Real Estate Investment News & Blog

How to Build a Portfolio of Rentals Without a Bank

As real estate investors, building a portfolio of rentals is the single biggest wealth-creating opportunity of our lifetime.

Real estate investors who rely on bank financing are struggling and failing because the large down payments required and mortgage underwriting criteria make it very difficult to buy investment real estate.

Those of us who have figured out a way to eliminate banks from our investing equation are succeeding massively.

real estate contract

In many markets, investors can buy rental property for less than the price of a new car.

A lot of real estate investing elements must be completed correctly in order to create cash flow and long-term wealth.  The good news is, real estate is still “on sale” and widely available.

In many markets, investors can buy rental property for less than the price of a new car. But even the price of new car still takes a lot of capital to acquire, so the key to investing in real estate remains finding the best way to leverage real estate acquisitions without using your own money.

Real estate investors who learn to buy with Other Peoples’ Money (OPM), can buy houses without the hassles of getting a bank mortgage.

Last week, in my own market of Richmond, VA, I put a house under contract for $25,000. This house last sold in 1968 for $9,900. It has a current tax assessment of $115,000. It will need about $18,000 of repairs and then it can be rented for $850 per month.

How I Bought the House Without a Bank or Any of My Own Money

To buy this home without needing a bank, I structured a joint venture.  In this case, the private lender is a self-directed IRA from Quest IRA. The IRA will fund the entire acquisition, closing costs, and repairs, for a total funding of approximately $45,000.

My side of the joint venture includes doing all the work, including finding the house, negotiating, completing the repairs, and then managing the house for the next 5 to 10 years.

With this joint venture, we are splitting all net income and future upside equity 50/50. The rental income is $850 per month, taking out taxes and insurance this will net at approximately $700 per month.

The $700 per month is then split 50/50. I retain $350 per month and send the other $350 per month to the self-directed IRA. If we keep this property for five years, and it is full occupied, both the IRA and I will receive 60 payments of $350 per month for a total rental income of $21,000.

It’s a Win-Win for Everybody

If we sell the house in five years for today’s tax assessment of $115,000, our upside gross equity on the $45,000 investment will be  $70,000, which is split 50/50 and another payday of $35,000 for each party in the joint venture.

Given the nature of the joint venture being a 50/50 deal, every second acquisition is the equivalent of one free and clear house.  How many of these deals do you need to be able to live just off of the monthly rental income?  If you could structure 20 of these deals, you would be at $7,000 per month. Structure 40, and you have $14,000 per month.

Don’t even focus on the equity and net worth, just focus on the cash flow and creating free and clear houses to hold long-term. Make the acquisitions without banks and you can succeed massively.

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About the Author...

Jim Ingersoll is a real estate entrepreneur who has bought and sold hundreds of homes. He is the author of Investing Now and Cash Flow Now (both available at, and enjoys speaking and coaching others on how to obtain their financial freedom.

You can visit Jim at and

You can find Jim on Facebook and Twitter.


  1. Mark Owens says:

    I love the way the author ignores all of the transaction costs of buying and selling the property as well as vacancy and repair considerations! lol

  2. Great article. How is the funding of repairs and maintenance handled between the partners? No escrowing of funds for repairs and getting the property in tip top shape to sell when it’s time to exit?

  3. Lynda Poe says:

    Wonderful article, I like the whole idea…..I will definitely have to try this.

    Thanks for sharing your ideas.

  4. eric torres says:

    I’ve been to real estate classes and realtor school only i fall short and much like a lot of americans I have a lot of bills to maintain and I just want to learn to be an investor only I have nothing saved. I would like to do some deals in renting houses and buying at auctons I havent found that right coach!!!

  5. Jim Ingersoll says:

    Thanks for the response, glad everyone is thinking about it.

    Mark – Good points, in a case study style article it is hard to cover 100% of all contingencies. I pulled out the taxes and insurance. Regarding repairs and vacancy, that is dependent on a lot of other factors that mostly relate to ability to screen tenants and properly manage. In the best scenario you find a tenant that stays multiple years, but there are always opportunities for the worst case scenarios as well. My overall point is not about expenses, but about creating cash flow and equity opportunities without needing your own money and without needing banks for a mortgage.

