Buying an apartment building with no money down is possible, and the mechanics are boring: a bank or credit union funds most of the purchase, the seller carries the remaining balance as a second, and you cover closing costs. Eric Martel did exactly that on an 8-unit at age 18 — a credit union first at 75-80%, seller financing for the rest, and $75 out of pocket for the loan application when he had $125 in the bank.
The hard part is not the paperwork. It is finding a property that still produces positive cash flow with two layers of debt service stacked on it and zero equity underneath. Martel analyzed roughly 400 to 500 listings before one penciled.
Below: the exact capital stack, the underwriting test the deal has to survive, how many properties you should expect to grind through, and how to pick a market where these numbers still work.
Key takeaways
- A no-money-down apartment purchase is typically a two-layer stack: an institutional first at 75-80% of purchase price, with the seller carrying the remaining 20-25% as a second mortgage.
- The constraint is underwriting, not financing. Martel’s 8-unit still netted $300-325 a month after both loan payments — if the deal cannot cash flow at 100% leverage, no structure fixes it.
- Expect low hit rates. Martel reviewed 400-500 properties before finding one that worked, and his broker repeatedly told him the deal he described did not exist.
- Cash flow markets are found with data, not opinion. Martel pulled Census Bureau and Bureau of Labor Statistics figures to identify the Midwest, then bought his first Memphis house at about $40,000 plus $20,000 in renovation, renting near $750 a month.
- Low basis beats a big down payment. Martel’s view: with cash in hand at 18 he would have bought a 9% cash-on-cash apartment building instead of earning an infinite return on $75.
From the Real Estate Pros Show
This article draws on an interview with Eric Martel of MartelTurnkey on the Real Estate Pros Show, hosted by Meghan Escobar.
The Capital Stack: Bank First, Seller Second, $75 Out of Pocket
The structure Martel used on his first 8-unit had two pieces. A credit union provided roughly 75 to 80% of the purchase price as a conventional commercial first mortgage. The seller carried the remaining 20 to 25% as financing in second position. The only cash that left Martel’s account was a $75 loan application fee.
He was a university student with $125 in the bank at the time. As he put it, he wrote the check thinking “this better work.”
The seller is the natural source of the gap capital for one simple reason: they already own the asset, they know its rent roll better than any outside lender, and they have a reason to want the transaction to close. A seller carrying a second is not underwriting a stranger’s business plan — they are financing a building they operated.
What makes a seller say yes is motivation on terms rather than price. Sellers who want out, want the income stream to continue, or have a property that conventional buyers are struggling to finance at full leverage are the realistic pool. Sellers who want a clean cash close and have three competing offers are not.
Two practical points on the stack:
- The first lender has to permit it. Some commercial lenders will not allow subordinate seller debt behind their loan, or will require the seller note to be fully subordinated with no payments during a stated period. This is a conversation to have with the credit union before you negotiate the carry.
- The seller’s terms drive the deal’s viability. The interest rate, amortization and any balloon on the second directly change whether the property clears both payments.
This is a structure, not a loophole. It only functions if the property supports it.
The Real Constraint: The Deal Has to Cash Flow at 100% Leverage
No-money-down is an underwriting test, not a financing trick. Strip out the down payment and you have added a second debt service payment to the operating statement. The property either still throws off positive cash after both payments, taxes, insurance, management and reserves, or it does not. There is no clever paperwork that makes an over-priced building cash flow.
Martel’s 8-unit cleared the test. After everything was paid — the credit union note and the seller note included — it netted $300 to $325 a month. That is not a large number in absolute terms, but on $75 invested it is a different category of return, and it left the deal solvent rather than dependent on his personal income to survive.
Compare that to what he found in California around 2000, when he had substantial cash and went looking for an apartment building. The numbers required roughly 50% down just to break even. His conclusion was straightforward: putting a couple of million dollars into something that produces a zero return makes no sense when bonds were paying 3% with no risk. He did not buy.
That comparison is the whole discipline. In a market where a building needs half the purchase price in equity to break even, a zero-down structure is arithmetically impossible — you would be negative from day one. Zero-down deals only exist where purchase prices sit low enough relative to rents that the property can absorb full leverage.
