You can acquire assets without money by replacing the purchase price with a legal obligation: a promise to pay the seller over time, a pledge of your labor for equity, a loan secured by the asset itself, an assignable contract you sell to another buyer, or the assumption of a mortgage that’s already in place. Each of these is a real, everyday transaction, and each comes with regulatory rules and tax consequences that can undo the deal if you ignore them. What follows is what each strategy actually requires and where the traps sit.
Seller Financing
When bank financing isn’t available or isn’t wanted, the seller becomes the lender. You and the seller agree on a price and sign a promissory note that sets the interest rate, the payment schedule, and the term. The note may fully amortize over 15 or 20 years, or it may call for a balloon payment after a shorter period; five years is common. The seller secures the debt by recording a deed of trust or mortgage against the property with the county recorder, which preserves the right to foreclose if you stop paying.
The purchase agreement should spell out what happens on default: how long you have to cure a missed payment, what late fees apply, and when the seller can accelerate the full balance. You take possession right away and can use the asset’s income to make the payments. For the seller, spreading the sale across multiple tax years triggers installment sale treatment under federal tax rules, so gain is reported as payments come in rather than all at once in the year of sale.1Internal Revenue Service. Publication 537 (2025), Installment Sales
Federal Limits You Have To Respect
For residential property, federal law caps how often a seller can carry the paper before triggering loan originator licensing. Under Regulation Z, a person who finances the sale of three or fewer properties in any 12-month period is exempt from loan originator requirements, but only if the financing is fully amortizing, the rate is fixed or an adjustable rate that doesn’t reset for at least five years, and the seller makes a good-faith determination that the buyer can reasonably repay the loan.2eCFR. 12 CFR 1026.36 – Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling Exceed three properties in a year, or skip the ability-to-repay analysis, and you have crossed into regulated lending.
The interest rate matters to the IRS too. If the rate on the note falls below the Applicable Federal Rate the IRS publishes each month, the government will impute interest at the AFR no matter what the contract says, creating phantom taxable income for the seller.3Internal Revenue Service. Applicable Federal Rates (AFRs) Rulings
Sweat Equity for a Business Stake
If your skills are worth more than the cash in your account, you can trade professional services for ownership. A developer who builds the product, a marketer who launches the brand, or an operator who turns around a struggling company can each negotiate equity in exchange for labor. The arrangement is documented in an operating agreement or shareholders’ agreement that sets the percentage of ownership, the scope of the work, and the timeline for earning it.
Vesting protects both sides. A typical schedule requires four years with a one-year cliff: nothing vests if you leave in the first year, and vesting continues incrementally after that. Valuation matters and needs to be documented. If your services are genuinely worth $50,000 to a company valued at $500,000, a 10% stake is arithmetically fair, and the IRS will want to see the numbers behind that.
The Tax Bill Most People Don’t See Coming
When you receive equity in exchange for services, the IRS treats the fair market value of that equity, minus anything you paid for it, as ordinary income. Under IRC Section 83, you owe tax on the value of the stock or membership interest at the point it vests and becomes yours to keep, not when you eventually sell it.4Office of the Law Revision Counsel. 26 U.S. Code 83 – Property Transferred in Connection With Performance of Services
If the company’s value grows between the grant date and the vesting date, tax is owed on the higher value even though nothing has been paid to you in cash. A 10% stake worth $5,000 at grant could be worth $100,000 at vesting, and you would owe income tax on $100,000 you cannot spend.
This is what the Section 83(b) election is for. By filing an 83(b) election with the IRS within 30 days of receiving the equity, you choose to pay tax on the value at the time of transfer rather than at vesting. If the company is worth very little when you get the shares, the tax hit is minimal, and future appreciation is taxed as capital gains when you sell.4Office of the Law Revision Counsel. 26 U.S. Code 83 – Property Transferred in Connection With Performance of Services Miss the 30-day window and the election is gone. Once filed, it cannot be revoked; if the company fails and the shares are worthless, there is no refund. For early-stage startups, it is almost always the right move.
Asset-Based Lending and Leveraged Buyouts
When you’re acquiring a business or expensive equipment, the target’s own balance sheet can supply the financing. Asset-based lenders look at what the company owns — receivables, inventory, equipment, real estate — and lend against those assets instead of your personal net worth. The lender records the security interest by filing a UCC-1 financing statement under Article 9 of the Uniform Commercial Code.5Legal Information Institute / Cornell Law School. U.C.C. – Article 9 – Secured Transactions (2010)
How much you can borrow depends on the collateral. Lenders typically advance up to 85% of eligible accounts receivable and up to 60% of inventory value, with percentages shifting based on the industry, the age of the receivables, and how quickly the inventory could be sold. Equipment and real estate carry their own advance rates, usually tied to appraised liquidation value. The lender cares less about your credit score and more about whether the collateral can cover the loan if the deal falls apart.
