Buying Property with No Money Down
How to buy property with no money down
Today we’re talking about buying property with no money down.
I know you’ll love this episode because of it’s just such a sexy idea to be able to own assets, create long-term wealth without investing any money.
I’m going to explain how creative property strategies helped us buy properties.
Let’s dive in.
No Money Down
It’s seductive
We’re all in love with the idea that you can generate cashflow or build wealth starting from nothing.
And you can do it without any of your own money
But you will need one thing that you often won’t have at the start but you can build it
You will need resourcefulness.
Buckets of it
Because resources are always needed.
Whether it’s your time
Whether it’s your knowledge
Whether it’s your money – because money is always needed - yours or other people’s
Some people don’t like the phrase no money down for the reason.
Because money is always needed.
But we know what it means.
No money down.
It means using other people’s money.
Or being able to recycle your money.
Before we go further I want to explain the main strategies
Let’s go into what the main creative strategies are
There are two main ones
The first is
Lease optionsOption to buy a property by an agreed date for an agreed price
Option to buy
A lease option means that you don't need to take out your own mortgage or find a big deposit immediately.
You can pay a very small amount and buy the property over time.
The second is
Exchange with delayed completion
Contracted to buy a property by an agreed date for an agreed price
Contracted to buy
This is similar to a lease option except that with an exchange with delayed completion you have an obligation to buy the property at the end of it.
The idea that a property owner would want to sell their property and receive the money over time instead of all at once is confusing to most people. So let’s start off with a real life example so that you can see how this works.
Let me give you an example
We have a property on an exchange with delayed completion is 4 self-contained flats on one title.
So it’s a conversion from a single house into 4 flats.
Exchange with Delayed Completion summary
Agreed completion date: within 5 years
Agreed price: £160,000
Option fee: £16,000
Monthly payment: £320
Balance after 5 years: £124,800
Monthly income: £2,200
Monthly cashflow: £1,660
Yearly income: £26,400
Yearly cashflow: £19,920
5 year income: £132,000
5 year cashflow: £99,600
What’s happening in this deal?
Essentially this means that we pay for the property over time.
And during that time we don’t pay rent.
And at the beginning we don’t pay a typical 30% deposit which would be £48,000
You have probably noticed that £16,000 is not no money down.
It’s well…, £16,000!
You can do this type of deals where you pay £1 upfront.
It’s whatever is agreeable to buyer and seller.
So in this case we paid £16,000 as entry.
Instead of £48,000.
And this is where resourcefulness comes in
There are lots of ways to raise money
And I’ll focus on how you can begin to make more money and attract more investment
For now, I just want to give you some ideas
Take the cashflow from your business
Family and friends
What if you raised half and a friend or family member?
We live in one of the richest countries in the world resources aren’t the problem.
Resourcefulness is the issue.
This sort of deal is open to a lot of people.
But then people are totally incredulous and say to me
”But Steph no property owner would want to do that!”
Well they do.
The circumstances for this couple is that they have a portolio of properties.
They’re approaching retirement and want to sell off their properties on a schedule so not all in one tax year.
They are fair
And we were able to agree a price which is at what both buyer and seller agree is fair value
Why is the monthly payment so low?That is what the seller chose.
They chose that amount and we agreed to it.
One important thing about this
Is that we want everyone we work with to be delighted they worked with us.
Whether that’s, landlords, investors, tenants, students on our Programmes.
We want them to feel great about the deal and we want to feel great about it too.
We’d love to buy other of their properties as they sell them on too.
It’s not about a transaction, it’s about a relationship
Relationships are much more valuable in every sense of the world.
You can’t put a price on feeling good about what you do and what you stand for
How did we find them?
They found us.
We’ve been sending out rent to rent letters to landlords since we started in 2016. So when they came to sell, they know us, had heard about our work and got in touch.
So send letters to your HMO landlords, it’s a phenomenal strategy and we will devote a whole episode to it.
CLICK HERE to download your rent to rent landlord letter templates
What about the end of the 5 years?
· What about at the end of the 5 years how do we pay £125,000
· You’ll have had the cashflowing asset for 5 years and will have made £99,600 after costs.
· We’ll be able take out a conventional mortgage
· Use private finance
· Sell the deal on as it’s transferrable in our contract
Likelihood is we’ll just mortgage property.
It’s likely we’ll be able to get a loan for 70% of value.
And it’s likely value will have gone up even if it hasn’t, still a good deal.
Lease options and exchange with delayed completion give you flexibility this way to buy more properties.
If we had to save up £48k for each one it’d take much much longer to build our portfolio.
So how can you do this?
You’re all in for lease options.
How can you do it?
Understand the options (pun intended!)
Be able to offer solutions that work for people
A lease option or exchange with delayed completion won’t work for everyone
Rent to rent is a great strategy for finding lease options
We now have properties we’re buying this way that are worth over half a million pounds as a direct result of rent to rent.
As part of our Kickstarter Programme we explain how to just simply incorporate it to what you do.
Because the ultimate aim for most of us is to start with cashflow and then build up our owned assets
That you have long-term
Where you benefit from increase in values
Where you can pass on in trust to your children
So if you were thinking rent to rent is not for you because you want to buy
But you’re not in a position to buy right now
You can start rent to rent for cashflow and then buy by
Using creating strategies like the ones we’ve discussed here
Attracting investment
Conventional purchase using your rent to rent cashflow
So those are my thoughts on no money down
You can invest with little money and lots of resourcefulness.
It’s important to understand the options you can offer and to offer those options in the right situations. A solicitor will do the work of turning your agreement into a legal contract.
You know when I even talk about rent to rent, never mind lease option
Most people just can’t believe that rent to rent is a legitimate business model.
When I first heard about rent to rent, I thought
“Well surely if this is legal everyone would be doing it.”
Closely followed by “Why have I never head of this?”
The question I’m often asked is
“Is this legal?!” which takes us on to next week’s episode.
It’s almost as though I planned this!
Have you found this useful?
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And remember Believe Bigger, Be Bolder and Be a Gamechanger!
See you soon!
Stephanie & Nicky
xx
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