'Absolutely zero money out of my own pocket': Here's how Jared Holland turned a little-known real-estate investing strategy into screaming business - and nabbed a $120,000 profit on a 'free house'

ROBYN BECK/AFP/Getty Images

• Jared Holland started investing in real estate with no money.
• He quickly learned he could acquire "free houses" through a unique negotiating and financing strategy, leaving him free from any capital outlays.
• Holland's end goal is to flip properties for a fast profit.
• Today, he aims to flip 30 houses a year.
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When Jared Holland heard that a flipped house in his local market garnered a $200,000 profit, his interest in the space immediately piqued.

"I fell into it a little bit I guess," he said on the "BiggerPockets" podcast. "After that I kind of got the bug and just started learning as much as I could and went into the industry."

But before he set out to start investing in real estate full time, Holland spent a year learning the ins and outs of the industry. Voracious networking and a mentorship program helped build a solid foundation of core concepts and investment principles.

Still, despite the dedication to his craft, Holland wasn't immediately successful as a real-estate investor. His first deal - which was a wholesale - netted him only $1,000 in profit, a far cry from the returns he'd been expecting.

But that wasn't the end of his journey, not by a long shot. The lessons he came away with were priceless.

"That's when it becomes real though," he said. "Up until then you're chasing this mythical industry, thinking that you can make all of this money and do these deals and these great things, but until you actually get one done, it feels like, man, you're just running up this hill that never ends."

Today, Holland aims to flip around 30 houses per year.

Holland's strategy

Although Holland employs a plethora of different real-estate investing strategies, for the purpose of this discussion we'll only focus on his "free house" flipping strategy.

"When I first got started, I had no money really to speak of," he said.

To most real-estate investors, a lack of funds would pose an insurmountable barrier to the industry. But that's where Holland's creativity set him apart.

"I like to joke and say I am able to get free houses," he said. "So in my career I've gotten maybe about 10 of these free houses."

He added: "A free house is, it's a seller financing deal essentially."

For the uninitiated, seller financing is a real-estate investing strategy that is exactly what it sounds like. Instead of a bank facilitating the mortgage process, the buyer (borrower) signs a mortgage with the seller (lender).

Since a conventional financial institution isn't involved in the transaction, the seller and buyer negotiate the terms - length of time, interest rate, down payment, default circumstances - of the sale themselves.

But Holland takes the strategy one step further.

Due to the unconventional nature of seller financing (essentially, making up your own stipulations), he had the sellers pay for things that normally would've come out of his own pocket. Then, to complete the renovations on the house, he borrowed.

"I was able to negotiate deals to have 100% free from the seller, no money deposit to them at all," he said. "I had them pay for the carrying costs, taxes, all their own closing costs, everything. Then I borrowed the money to do the renovations, so absolutely zero money out of my own pocket and the sellers were stoked.

He added: "Also, it ended up being really good deals for them too."

Holland notes every seller financing deal is going to be different. He says it usually takes a motivated seller who's looking to get out of their property without the hassle of a normal sale.

$120,000 profit on a 'free house'

Holland found this "free house" through a direct mail marketing campaign. The end goal was to flip the property for a quick buck.

When it came time to negotiate, Holland came prepared with three different options:

1. $375,000 cash purchase for the property
2. List the property for the seller for $420,000
3. Seller finance the deal for $405,000

In the end, he negotiated a seller financing deal for $405,000. What's more, the seller agreed to finance the entire renovation for $120,000.

After a slew of setbacks with the renovations, and a plethora of unexpected cash outlays, Holland found himself $45,000 over budget.

When the renovation was finally complete, he put the house on the market for $650,000.

Just one day after the house was listed, a buyer stepped in and offered $720,000 for the property - a $70,000 premium. Needless to say, Holland was smitten.

"We had $120,000 net profit on that deal - and I was so happy I gave the seller a $10,000 cash bonus," he said. "It gave me so much confidence."

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