For real estate, hard money and private lenders focus on loan-to-value, often capping loans at 70% to 80% of the appraised value. An independent appraisal is required, and interest rates are higher than conventional financing because the lender is taking more risk. The upside is speed. These loans can close in days or weeks, and approval turns on the property rather than your tax returns.
Wholesaling Real Estate by Assigning a Contract
Wholesaling lets you profit from a real estate transaction without ever owning the property. You find a seller willing to accept a below-market price, sign a purchase contract that permits assignment, and then sell your contractual rights to another buyer at a higher price before closing. The spread is your assignment fee. Put a property under contract at $200,000, assign the contract to an end buyer for $215,000, and you collect $15,000 at closing without taking title.
The purchase contract has to allow assignment; language such as “buyer and/or assigns” on the purchaser line does that work. You post a small earnest money deposit to create a binding agreement, then market the deal to cash buyers or investors. A separate assignment of contract form transfers your rights and obligations to the new buyer.
Licensing and Disclosure
Wholesaling sits in an increasingly regulated space. A growing number of states now require wholesalers to hold a real estate license, register with a state agency, or make specific written disclosures to the seller before signing. Some cap the number of wholesale deals per year without a license, and at least one has effectively prohibited unlicensed wholesaling. The trend is toward more regulation.
Where states do regulate, common disclosures require telling the seller that you intend to assign the contract for a profit, that you are not acting as the seller’s agent or advisor, and that the seller has the right to consult an attorney before signing. Failure to make required disclosures can void the contract. Check your state’s rules before you sign anything.
Assuming or Taking Over an Existing Mortgage
Stepping into a seller’s existing mortgage can hand you an interest rate lower than what the market is offering. Government-backed loans (FHA and VA) are generally assumable, and the assumption fee is typically 1% or less of the remaining balance. Conventional loans are rarely assumable, because the lender has no obligation to allow it.
Subject-To Deals
A “subject-to” transaction is different from a formal assumption. The deed transfers to you, but the mortgage stays in the seller’s name. You make the payments and control the property, and the seller’s credit remains on the hook if you default. The seller signs an authorization letting you communicate with the lender about the account, and the transfer is recorded through a warranty or quitclaim deed.
The obvious risk is the due-on-sale clause in virtually every conventional mortgage. That clause gives the lender the right to demand full repayment of the loan if ownership changes without lender consent. In practice, most lenders don’t enforce it when payments are current, because accelerating a performing loan is bad business. Rarely enforced is not the same as never. If the lender does accelerate, you typically have 30 days to pay in full or face foreclosure.
Transfers That Can’t Trigger Due-on-Sale
Federal law bars a lender from enforcing a due-on-sale clause on a residential property with fewer than five units in specific situations. Under the Garn-St. Germain Act, the following transfers are protected:6Office of the Law Revision Counsel. 12 U.S. Code 1701j-3 – Preemption of Due-on-Sale Prohibitions
- Transfers by inheritance or to a relative on the borrower’s death.
- Transfers to a spouse through a divorce decree or separation agreement.
- Adding a spouse or child to title.
- Moving the property into an inter vivos (living) trust where the borrower remains the beneficiary and occupant.
- Adding a subordinate lien, such as a second mortgage or home equity line, that doesn’t transfer occupancy.
- Leases of three years or less with no purchase option.
These protections cover owner-occupied residential properties. An investor buying a rental subject-to doesn’t get the same shelter, and commercial properties are governed entirely by the loan contract.6Office of the Law Revision Counsel. 12 U.S. Code 1701j-3 – Preemption of Due-on-Sale Prohibitions
Costs You Still Have To Pay
No purchase price does not mean no cost. Recording a deed with the county runs roughly $25 to $250 depending on the jurisdiction, and many counties charge per page. Notary fees for acknowledging signatures are modest, capped in most states at $5 to $25 per signature, but real estate transactions require notarization on multiple documents. Title insurance, which protects against defects in the ownership chain, runs from several hundred to over a thousand dollars depending on property value and state rate structure.
Attorney fees vary widely. A real estate attorney reviewing a seller-financed note and deed of trust might charge $500 to $2,000. A sweat equity deal needs a business attorney to draft or review the operating agreement and the 83(b) election paperwork. Skipping legal review on these transactions is the kind of economy that costs five figures later.
Which Strategy Fits Your Situation
Seller financing suits transactions where the seller owns the property free and clear, or has enough equity to carry a note, and wants to spread taxable gain over time. Sweat equity works when you have skills a company genuinely needs and the founders will dilute rather than pay cash. Asset-based lending fits established businesses with strong receivables and tangible collateral. Wholesaling rewards people who can find underpriced deals and connect them with buyers quickly. Mortgage assumptions and subject-to transactions make sense when existing loan terms beat what the market is currently offering.
Across all five, the paperwork is the deal. The promissory note, the operating agreement, the 83(b) filing, the UCC-1, the assignment form, the deed — each of these is what you own instead of cash, and each of them has to be right before you sign.