    Ed – With joint venture investing the answer to your question is that it can be anything you work out with your JV partners. For me, I wont nickel and dime anyone and I will focus on the long term. If something dramatic happens like A.C. stops working, I will make a phone call and discuss how to handle it. We can both contribute 50/50, maybe the partner funds it or maybe I will fund it…

    Thanks for your comments

    • Michael says:

      Jim: I appreciate that the article is about cash flow, but is it fair to talk about cash flow and leave out the items that drain cash? Taxes, insurance, cost of finding tenants, utilities (when the place is empty), vacancy rates, property management fees, repairs, cost of acquisition, closing costs at the time of sell are a major drag on profit margins.

      • Jim Ingersoll says:

        I did cover taxes and insurance in the example. I think those topics would be great for a future article on controlling expenses while managing property, but are outside the boundaries of what I am able to cover when focusing on financing.

      • The IRA pay the expenses, property management fees etc. But my concern is how are losses handled by IRA. Does valuation of IRA reflect this and does JVP deduct losses.

  6. Catherine Edwards says:

    I love this idea! I understand that a few costs are not included for illustrative purposes, but the overall idea is great!
    I like that profit is split, so you are not dealing with a mortgage. And a good equity payout in 5 years (if you both choose) is icing on the cake.

    Now to find that $25k house with an investor with $50k to invest.

  7. Jim Hill says:

    Is this IRA owned by the same person who partners with it?

  8. Jim Ingersoll says:

    Hi Jim

    No the IRA account holder is essentially a private lender, though an IRA can indeed own real estate.


  9. Stephen says:

    So you need to find a private lender with an IRA for this to work?

    • Jim Ingersoll says:

      Hi Stephen

      Good question, but the answer is no. A lot of people moved funds out of the stock market into CD’s which earn less than inflation rate. Others could be small business owners, etc who aren’t sure what to do right now.

      IRA’s are an easy one as a lot of people have a 401k that can roll into a self-directed IRA


  10. Michael says:

    Jim: Do you find many investors willing to do the 50/50 split? Given that a return on a rental of 10% is common, this means that the investor gets a 5% return. Given my marginal tax rate of 35%, I net out only a 3.25% return. In contrast, I can buy a stock that pays qualified dividends, get a 6% yield and pay 15% in taxes, leaving me with a 5.1% or 57% higher return than the real estate investment. I am not sure why I would take the real-estate route.
    Thx much.

    • Jim Ingersoll says:

      But when the house is sold you get another return. Total investor return is typically 11 – 17% annually over 5 years. Here is a case study on one:

      Case study – investor return on buy and hold 3 bedroom single family house

      Purchase price: $46,000

      Renovation expenses: $34,000

      Total investment: $80,000

      Home rented for: $900 per month

      Taxes and insurance expense: $150 per month

      Net rental income stream: $750 per month

      Income stream split 50/50: $375 per month to private lender

      Value of home today: $125,000 (for this case study we assume we sell in 5 years at today’s value)

      Upside equity split 50/50 when sold is $45k: $22,500 for private lender

      Total cash return in five years: $22,500 in rental income and $22,500 in upside equity = $45,000

      Annualized return for investor: 11.25% return


      • But in both cases, the actual Richmond, Va. example and this “case study”, the JV’s investment is not attractive. In the former, the return after 5 years is only about $10k over his original investment ($2K per year); and in the latter, he’s under water! ($80K initial investment, $45K return.)

        • He doesn’t indicate the return of the original $80k, but that is returned as the base principal, the investor on sale get s $105,000 plus having received the $22,500 in rents. Although I will say that he’s probably not going to get the full $22,500 at that price point in Richmond, there will be repair and turnover costs that will come out of his share for sure, great management or not.

  11. David Cooper - Las Vegas says:

    Jim. I don’t need an equity partner to split 50/50 on a $45,000 real estate investment in Las Vegas as of Aug 15. Investors seem to be going to any city that has low-priced properties that has an active rental market, which is what we have.

    • Jim Ingersoll says:


      Vegas sounds good right now, what will that $45k house rent for your in market?


  12. Michael says:

    I am sorry but talking about cash flow and ignoring the biggest expenses is not real. if the rent is $850 you can expect about half of that in net after insurance, taxes, repairs, vacancies… so you guys will split $425 average for each of you getting $212.5, that’s realistic, and that’s if the property is not in a war zone, cos the majority of those 25k properties are in bad areas with problem tenants or no tenants at all.
    sounds good, but I don’t see that as real.
    I myself experience that first hand.

