seller finance you a property. I said, Okay, will you seller finance me this property? He said, Sure.

It was an easier sale at that point, but I had to learn more about him first. I went out and I walked the property. This place was originally under contract with another broker in the office. He had written it up for his client and his client and didn't end up buying it. So I said, Can I get his phone number? He seems to be doing well. He's one of the wealthier people I know, even today. I went over and met with them, learned as much as I could from him and he said, get in my truck. We went in his truck and we looked at all his properties. He has single family houses, land on the water, apartment buildings, he managed to accomplish quite a lot over the last couple of decades. I learned a lot from him. And he finance that twelveplex. And the last deal I bought in March of this year was the sixplex that he bought for $9,000 down.

How did you find the $125,000 second loan?
I asked the owner of the firm, I got this opportunity, can you help me out? We looked at the numbers and he said, Yes, it makes sense, let's do it. He helped fund it. It's about asking for help, it doesn't have to be a one person show. You don't have to be self made because you're going to grow based off of your interactions with others. For me, I want to get as much help as possible because I just want to make this happen. I asked for help from everybody I knew, and I don't have family or friends in the real estate space. So I couldn't just go to them and say Hey, can I get a small loan of $120,000 because that's a lot of money, especially to my family, they don't have that, so I had to ask other people in the business space, and they helped put together a loan of 12% which is pretty standard. It was hard money, but I got to buy it. And that was fine. I didn't really care what interest I was paying, you can't make money on a deal you don't own, or you can't make real money. You can wholesale, but real money is made owning. So I said, I'm going to own this, whatever it costs.

What were some of the things that people said no to? And how were you able to overcome that?
I had a lot of help starting out. But the objections that I got, and it's good to know the objections, such as you haven't done this before, you're young, you've never seen this much money in your life. Those are some of the objections. I am a Grant Cardone guy, I love to study from him. That's just a complaint. They're complaining that they didn't start this young, in my mind. And so I had to flip it, I said, that's the reason we should do this, because if you were in this position, you would want the same opportunity. Now, this is how I'm going to protect your money. Once the property stabilized, it's worth $1M. To back that up, I got an offer and I'm going to be selling this twelveplex. As long as things move forward, we're going to close. The financials are all good with the bank and I helped them sell a couple properties, so they're 1031 exchanging it, but I got the value up to where I projected it would be. If they had to foreclose on me, I just presented as The property has $560,000 in debt with the seller, if you foreclose on me, you're getting a million dollar property with a $560k debt for $125,000 in one year, that's a good ROI, so let's do this.

And that's how I had to phrase it. And it was the same for the sixplex I purchased. I raised the downpayment for that as well. I didn't give them ownership, it was structured just as a loan. I've got a $500,000 asset, if I didn't do any renovations, it was worth $500k, I owe $290k on it. So you're investing $90k, you're doubling your money in one year if I can't pay you. And that's the pitch I've had to adopt, Let's find a way to make this work because if you're happy with the return, and you're happy with the security, there's no reason not to do it. And that's how I've been able to scale this.

What are some of the things you say when people say no to you?
"If you won't do it for you will do it for me?". That's a last resort, and it's just the asking for that help.

How were you able to grow from there? Let's dive into refinancing and cashing out.
I actually haven't had to refinance anything, I was going through the refinance process and then I got these offers to buy the two twelveplexes. I can get out all of my hard money debt and pocket some money. And then they'll start over with a new foundation, and a sixplex. That's the route I'm looking to take. But the refinancing, I just had to get really good books, I use AppFolio to keep track of all the financials and make sure I've really good bookkeeping, and trailing twelves. I have all the documents that I can give to my lender. I resigned all the tenants into new, stronger leases, and long term leases. I like to go for one year, I don't like the month the month thing. And people have different opinions on that. But I like the year long leases, I like to know that I've somebody in there. I just presented that to the lender, we started moving forward, and then it's just about liquidity and cash flow.

