Zero money down usually sounds like a late-night infomercial. It is not, when the structure is right. At Mac Does REI we use creative financing to put together real deals that produce monthly cash flow with little or no upfront capital of our own, and this post breaks one of them down: how to make a few hundred dollars a month with zero money down on a house in a Dallas-Fort Worth suburb, using a subject-to acquisition, a private lender, and a wrap resale.
The short version
The seller had fallen behind on a low-rate mortgage and was relocating out of state. We bought the house subject-to that mortgage, meaning we took title and took over the payments while the loan stayed in place, and a private lender funded the arrears and closing costs so none of our own cash went in. We then resold the house with seller financing to a buyer who brought a down payment; that down payment repaid the private lender and the closing costs with profit left over on day one. The difference between the buyer’s monthly payment to us and our payment on the underlying loan is the monthly cash flow, roughly $500/month, and the note keeps paying for years.
How was the property acquired?
The acquisition was a subject-to purchase in a DFW suburb: we took the deed and took over the existing mortgage payments, and the loan stayed in the seller’s name at its existing rate.
The pieces:
- The seller’s situation. Behind on the mortgage and relocating out of state, with a house that needed a fast, certain exit more than it needed top dollar.
- The existing loan. A conventional mortgage at a rate well below what a new buyer could get, which is what made the deal worth structuring around.
- The catch-up cost. The loan had to be reinstated, so the arrears plus closing costs were the total cash needed at the table.
- The funding. A private lender covered the reinstatement and the closing costs on a short-term, interest-only loan, due after resale or refinance.
Subject-to deals carry a due-on-sale risk, because most mortgages let the lender call the loan if the property changes hands. Our explainer on what happens to the mortgage in a subject-to purchase covers that in detail; the short answer is that the loan stays current, insurance is set up correctly, and reserves exist in case it is ever called.
How was the house resold?
We resold the property with seller financing, using a wraparound note: the buyer pays us on a new note, and we keep paying the underlying mortgage out of that payment.
- The buyer. Someone who could not qualify for a bank loan but had a meaningful down payment and steady income.
- The terms. A long-term note at a rate reflecting the fact that a bank would not lend to them, on a sale price at retail value.
- The down payment. Large enough to repay the private lender and the closing costs, with profit left over at closing.
- The spread. The buyer’s monthly principal, interest, tax, and insurance payment is higher than our payment on the underlying loan. The difference is monthly cash flow.
Wraparound mortgages 101 walks through how the two loans sit on top of each other and why a third-party servicer handles the payments.
How was it zero money down?
Because none of the cash at the table was ours, and the buyer’s down payment paid it all back. The private lender funded the arrears and closing costs. The end buyer’s down payment then paid off the private lender, covered our closing costs, and left profit at the close. From that point, the deal had no cash of ours in it, a monthly spread coming in, and a note balance that pays down over the years with a backend payoff when the buyer refinances or sells.
Why did this deal work for everyone?
It worked because every party got the thing they needed most.
- The seller stepped out from under a loan they could not keep paying and moved on before the foreclosure timeline ran out.
- The buyer, who could not qualify for a bank loan, became a homeowner with a fixed payment.
- The private lender was repaid with interest on a short timeline.
- The investor ended up with monthly passive income, a growing equity position, and a backend payoff still to come.
What are the takeaways for investors?
- Chase control, not equity. A house with a low-rate loan and a motivated owner can be worth more to control than a discounted house you have to pay cash for.
- Subject-to plus wrap lets you borrow to acquire and resell at retail. The end buyer’s down payment can fund your entire position.
- Notes build long-term income. The spread pays monthly, and the payoff comes later.
- Paperwork is the whole game. Texas has specific rules for seller-financed and wraparound transactions, and a lender’s due-on-sale clause is real. Use an attorney and a servicer who do these deals.
This is not theory; it is a method we use regularly, and it can work for other investors who are willing to learn the structure and respect the rules.
Frequently asked questions
What does zero money down actually mean here?
It means none of the investor’s own cash went into the deal. A private lender funded the arrears and closing costs, and the end buyer’s down payment repaid that lender at the resale.
Where does the monthly cash flow come from?
From the spread between the payment the end buyer makes on the new wrap note and the payment the investor makes on the seller’s original mortgage.
Is a subject-to purchase legal?
Yes, but the underlying lender can usually call the loan under a due-on-sale clause, and Texas regulates seller financing and wraps. Have an attorney who does these deals document everything.
Where we land on it
A zero-down wrap deal is a structure, not a trick: favorable existing debt, short-term private money, and a resale with owner financing that returns the cash and leaves a spread. If you want to fund deals like this as a private lender, or bring us one to structure, our investor funding page explains how we work with both sides, and how we closed on a home with zero down walks through a second example. Nothing here is legal, tax, or lending advice; every subject-to or wrap deal needs an attorney, a CPA, and a servicer who know the rules.
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