  13. Randal says:

    Michael, they are not all in a war zone. Sometimes the property was newly inherited. This is where it can be helpful to have a lawyer friend as they are often the first to hear about such homes. I have a friend here in St Louis, MO that bought a house for 55k, dumped 20 into it, and had it listed on a retail venue, such as mls and got 115k. In this case he could have rented it for about 700 or maybe 800. Does that sound any better? Maybe he just likes what he is doing? IDK

    • Jim Ingersoll says:

      I know investors that do well working in low income areas and war zones, but that is not my investing model either. The case study is a house in working class suburbs and is rented to an airline pilot. He has rented the house since acquisition about 15 months ago and nothing has broken yet.

      The property management is important and expenses can vary widely. Some tenants are a challenge and others stay for years without problems. The purpose is to show alternate ways of making acquisitions where you don’t need a bank with high down payments and difficult under-writing criteria.

  14. These examples provide a very good return for you but not so good for the investor because they seem to ignore the money that came out of the IRA.

    Example 1: $45,000 invested with $42,000 rent and $70,000 equity returned for a net gain of $67,000.
    You have $0 invested with $21,000 rent plus $35,000 equity returned for a net gain of $56,000.
    The IRA has $45,000 invested with $21,000 rent plus $35,000 equity returned for a net gain of $11,000.

    Example 2: $80,000 invested with $45,000 rent and $45,000 equity returned for a net gain of $10,000.
    You have $0 investedwith $22,500 rent plus $22,500 equity returned for a net gain of $45,000.
    The IRA has $80,000 invested with $22,500 rent plus $22,500 equity returned for a NET LOSS of $35,000.

    Example 2 would not have penciled out to begin with so what am I missing here??

    • J.P. Vaughan says:

      Dave, Those examples assume the investor gets back his original investment *before* profits are divided.
      So those figures are NET profit. In example 2 (above) Investor gets his $80k and then gets a $45k profit.

      Hope this helps.

      JP Vaughan

  15. Dave’s response is the same as mine, to which (Dave’s) you answered, JP, that the cases assume that the original investment already has been returned. But this is nowhere spelled out and is not visible or even conceiveable. No one can imagine how the JV person gets his initial investment back, and it is childish to start and continue a thread that attempts to weave such a weak tissue of possibilities. Clearly, anyone attempting to start in the real estate business on the basis of this kind of advice is not serious and probably will not follow through, anyway.

    • J.P. Vaughan says:

      Ann — It’s completely spelled out. Here is a direct quote from Jim’s article:

      “If we sell the house in five years for today’s tax assessment of $115,000, our upside gross equity on the $45,000 investment will be $70,000, which is split 50/50 and another payday of $35,000 for each party in the joint venture.”

      Investment = $45k
      Gross Equity = $70k

      45+70=115 — the sale price – Investor gets 45k + 35k = $80k plus the monthly cash flow collected.

      I’m sorry if you find this confusing. This is basic stuff for more experienced real estate investors.

    • Jim Ingersoll says:

      Try it this way. I would be happy to take either side and often do transactions as the catalyst (real estate deal maker) and the investor (financier):

      Financier Investment:

      Total invested: $80,000

      Total rental income received over 60 months: $24,0000

      Total equity received by financier when sold: $22,500

      Total profit received on investment: 24,000 + 22,500 = $46,500

      The financier ALSO gets back the entire initial investment when sold: $80,000

      Total financier receives back the total of $126,500 vs the $80,000 investment over 5 years.

      A $46,500 profit in 5 years should work out to 11.25% annual return. Double digit returns in today’s economy are much better then most other passive investments available.

      These deals are not hard to put together and provide great returns for both the financier investor as well as the real estate catalyst.

      The key for the catalyst is the ability to source the right property and efficiently manage the property.

      Hope that helps

  16. Justin says:


    Great article. Thanks for taking the time to share.

    I’m a new real estate investor who recently completed/ leased my first rental property right here in your backyard (Richmond, Va). My strategy is to buy and hold to begin building passive cash flow/ equity build up. I learned much of what I know from a friend who has successfully navigated this model over the past few years. My question is concerning long term financing.

