Discover five practical, beginner-friendly ways to fund your first investment property. From HELOCs and retirement accounts to private money and creative financing, you’ll learn how to stack strategies and eliminate the excuses that keep most people stuck.
We’ll cover:
- How to use a Home Equity Line of Credit (HELOC) responsibly
- Why selling your single-family rental and using a 1031 exchange can accelerate your growth
- How to tap into retirement funds—even with penalties and taxes
- The mindset and structure behind raising private money
- How to leverage your own funds and combine multiple sources to get your deal done
Plus, I’ll share real student success stories and give you a clear path to take action. Watch now and let me know in the comments which method you’re most likely to use.
What If Money Was No Longer Your Excuse?
One of the most common barriers for new investors is the belief that they simply don’t have the money to get started. Our goal with this training is simple: to help you see just how many funding options are available and give you a clear path to closing your first deal. Whether you’re working with home equity, retirement funds, private capital, or creative financing, there’s a way forward—even if you’re starting with limited resources. These strategies are beginner-friendly, proven, and in many cases, can be combined to create a complete funding solution.
Simple Investment Model
To simplify the discussion, we will use a single example: a 12-unit apartment building valued at $1.3 million.
- Each unit rents for $1,250 per month, generating a total net operating income (NOI) of $91,000 annually after expenses (7% capitalization rate).
- The property is located in either the Midwest or Southeast region.
- For financing, we assume a bank loan covering 75% of the purchase price, which amounts to $975,000.
- The remaining 25%—a down payment of $325,000—must be funded by the investor.
- Closing costs are excluded for simplicity.
The purpose is to show you how to cover that $325,000 down payment using five different funding methods.
Method #1: Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC) is a flexible financing option that allows investors to tap into the equity of their primary residence. For a detailed breakdown of how this works, refer to the my video, How to Turn Your Home Equity into Monthly Cash Flow .
Understanding HELOCs
Home equity is the difference between a property’s fair market value and the outstanding mortgage balance. For example, if a home is worth $700,000 and the mortgage balance is $300,000, the owner has $400,000 in equity. A HELOC enables the owner to borrow a portion of that equity to fund an investment property.
Advantages of Using a HELOC
- The funds accessed through a HELOC are tax-free until the asset is sold.
- Interest-only payments are available, which can reduce monthly payments.
- HELOCs can be approved relatively quickly through standard bank procedures.
Guidelines for Beginners
Because a HELOC is secured by your personal residence, it must be used with care. The following rules of thumb are essential for first-time investors:
- Learn Before You Leverage
Do not use a HELOC unless you understand how to analyze investment properties, perform due diligence, evaluate market trends, manage real estate, and plan exit strategies. Without this knowledge, the risk of losing your home increases significantly.
- Borrow Within Your Means
Only borrow what you can personally afford to repay. If the investment property fails to generate sufficient income, you must be prepared to cover the payments yourself.
- Ensure the Property Covers the HELOC Payment
The investment property must generate enough cash flow to cover both its own mortgage and the HELOC payment.
- Have a Clear Repayment Plan
You must have a strategy to repay the borrowed funds within 18 to 36 months. Options may include refinancing, selling the property, or aggressively paying down the balance.
Using a HELOC responsibly can be a powerful tool for building wealth. However, it requires discipline, planning, and a solid understanding of real estate fundamentals.
Method #2: Sell Your Single-Family Rental and Use a 1031 Exchange
Another effective strategy for funding your first investment property is to sell an existing single-family rental—not your personal residence—and reinvest the proceeds through a 1031 exchange. For a detailed walkthrough of this process, watch my video From Single-Family to Multifamily with a 1031 Exchange, which explains how to transition from a single-family rental into a multifamily property using this tax-deferred strategy.
Why Consider This Approach?
Many investors own single-family rentals yet fail to reach their financial goals. This is a common scenario and a compelling reason to consider scaling up.
How It Works
The process is straightforward:
- Sell your single-family rental.
- Place the proceeds into a 1031 exchange.
- Identify and purchase a larger multifamily property.
To qualify for full tax deferral, you must identify the replacement property within 45 days of the sale and close within 180 days. This allows you to defer capital gains taxes and reinvest your profits into a more scalable asset.
Building Long-Term Wealth
Once you acquire the multifamily property, hold it for five to seven years—or longer, depending on your strategy. Then repeat the process:
- Sell the multifamily property.
- Use a 1031 exchange to purchase an even larger asset.
- Continue scaling.
By repeating this cycle over 5, 10, or 15 years, you can build substantial, life-changing wealth. This strategy not only accelerates your financial growth but also sets the foundation for generational wealth. It’s important to note here, that it is essential to teach your children or heirs how to do the same. Many investors aspire to leave a legacy, and the most powerful way to do so is by passing on both the assets and knowledge.
Method #3: Leveraging Retirement Accounts
Another viable strategy for funding your first investment property is to leverage your retirement accounts. For a deeper dive into this approach, refer to my video titled How to Use Retirement Funds for Multifamily Investing, which explains the process in detail.
Common Concerns
You may hesitate to tap into retirement funds due to potential penalties and taxes. These concerns are valid. If you withdraw funds before the age of 59½, most retirement accounts impose a penalty. However, after reaching 59½, penalties typically no longer apply. Taxes may still be due, but the key consideration is whether your real estate investment can outperform the returns of your retirement account. In many cases, especially with the guidance of an experienced mentor, real estate can generate higher returns than your traditional retirement account.