So the first question is not “who will finance this?” It is “at 100% leverage, what does this property produce?” If the answer is a negative number, you are looking in the wrong market or at the wrong price.
If I had money, no — I would have bought another apartment building that made 9% cash-on-cash return. I was doing infinite return. So if I had money, I would have made a lower investment.
— Eric Martel, MartelTurnkey
Deal Volume Is the Price of Admission: 400-500 Properties Analyzed
A cash-flowing property at full leverage is a low-frequency event. Martel estimates he analyzed 400 to 500 properties before he found one that worked.
This was before Zillow and Redfin. The MLS lived on a computer at the broker’s office and in physical binders, one sheet per property. He worked through them by hand.
The friction was not just volume. He was 18, pushing a 40-year-old commercial broker for more inventory, and the broker kept telling him the deal he was describing did not exist. That went on for months. Eventually the broker handed him four binders of listings and told him to take the weekend and report back if he found anything. He found a few that penciled — and one of them became the 8-unit.
The takeaway for anyone running acquisitions today: your funnel math has to account for a very low hit rate. If a structure this specific shows up once in several hundred listings, then reviewing twenty properties a week is not a search — it is a hobby. Martel makes the same criticism of coaching clients who report analyzing twenty properties and then take no action on any of them.
Two things speed this up now that did not exist then:
- Pre-screening on the numbers before you look at anything else. Rent-to-price ratio filters out most inventory in seconds.
- A broker who will send you volume rather than curate for you. The listings a broker thinks are good deals and the listings that survive a 100%-leverage test are different sets.
Expect to be told repeatedly that what you are looking for does not exist. Martel’s mentor’s contribution was mostly refusing to accept that.
Where These Deals Live: Choosing a Cash Flow Market With Public Data
Martel picked his markets with government data, not with anecdotes. After technology made remote investing practical — smartphone cameras, DocuSign, national listing sites — he downloaded data from the Census Bureau and the Bureau of Labor Statistics, compiled it, and used it to identify which metros supported cash-flowing rentals for the strategy he was running.
The answer was the Midwest. Working down to the metro level produced Memphis, Cleveland, St. Louis and several markets in Indiana.
His first Memphis purchase shows what those numbers looked like in practice: roughly $40,000 to buy, about $20,000 in renovation, rented at around $750 a month. His California friends could not process it — one of them pointed out his garage was worth $200,000.
The broader pattern worth internalizing is Martel’s observation that cash flow rarely exists in the core of large cities. He tried to buy in Toronto while earning well and found nothing that worked. In California, the only options were four hours out in places like Fresno. Cash-flowing rentals tend to sit in suburbs and in smaller metros where price has not run away from rent.
What to pull when you run this yourself:
- Population and household formation trends, so you are not buying into contraction
- Employment levels and employer concentration, so the rental demand has a basis
- Median rents against median home prices, which is the ratio that determines whether full leverage can ever clear debt service
Market selection is where the zero-down deal is actually won or lost. In a 50%-down market you can be a brilliant negotiator and still get nowhere.
Why Low Basis Beats Big Down Payments: Infinite vs. 9% Returns
Martel’s retrospective on the 8-unit is the most useful thing in his story. At 18 he assumed money was the problem — that with capital, everything would have been easier. Looking back, he thinks the constraint made him a better buyer.
His reasoning: with cash in hand, he would have bought a different apartment building, one producing something like 9% cash-on-cash. Instead he bought a property that required no equity and earned an infinite return on $75. Having money would have led him to a worse investment, because a down payment lets you paper over a mediocre purchase price.
His mentor engineered that constraint deliberately, whether or not he intended to. Every time Martel raised financing, the answer was the same: don’t worry about the money, find the deal, we’ll figure out the money later. Martel privately assumed the mentor would fund it. That assumption kept him searching, and by the time he found the deal he had a structure that did not need outside equity at all.
Two lessons sit inside that.
First, if you remove equity as an option, the only lever left is purchase price and terms — which forces the deal quality up. A low basis carries the return regardless of how you financed it.