    I originally financed this project with a combo of my own money and a self directed IRA. However, I then went to a small bank to refinance the property in order to pay back myself and the IRA, while locking in a lower interest rate of 6% (at least for the moment as the rate is only locked for 5 yrs – amort 20). This allows me to essentially re-use the original finances on my next venture as I don’t yet have an endless stream of investors to tie up their money long term. My concern is obviously the unknown for what may come of the interest rate on year six. I’m told the bank will work with me as they know what rent level I am receiving and they’d prefer to keep the asset performing versus skyrocketing the interest rate and subsequently nullifying my cash flow or worse. Is that belief solid enough to continue building a portfolio upon? Do you have any experience with, or input on, this approach in general? Additionally, is it possible to go to Quest Trust and work out long term financing even if you don’t know the actual IRA owner?

    Thank you,

    • Jim Ingersoll says:

      Hi Justin

      Glad you are moving forward toward passive cash flow and equity.

      Questions to help me understand your current loan: Is the self-directed IRA an account that you own or is it someone else’s account?

      It sounds like you are exploring a loan with a portfolio lender and you are right that they do a loan check after 5 years. If rates are up, they your loan gets adjusted up as well.

      • Justin says:

        Hey Jim,

        The self directed IRA belongs to someone else who agreed to lend it to me at a higher fixed rate temporarily. Do you agree that bankers calling the loan at 5 years will take into consideration your rental income so as to preserve the renewed loan as a performing asset or will the new rate reflect the current market regardless of circumstances?

  17. Jim Ingersoll says:

    Hey Justin

    I don’t like banks ha ha. There is no guarantee that your portfolio lender won’t call you loan due in full at 5 years or at some other point in time. In reality, they may never call it due. Before I stopped using banks, I was using portfolio lenders in our area, I have made it past the 5 year mark. For me it was like a speed bump, we just essentially renewed and continued on.

    Thanks for clarifying the IRA, if it had been your own, you could not have refied it like you are proposing. Being someone else’s will allow you to move forward as stated.


  18. Aaron Ataide says:

    Can I use my 401k and an annuity that I have through my employer? It’s not much, but both of those accounts together add up to about $44000. I think I can do something with that amount, but I don’t know if it is legally possible to use the money from both of the accounts.

    • Jim Ingersoll says:

      You should be able to roll over your 401k, not sure on the annuity.

      Let me know if you need a referral to a custodian who can help you


  19. Mike Storey says:

    Jim, Great ideas on how to access the 401k money. Can you give me some more information to what IRA to roll it over to. I also would like to know if the 50/50 split is the average. Also what would be your net out of a deal to make it worth your time. I realize this is different person to person but i am just starting out and was curious about what a seasoned investor would say. I am looking to buy and hold as i have a good job. Thanks in advance.

    Mike Storey

    • Jim Ingersoll says:

      Hi Mike

      Some good custodians include Quest IRA and Equity Trust. Contact Ryan Kimura at Quest281-492-3434 and tell him I said hello. He will explain the entire roll-over for you, it is not difficult.

      50/50 works good for me as both a lender and as a catalyst putting the deal together so I feel it is fair. Here are the numbers on 2 I just completed:

      4 bedroom homes, split level style purchased for $75k, put $25k of repairs into the houses and rented for $1245 per month.

      I deduct taxes and insurance from the rent and that leaves approximately $500 net for myself and the IRA I joint ventured with.

      I am happy with $500/month positive cash flow, none of my own money in the deal.

      The IRA gets about 6% annual return on just the cash flow ($6,000 in annual rent against the $100k investment).

      Someday, when we sell, we will split the upside equity that is over the $100k investment and that is the bonus for both of us.

      At the end of January we are opening our affordable and personal coaching program and will teach all the details of private lending and joint ventures for you…. stay tuned to CREonline


  20. Marian says:

    Hi Jim,

    I have a property that I used my self directed IRA to fund this property and my propblem is I having a hard time to refinance this property using a non-recourse loan.
    I paid 150K on this house and has a positive cash flow of $150/mos net, on this 150 K I still owed the private lender about 35K and pay him $100.00 per mos.
    Question is – why do this lenders turs me down, I just want to refinance this property so I could flip another house. I should have enough equity on this house to be able to borrow against is it, right or wrong?

  21. Brenda Wardle says:

    I live in Johannesburg, South Africa and have been toying with the idea of buying properties at auctions. We have rental guarantee insurance in South Africa but also tenant-friendly laws like the PIE Act where you cannot evict tenants without court order or even cut their electricity. However it is a good idea if only one could get the private funder willing to enter into the 50/50 pack. Rental property is in great demand but cash flows for repairs are also a problem. I’m not even considering banks

  22. Barry says:

    How do you find the investors

    • Linwood says:

      Yes Jim Ingersoll, In this example how did you find your IRA lender? Im excited because I am starting my career in REI and I too live in Richmond VA, so it was great to see you are successful in Richmond! Id like to covet you as a mentor.