And I know that this just didn't come like this for you. How long did you put into learning about seller financing and everything related to real estate?
I learned about seller financing when I bought my first property in October of 2019, a little less than two years ago, but it wasn't just two years of studying a little bit. It's been an everyday occurrence. I'm looking at properties every day, I'm learning about debt every day, and I'm trying to improve every day. It's not a part time thing, it's been a lot of work. But it's worth it, because I'm not pursuing knowledge for the information, I'm pursuing knowledge for certainty. Because when I can be certain about something, it allows me to move quicker. And sellers like that a lot, that's what I've found. I can show them, Hey, I'm certain I can do this, I've no doubt in my mind, I've never bought on a budget, and never will buy on a budget, let's do this. And I'm trying to build on that, I'm getting my home inspector license, so that I can say, Look, I don't even need a third party, I can walk through this and tell you exactly what I need done, I'm the sole decision maker. So I'm trying to improve every day to become that decision maker. So I can show people, hey, if you want to do the deal, we can do it, and we can do it right now. Because when you can take time out of the equation, I found that it helps the seller feel more comfortable with it, because they see that you're professional about it. And if they're going to loan you money, then it's good to present that way.

You also don't learn only about real estate, you've told me before that you also learn about sales and objections and everything else, and you observe people selling. What are some pieces of advice that you would give someone that literally has no money down to get started in real estate investing?
I would say get certain about what you're trying to accomplish. People say, You either have money, or you have time, well, you have your brain either way, so use it. Learn the numbers, because if you can present numbers in a clear, concise manner to individuals, you can give them an easy way to invest. There's a lot of scared money that doesn't know where to go, especially with all this printing. I see a lot of it going into real estate. And because of that, I need to figure out how to get a piece of real estate, I need to get good at the numbers first so that I can go and get a little bit of that money, I just have to figure out how to get control of a little piece. I may not even take money.

There are deals where it's $20,000 down, there's a 15 unit on the water. It's right next to my twelveplex. I called the owner and this is one of the deals I'm working on right now, we got in his truck and we drove around. He has 550 units, he owns out right. He started with a single family house, in the 60s or 70s, and he just bought up almost the whole town. It's pretty phenomenal. But he has no debt, and we drove around. He owns this 15 unit and owes nothing on it. I said, That's right next to my property, I want to make an offer. He said, Well, what are you thinking? And I asked if he wanted to cash out or hold contracts? He said he wanted to hold a contract. He doesn't want the tax implications, because he already makes enough money.

And so we dove into that and I said, Well, I don't have any cash, will you do 100% financing? He said, Let me call my partner and figure that out. His partner said that's fine. And so it's not a matter of if, it's a matter of if we're doing it this year, or if we're doing it on January 1. He's going to 100% finance this 15 unit. It's going to cashflow a little over $3,000 a month, with no money down. So it doesn't take money. It takes the certainty and the confidence to ask the questions. He hasn't been asked ever. if they'll do 100% financing. I don't think many people are so if you just ask the question, then what's the worst they can say?

Why do you think he is selling it?
Because I called him up. I had to call him up for over a year. There's a little bit of time there. But I stayed interested when he wasn't. That's really important.

I say this over and over, it is so important to follow up, follow up, follow up. Very few people follow up. So if you're following up, you will stand out, I guarantee.
Another example, there's a sixoplex, and I called that owner over a year ago and said, I just got a twelveplex, I'd like to buy your six, can I make an offer? And he said, Who are you? I told him my story. And he said, Well, I appreciate you telling me your story, but I don't want to sell right now, call me back later. So I called back later. He wasn't interested. I called him back two days ago. And he said, Oh, you're that young guy that was trying to buy my real estate. I said, Yes, I was and yes, I am. Can I make you an offer? Would you be interested now? He said, No, thanks. Then he hung up. He called me back the next morning and said, I talked to my wife, we actually want to sell it. What do you want to offer? I said, I've two questions for you. Do you want to be cashed out? Or do you want to hold a contract? Those are my go to questions. He said, Well, I'd be receptive to cash out, or if you do a little higher price, let's do a contract. And so I was able to move that one. And I sent him an offer yesterday for $550k. I'm certain that I can do the deal, and I had to reaffirm that to him a couple times.

Is there anything else that we haven't covered that you think is important for our audience to know?
The biggest mistake you can make is not getting started and not buying a piece of real estate. There was a 16 unit that I could have bought with zero down, it would have cashflowed $4,000 a month. I passed on it because I thought I was expanding too quickly. That was a mistake. If you find a great deal, and you're certain it's a great deal go buy it.

Cody Davis
Instagram: codyd2020