Second, be careful about counting on somebody else’s promised capital. Martel was working on an assumption his mentor never actually confirmed. It happened to work out because the deal he found did not require the money. Had he found a deal that needed 20% down and no one showed up with it, he would have been dead at the closing table.
After the First Deal: Hard Assets, Leverage, and Repeating the Model
The scaling pattern was unglamorous: one house, then two, then four. Martel and his team eventually bought and sold over 1,000 single-family rentals in Midwest markets, with more than 50 transactions in some months. The current model is leaner — roughly 10 closings a month with a five-person team, largely selling finished rentals produced by coaching clients rather than doing the distressed acquisitions in-house.
Why he stayed in real estate rather than going back to paper assets comes from a specific loss. In 2000 he had a professional money manager, a fee of about 2% of assets under management, and a portfolio spread across roughly 100 different stocks. He believed he was diversified. The dot-com crash cost him about a million dollars.
His conclusion: diversifying within the stock market is not diversification. Even a REIT, which is a real estate vehicle, moves with the market rather than with the underlying asset.
What he wanted instead was a hard asset that produces income and accepts leverage. Gold and silver are hard assets but pay nothing, and no lender will finance them — you cannot put $20,000 down and control $100,000 of gold. Real estate does both. And with leverage, appreciation applies to the full value of the property, not just to the amount you put in.
That is the argument for the zero-down structure taken to its logical end. The equity you did not contribute is capital still deployed elsewhere, and the appreciation and rent growth accrue to you on the whole asset regardless. The requirement remains what it was on the 8-unit: the property has to carry itself first.
Frequently asked questions
Can you really buy an apartment building with no money down today?
Yes, but only where the numbers permit it. The structure is straightforward — an institutional first mortgage covering 75-80% of the purchase price with the seller carrying the balance in second position — and Martel closed exactly that deal with $75 out of pocket. What has changed is not the availability of the structure but the availability of properties cheap enough relative to rent to service two loans.
Confirm with your first lender that they will allow subordinate seller debt before you negotiate the carry, since some commercial lenders restrict it or require the second to be fully subordinated.
Why would a seller agree to carry the second position on a sale?
Because they know the asset better than any outside lender does, and because carrying paper can be the difference between closing and not closing. A seller who wants out, wants the income stream to continue, or owns a building that buyers are struggling to finance at full leverage has a reason to be flexible on terms.
Sellers with multiple cash offers do not. Your realistic pool is sellers motivated by structure rather than by price.
How much cash flow should a 100%-financed deal produce to be worth doing?
Enough to be clearly positive after both debt payments, taxes, insurance, management and reserves — not marginal. Martel’s 8-unit netted $300 to $325 a month with both loans being serviced, which was modest in dollars but sufficient to keep the property self-supporting.
The number matters less than the sign. A deal that only works if nothing goes wrong is not a deal at zero equity, because you have no cushion to refinance into.
How do I pick a market where zero-down deals can still cash flow?
Start with public data rather than opinions. Martel pulled Census Bureau and Bureau of Labor Statistics figures to compare metros, and the exercise pointed him to the Midwest — specifically Memphis, Cleveland, St. Louis and parts of Indiana.
The ratio that decides everything is median rent against median price, because that determines whether full leverage can ever clear debt service. Also expect to look outside the cores of large cities; Martel’s experience in Toronto and California was that nothing in the urban core penciled for cash flow.
Is it better to wait until I have a down payment saved instead?
Not necessarily, and Martel’s own conclusion argues the other way. He believes having cash at 18 would have led him to a roughly 9% cash-on-cash purchase rather than the infinite-return deal he actually found, because a down payment lets you accept a worse price.
The counterpoint is honest: a zero-equity deal has no cushion, so it demands a better property and tighter underwriting, not looser. Saving cash while searching is reasonable — just do not let the cash relax your standards on basis.
The bottom line
Before you spend another hour on financing structures, rebuild your underwriting model to run every prospect at 100% leverage with two debt payments in it, then point it at a market where rent-to-price actually supports that math — because the deal, not the paperwork, is what makes a zero-down apartment purchase survive.
