How to Buy a Commercial Property with No Down Payment

Buying a commercial property without a deposit is possible but not easy. You must be creative, resourceful and willing to take risks. This article will show you how to buy a commercial property with no money down. You will also discover the advantages and disadvantages of each strategy to help you make better real estate investment choices.

Understanding What No Down Payment Really Means

No down payment doesn’t mean you can buy a commercial property with no fees. You will still have to pay closing costs, fees, taxes, insurance, and other associated expenses. This means that you can purchase a commercial property without paying any money as a down payment. The typical down payment for commercial properties ranges from 10% to 35%, depending on various factors.

A down payment serves as security for the lender, but it can be a significant barrier for investors who don’t have the necessary savings or equity. As a result, some investors are looking for ways to purchase commercial property with no down payment or very little money. This strategy can increase their return on investment and maximize their capital. However, this also presents challenges and disadvantages.

Ways to Buy a Commercial Property with No Money Down

To purchase a commercial property with no money down, evaluate your options and consider the associated benefits and risks. Common methods for purchasing a commercial property with no down payment include:

Get an SBA Loan

Consider a Small Business Association (SBA) loan if you’re looking to purchase a commercial property but don’t have a down payment. This loan is part of the SBA program designed to support and guarantee small businesses. With the SBA 504 or SBA 7 loan, you can get up to 90% of the purchase price financed at a low interest rate and long repayment term. The loan comes in two parts: one from a certified development company (CDC) and the other from a conventional lender.

The CDC portion covers up to 40% of the purchase price, while the conventional lender covers up to 50%. The remaining 10% can be borrowed or gifted. This home loan is a good option due to its low interest rate, flexible eligibility criteria and extended repayment period. However, this requires strict use and occupancy of the property, carries high fees and closing costs, and requires a lengthy application process that can take months.

Borrow from friends and family

Borrowing from friends or family is an easy way to raise money for your down payment or even the entire purchase price. You can negotiate the terms of the loan, including interest rates, repayment schedules and guarantees. Borrowing from your loved ones helps you avoid the hassle and expense of dealing with banks, build trust with lenders and reduce taxes. However, failure to repay the loan can damage relationships and cause emotional stress. Additionally, the loan may limit your options and flexibility for future sale or refinancing of the property. Borrowing from friends and family can put you at legal risk if you don’t have the proper documents for the loan.

Assume existing mortgage

Assuming a seller’s existing mortgage is a way to purchase a commercial property without needing a down payment or applying for a new loan. You take care of the rest of the mortgage payment on the loan. This method can save you time and money because you don’t need to go through the process of getting approved for a new loan or paying closing costs. This may also benefit you from a better interest rate and terms inherited from the existing loan that the seller negotiated with the lender.

However, this method requires lender approval, seller cooperation, and extensive due diligence. The lender may not agree to let you take on the loan or impose additional conditions or fees. The seller may not want or ask for a higher price or other concessions. Check the status and condition of the loan and property before taking over.


Leasing is a method of purchasing a commercial property without an upfront payment. Essentially, you lease the property from the seller for a fixed period of time and have the option to purchase it at a predetermined price at the end of the lease. Your monthly rent covers both occupancy and a portion of the purchase price, and you pay an option fee up front to secure your right to purchase the property in the future.

This method offers several advantages, such as the ability to evaluate the performance and potential of the property before purchasing it, the ability to obtain a favorable price and terms, and the ability to build equity and credit. However, it also comes with some risks, including market fluctuations that may cause you to pay more than the property is worth, legal disputes, and maintenance costs. Consulting an expert or lawyer can help you manage these risks.

Seller Financing

One way to purchase a commercial property with no money down is through seller financing. Instead of getting a home loan from a traditional lender, you receive financing directly from the homeowner. This agreement usually involves regular payments over an agreed-upon period with a lien on the property until you repay the loan in full.

Seller financing eliminates the need to qualify for a conventional loan and allows you to negotiate loan terms directly with the seller. It can also save you money on fees and closing costs.

On the other hand, finding a seller willing and able to finance the transaction can be difficult. The seller may also require a deposit or lump sum payment and the agreement may not protect you from foreclosure. Despite these potential drawbacks, seller financing remains a viable option for purchasing commercial property with no money down.

Negotiate the deposit based on the after repair value (ARV)

One way to purchase a commercial property with no down payment is to negotiate the down payment based on the estimated value of the property after repairs. Instead of determining the down payment based on the current market value or asking price, you’ll base it on the ARV of the property.

This strategy works best for properties that need renovation or rehabilitation. You can increase its value by repairing and improving it, then use the increased value as a down payment or as equity to get a loan. This approach allows you to purchase properties at a reduced rate, creating instant equity and qualifying for a higher loan amount. However, this requires a lot of research and analysis, execution and management of repairs and renovations and financing.

Offer a higher price with better terms

To purchase a commercial property with no down payment, consider offering a higher price with better terms, such as faster closing time, longer due diligence period, higher down payment, contingency period shorter, a waiver of inspections or appraisals, a leaseback option or a referral fee. . This approach can help you stand out from other buyers and convince the seller, creating a win-win situation. However, it can also increase risks, limit flexibility and require strong negotiation skills. By focusing on aspects beyond just price, you may be able to reach a deal that benefits both you and the seller.

Working with a business partner

Buying commercial property with no money down can be accomplished by partnering with someone with more money or experience. This way, you distribute ownership and responsibilities according to your agreement. Partnering has benefits such as leveraging your partner’s resources and expertise, sharing risks and rewards, and learning from each other. However, conflicts and disagreements may arise due to divergent goals, and opinions and issues such as trust, communication, responsibility and accountability must be addressed. Partnership may reduce your control and autonomy, and you may not obtain the full benefit or ownership of the property.

Do banks support no-money-down lending strategies?

Banks may or may not support no-down lending strategies for purchasing commercial properties. Some banks do this, especially if they are supported by government programs and convinced by your business plan, your credit history, your income potential or the value of your collateral. Yet some banks do not support such strategies, especially if they are risky or unconventional or if they are unhappy with your financial situation, credit score, debt ratio or cash flow. Therefore, research banks willing to lend and prepare a strong loan application to showcase your capabilities.

The Zero Down Guide to Buying Commercial Properties

Purchasing a commercial property with no money down is an ambitious goal that requires careful planning and consideration of various strategies. While options like SBA loans, seller financing, and rent-to-own agreements can make this possible, each has benefits and risks. Ultimately, being successful in acquiring commercial property with no down payment comes down to creativity, negotiation skills and a thorough understanding of the market. Be prepared to navigate the complexities of real estate transactions and financial arrangements to achieve this goal.

Frequently asked questions


It’s difficult to purchase a commercial property without a down payment, but some options are available, such as seller financing or finding a partner to invest with.


Investing more money in commercial real estate can lower your monthly payment and interest rate, but there may be better options depending on your financial situation and investment goals.


Yes, SBA loans generally require a down payment of 10-15% of the total loan amount.


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