Buying Strategies
Buying Strategies, Controlling Properties & Funding Sources
Real estate investors have three core skill sets: buying properties, controlling properties, and funding deals. Buying gives you ownership and equity. Controlling gives you cash flow and optionality without the burden of ownership. Funding determines what deals you can actually close.
This guide covers all three categories — the specific techniques, how they work, and when to use them.
These techniques focus on acquiring ownership of a property. Each has different capital requirements, risk profiles, and exit strategies.
In this strategy, the seller obtains a new first mortgage on the property, and then the investor purchases the property subject-to that new loan. The seller walks away with cash from the refinance, and the investor takes over payments without formally assuming the loan.
How it works:
Best for: Sellers who need cash but want to avoid traditional sale timelines; investors who want built-in financing.
Private lenders are individuals or small companies that lend money for real estate deals. They are typically faster and more flexible than banks, though rates are higher .
How it works:
Best for: Investors who need speed and flexibility; deals that don’t fit traditional lending criteria .
A contract for deed (also called a land contract or installment contract) is a purchase agreement where the buyer takes possession and makes payments, but the seller retains legal title until the contract is fulfilled .
How it works:
Best for: Buyers who can’t qualify for traditional financing; sellers who want income and tax deferral.
Hard money lenders provide short-term, asset-based loans for fix-and-flip projects. They focus on the property’s value rather than the borrower’s credit .
How it works:
Key numbers to understand:
Best for: Experienced flippers with capital reserves and a clear exit strategy.
This strategy involves purchasing a property at or near market value, then renovating it to sell at a premium. It requires strong renovation skills and market knowledge.
How it works:
Best for: Investors with renovation expertise in strong seller’s markets.
Also called owner financing, this is when the seller acts as the bank, financing all or part of the purchase price. The buyer makes payments directly to the seller .
How it works:
Best for: Buyers who can’t qualify for bank loans; sellers who want interest income and tax deferral.
This combines a subject-to purchase with a land trust structure. The property is placed into a land trust, which holds title while the investor controls the property and makes payments .
How it works:
Important note: Land trust vesting does not guarantee protection from due-on-sale enforcement. Always consult with an attorney .
Best for: Investors seeking additional privacy and potential due-on-sale protection.
Wholesaling involves contracting a property at a discount and assigning the contract to another buyer for a fee, without ever taking ownership .
How it works:
Key numbers to verify:
Best for: Investors with strong marketing and negotiation skills but limited capital.
Before any purchase, thorough analysis is essential. This isn’t about what the listing says — it’s about what the numbers actually reveal .
The 70% Rule for Fix and Flips:
Maximum purchase price = (ARV × 0.70) − Repair Costs
Example: ARV of $250,000 with $40,000 in repairs = ($250,000 × 0.70) − $40,000 = $135,000 maximum purchase price .
Key analysis steps:
Controlling a property means having the right to use, profit from, or purchase it without owning it. These strategies require less capital and carry different risks than ownership.
A lease-purchase agreement (also called lease-to-own) gives the tenant-buyer the obligation to purchase the property by a set date .
How it works:
Best for: Sellers who want certainty of sale; buyers who need time to improve credit.
A lease option gives the tenant-buyer the right but not the obligation to purchase. This is a unilateral contract — the buyer can walk away by forfeiting the option fee .
How it works:
Best for: Investors who want to control property with minimal capital and limited downside.
Real estate investors have multiple funding sources available beyond traditional bank loans. These strategies range from private lending relationships to retirement account structures and syndication partnerships.
Private money lending involves borrowing from individuals or private companies that lend their own capital rather than operating through a bank or financial institution . These lenders profit from interest charges and typically focus on the property’s value rather than the borrower’s credit score.
How it works:
Why investors use it: Speed and flexibility. Private lenders can close deals in days rather than the weeks or months traditional banks require . Investors are often willing to pay higher interest rates (10-12%) in exchange for the ability to close quickly and avoid extensive paperwork .
Best for: Fix-and-flip projects, auctions, and time-sensitive deals where traditional financing would cause you to lose the property.
A real estate joint venture is a partnership between two or more parties formed to acquire, develop, or manage a property. The structure typically pairs a capital partner (who provides most of the equity) with an operating partner (who brings expertise, deal flow, and management) .
How it works:
Why investors use it: JVs allow investors to take on larger deals than their own capital would permit. The capital partner gains access to the operator’s local market knowledge and deal flow, while the operator can “supercharge returns” through carried interest without needing to raise all the equity themselves .
