Advanced Creative Financing Techniques Every Real Estate Investor Should Know With Derek Dombeck

If you want to level up your real estate business and build lasting wealth, then learning how to creatively leverage private money is a game-changer. In a recent episode of “Raising Private Money,” Jay Conner sat down with Derek Dombeck, an expert with decades of experience in private lending, creative deal structuring, and wealth-building through real estate. Together, they unpacked practical strategies and mindset shifts that have helped Derek successfully structure thousands of deals while helping investors and sellers alike.

Below, we’ll break down the top insights and actionable lessons from their conversation.

Creative Deal Structuring: More Than Just Financing

Derek emphasizes that creative deal structuring isn’t just about finding different ways to fund a property; it's about using every tool at your disposal to solve people’s problems.

For instance, many think that approaches like “subject to” (taking over a property’s existing financing) or seller financing are inherently creative. For Derek, those are just the basics. True creativity comes from recognizing the unique needs of the seller, the condition of the property, or the investor's goals, and then combining multiple strategies for a win-win outcome.

Real-World Example

Derek shares a deal where he purchased a property with existing bank debt (“subject to”), arranged for the seller to carry a second mortgage (sometimes at 0% interest), and leveraged private money in a third mortgage position to fund renovations. Each participant was protected and incentivized: the seller got steady principal paydowns, the private lender earned double-digit returns (including a share of profits through a “participating note”), and Derek maximized his leverage without overexposing anyone.

The Power of Participating Notes

A major gem from Derek’s toolbox is the “participating note.” Unlike traditional notes that just collect interest, participating notes allow private lenders to receive a share of the profits when a flip is complete or the property sells.

This approach has several benefits:

• Aligns interests. Lenders are invested in the success of the project.
• Boosts returns. Lenders can potentially earn more than a flat interest rate.
• Eases cash flow. With interest accruing and some payments deferred until exit, it helps investors better manage project costs during rehab.

The paperwork is straightforward: terms detailing profit splits and payout triggers are included in the promissory note—not buried in side agreements—ensuring transparency for all parties.

Multiple Offers: Meeting Sellers Where They’re At

Derek’s approach to negotiations is all about options. Rather than pushing a single offer, he sits with sellers and outlines a menu:

• All-cash, quick-close offers.
• Seller finance with interest at a higher purchase price.
• Full-price (or higher) offers with 0% interest, paid out over time.
• Lease options or creative “installment” arrangements.

This empowers sellers to choose what best meets their specific needs. In practice, many sellers are drawn to the financial advantages of terms deals—often netting more money over time, especially if they can take 0% interest and avoid a big tax hit.

Equity Cushion and Risk Management

No matter how creative the structure, Derek never skips prudent risk analysis. He focuses on maintaining a healthy equity cushion—typically borrowing no more than 65% of after-repair value for flips, and up to 80% for longer-term rentals. This ensures there’s enough margin for error, market shifts, or unexpected expenses, keeping both lenders and the project secure.

Building Relationships & Educating Private Lenders

At the core of Derek’s strategy is education and open communication with private lenders. Explaining unique deal structures, being t