  23. Wow! all of you commenters sound like real wheelers and dealers. I’m not that smart. I would lose my butt trying to do what y’all are doing. I’m 69, retired, own my on house free and clear. Own two single family rental properties. First one is paid off. Only owe 17k on the second. Gonna pay it off in January from my IRA. Bought both with a 100% loan from my bank. No down payment. They know me. Been with them for decades. Haven’t overdrawn my checking account for 14 years. Have had multiple loans from them for cars etc .Always paid them off early. Was careful to never be late on any payment. Have bullet proof credit with them. I like bank financing. I know they will go over the deal with a fine tooth comb. If there is a gnat’s hair out of place, they won’t finance it and I wouldn’t want it. While I’m alive it doesn’t matter to me if my personal residence is worth five dollars or five million dollars. I like where I live and plan to stay here for the duration. While I’m alive it doesn’t matter to me what my rental properties are worth on the market. I’m only in it for the monthly rental income and I have no plans to sell them, ever. My children might have different ideas about this but after I’m gone I’ll try not to worry too much about it. It wouldn’t have mattered very much if I got cheated a little on the purchase of my rentals. Even if I did get cheated, still, when I get them paid off they will be a source of lifetime income for me and inflation will eventually cover whatever I might have gotten cheated. I’m not smart enough to wheel and deal. My approach is slow steady progress. I’m planning to buy another when I get my second one paid off. Don’t want to get over my head in debt. I plan to acquire more rentals as time goes by. Eventually they will become self supporting. I mean, even if there is a vacancy, the income from the others will cover the costs til it is rented. My advice is build your financial house on a solid foundation. Get some things paid for before you stick your neck out again. I have worked in factories all my life. Contributed a high percentage of income to my 401k. Raised a family of successful children. Taught them values. Everything I have done, I have done with an eighth grade education. Success for someone as dumb as me comes by slow, steady determination.

  24. Lawrence Callis says:

    I am looking for an investor that will provide the funds to purchase, renovate, and allow me to rent to tenants without sharing in the profits. The cities that I invest in are Hampton, VA Newport News, VA and Baltimore, MD. Any feedback would be greatly appreciated.

  25. Tom Tinsley says:

    I am very interested in doing the 50/50 splits in the Del/MD/DC Markets. Who is the best person to contact to get started? I’m going to touchbase with Quest IRA on Monday, however I didn’t see this type of investment listed on the website.

    Please advise!


  26. I would like more information.

  27. Donti says:

    If you don’t see any risk then it’s probably not worth the investment because everyone would probably take that road!!! See the value in what he is trying to show you instead of trying to discredit. I see all of your points that see additional cost but at the end of the day lets be real about this, everything hasn’t matainance cost but what your profit margin here can be is amazing if the homework is done on the right deal. it can be a gold mine!! I’d like to add that I am a landlord of 6 yrs. I would suggest buying a fixer upper for under 30k and let it pay it’s self off first over 5 years then come back to this post and tell us how you feel… I bet it will be a different story once the profits are 100%. Be smart about the overhead mortgage though. If you can’t afford the payment yourself if no one is in the house then save all profits for a rainy year. I’m just saying you are taking a chance working for the company that you are working for you just dont see the amount of risk, this will secure your future at your determination of your risk. Good luck to all

    • Donti says:

      By the way thanks Jim for trying to share your ideas to help someone else to create financial freedom!!! Sharing knowledge is the way to network while saving someone from falling into the same financial ruts that others have. I am thankful that there are people out her that still want people to succeed such as myself!

  28. Oscar Osorio says:

    Great information, however regarding the IRA or SELF DIRECTED IRA or 401k, I have my CPA very emphatically tell me that if I go that route to find someone else, you loose control and bring careful scrutiny to your finances from th IRS, to stay away from that, opinion, thanks

  29. Jim Ingersoll says:

    Hi Oscar – Consider asking another CPA.

    Many investors are actively using them. The key is the custodian being self-directed.


  30. Oscar Osorio says:

    Hi Jim please explain about the custodian? Thank you

  31. Sooner House Buyers says:

    Very informative post, great read

  32. Owner Finance OKC says:

    Thank you for providing all the information you do to help others like me

  33. OK Cash Home Buyers says:

    Brilliant, thank you!!

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