Best for: Investors who find great deals but lack capital, or capital partners who want real estate exposure without active management responsibilities.
A Self-Directed IRA (SDIRA) is a retirement account that allows alternative investments — including real estate — rather than being limited to stocks, bonds, and mutual funds . The IRA holds title to the property, and all income and expenses flow through the retirement account.
How it works:
Leverage option: If your IRA lacks sufficient funds, it can use a non-recourse loan — a loan where only the property serves as collateral and the lender cannot pursue your other assets . However, the debt-financed portion may trigger Unrelated Debt-Financed Income (UDFI) tax .
Best for: Investors who want to build retirement wealth through real estate on a tax-deferred (Traditional IRA) or tax-free (Roth IRA) basis.
A Solo 401(k) — also called an Individual 401(k) or Self-Directed 401(k) — is designed for self-employed individuals with no employees. It offers checkbook control over retirement funds, allowing you to write checks directly for real estate purchases without custodian approval .
How it works:
Key advantage over SDIRA: The Solo 401(k) is exempt from UDFI tax on leveraged real estate under IRC Section 514(c)(9). This means if you use a non-recourse loan to buy a rental property inside your Solo 401(k), 100% of the rental income and future gains remain tax-deferred or tax-free — without the UBIT erosion that applies to SDIRAs .
Best for: Self-employed investors who want maximum control, higher contribution limits, and tax-efficient leveraged real estate investing.
A real estate syndication pools capital from multiple investors to acquire large properties — apartment communities, industrial parks, or mixed-use developments — that would be difficult or impossible for an individual to purchase alone .
How it works:
Investor qualifications: Most syndications are offered under SEC Regulation D and are restricted to accredited investors ($200,000+ annual income or $1 million+ net worth excluding primary residence). Rule 506(b) offerings may allow up to 35 sophisticated non-accredited investors; Rule 506(c) offerings require verified accreditation .
Why investors use it: True passivity, access to institutional-quality assets, professional management, portfolio diversification, and tax benefits like depreciation pass-through .
Key considerations: Capital is illiquid (typically locked for 2-10 years), returns depend heavily on sponsor execution, and fees should be reviewed carefully in the PPM .
Best for: Investors seeking passive income and portfolio diversification without landlord responsibilities.
| Category | Technique | Capital Needed | Primary Benefit |
|---|---|---|---|
| Buying | Sub2 with New 1st | Low | Built-in financing |
| Private Lender | Medium | Speed & flexibility | |
| Contract for Deed | Low-Medium | No bank qualification | |
| Hard Money Rehab | Medium-High | Quick funding for flips | |
| Retail – Rehab | High | Value creation | |
| Seller Carry | Negotiable | Direct seller terms | |
| Sub2-Land Trust | Low | Privacy & protection | |
| Wholesale Flip | Very Low | Assignment fees | |
| Analyzing Property | N/A | Informed decisions | |
| Controlling | Lease Purchase | Low | Guaranteed sale |
| Lease Option | Very Low | Optionality | |
| Funding | Private Money | N/A | Speed-sensitive deals |
| JV Partner | N/A | Deals beyond your capital | |
| Self-Directed IRA | N/A | Tax-advantaged retirement | |
| Solo 401(k) | N/A | Checkbook control + UDFI exemption | |
| Syndication | N/A | Large deals, passive income |
Due-on-Sale Clause: Most mortgages contain a due-on-sale clause allowing the lender to demand full repayment if the property is transferred. Sub2 deals and land trusts may trigger this .
Seller Liability: In sub2 deals, the original borrower remains liable on the loan. If the investor defaults, the seller’s credit is damaged .
Legal Compliance: Creative financing strategies are regulated differently by state. Some states have strict predatory lending laws. Always work with a local attorney .
Contract for Deed Risks: Buyers may lose all payments if they default. Sellers may face regulatory issues if not properly structured .
Retirement Account Rules: SDIRAs and Solo 401(k)s have strict prohibited transaction rules. Violating them can disqualify the entire account. Always work with a qualified custodian and CPA .
Syndication Risks: Capital is illiquid, returns depend on sponsor execution, and fees should be carefully reviewed in the PPM. Most syndications are restricted to accredited investors .
Learn buying, controlling, and funding strategies from experienced investors.
Disclaimer: This page is for educational and informational purposes only. It does not constitute legal, financial, or tax advice. Real estate laws vary by state and jurisdiction. Funding strategies involve significant risk and are regulated differently by state and federal law. Always consult a licensed attorney, CPA, and financial advisor before entering into any real estate transaction or funding arrangement.