A Real-World Example
Consider Eric and Maria, two of our students who are finance professionals and CPAs by trade. Eric had a substantial amount of money sitting idle in his retirement accounts, earning only 2–3% annually.
With our guidance, Eric and Maria began using portions of their retirement funds to invest in real estate. Although they were under 59½ and had to pay penalties and taxes, they offset those costs by conducting a cost segregation study. This allowed them to reduce their tax liability and improve their overall financial outcome. This strategy requires careful planning and execution, but it can be highly effective when done correctly.
Combining Strategies: The Fund Stacking Example
As mentioned earlier, some of these funding methods can be combined to meet your down payment goal. Here’s a practical example of how to stack strategies to reach the $325,000 needed for the 12-unit property:
- Use $150,000 from a Solo 401(k)
- Use $150,000 from a Home Equity Line of Credit (HELOC)
- Contribute $25,000 in personal funds
This combination totals $325,000 and shows how fund stacking—or personal capital stacking—can help you acquire your first investment property without relying solely on one source.
Method #4: Raising Private Money
Private money refers to capital provided by individuals—such as investors, friends, family members, or former colleagues—to help fund your investment property. In exchange, you offer a secure, clearly defined plan and a fair return, all backed by real estate.
Legal Disclaimer
Whenever you accept funds from anyone other than yourself—including family members—you must involve a qualified attorney. This is non-negotiable. Whether it’s your grandmother’s savings or a friend’s investment, legal documentation and professional guidance are essential to protect all parties involved.
Overcoming the “No Money” Mindset
A common objection from new investors is, “My friends and family are broke. I don’t know anyone with money.” This is often an excuse rooted in mindset, not reality. What’s typically missing is the ability to present a compelling offer: one that keeps the investor’s money safe, provides a clear plan, and delivers a fair return. When you learn how to communicate these elements effectively, capital tends to follow good deals. It always has—and always will.
A Real-World Example: Abby’s First Deal
One of our students, Abby, and her husband were pursuing their first multifamily investment—a $1,050,000 property. They didn’t have the full down payment, but they followed the principles we teach and overcame their initial hesitation. After learning how to structure a safe and compelling offer, Abby found a single investor who provided the entire down payment. In return, she offered the investor 40% of the deal. This included:
- 40% of the cash flow
- 40% of the profits from refinancing or sale
- A clearly defined exit strategy
Abby and her husband retained 60% ownership. If all goes well, they expect to double the investor’s money within seven to eight years.
The Three Keys Abby Followed
- Evaluate the Deal’s Strength
Abby ensured the property was strong enough to attract potential investors. Not every deal is worth raising money for.
- Build Trust Through Mindset and Clarity
She adopted the right mindset and built trust by presenting a safe, transparent plan with a solid return.
- Match the Deal to the Investor’s Goals
Abby understood that not every deal fits every investor. She tailored her offer to align with the specific goals of the person who funded her project.
For a deeper look into this strategy, watch the video titled Raising Money is Easy If the Deal is Right, which walks through the process step by step.
Method #5: Use Your Own Money
The fifth and simplest way to fund your first real estate investment is by using your own money. If you have the full down payment available, this is the most straightforward path. However, many beginners don’t have the entire amount on hand—and that’s perfectly fine.
Leveraging What You Already Have
Even if you don’t have the full down payment, you can still move forward by leveraging the resources you do have. By combining these sources, you can create what we call a fund stacking strategy. This involves stacking together multiple funding methods to reach your goal. It’s your choice how you structure it:
- Use a portion of your own savings
- Tap into a HELOC
- Access retirement funds
- Privat money
This flexible approach allows you to get your first deal done—even if you’re not sitting on the full amount upfront.
Going Deeper: Creative Financing Options
If you’re dealing with damaged credit or limited cash but still have access to capital, creative financing may be the solution. We recently released a video on this topic, which outlines several powerful strategies. At Commercial Property Advisors, we’ve helped students use creative financing to acquire nearly every type of property imaginable. The three primary techniques covered in the video include:
- Master Lease Agreement: This strategy allows you to control a property without taking legal ownership. You lease the property, but gain access to the cash flow, profits, and operational control. It’s an excellent way to leverage into ownership.
- Seller Carry First: The seller acts as the lender and finances the first mortgage. This eliminates the need for a traditional bank loan.
- Seller Carry Second: The seller helps fund the down payment by providing a second mortgage. This can be stacked with other financing methods to complete the deal.
Learning these creative techniques is essential for maximizing the funding options available—whether you have a lot or just a little.
Ready to Fund Your First Investment Property?
If you’re serious about buying your first multifamily or commercial property—but unsure how to fund it—this is where mentorship makes all the difference. At Commercial Property Advisors, we’ve helped hundreds of students use these exact strategies to close deals they never thought possible. We don’t just teach theory—we walk you through the process, step by step, with real-world guidance, deal reviews, and personalized coaching.
Every Successful Commercial Real Estate Investor Has a Mentor
Get your mentor here: Commercial Property Advisors Protege Program
If you have any comments or questions, text PETER to 833-942-4516.
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