Purchasing property without the use of your own capital is not difficult as long as you are able to learn different strategies.
Typically, the easiest property to buy no money down is the one which has been on the market for a long term. Long term here would mean several months. Generally, the longer the period of time a property has been on the market for, the more motivated the seller becomes. Hence, it becomes easier to negotiate a lower price and hence get a good deal.
When negotiating with the vendor of a below market value property, the buyer should prove to the vendor that he has sufficient funds for the purchase of that property. This can be done by showing bank statements or any documents evidencing credit status. In this way, the seller will be assured that his loan will be satisfied from the resale of his property.
The buyer should also check the sellers mortgage statements to ensure that his offer price is able to meet this obligation. If the offer price is less than the mortgage amount, the mortgagee will not be satisfied on completion of the sale and hence the sale will not be allowed to proceed.
Several parties are involved in the no money down buying process. Firstly, a surveyor will value the property you are considering purchasing. If the price you are buying the property for is truly less than the true value of that property, this will be reflected in the surveyors valuation figures. Solicitors and financiers are also involved in ensuring the deal goes ahead as planned.
The property purchasing funds that you apply for need to be based on the valuation figure and not the purchase figure of that property. This way, your mortgagee may be able to lend you the entire amount of the purchase. Often, if the discount is big enough, you can also receive cash back from this type of deal. Again, this depends on the purchase, price, valuation figures and the mortgagee who is lending to you. Rental calculations are also taken into account especially if you are purchasing the property as a rental investment.
For a truly no money down deal, none of your money should be used for that transaction. This would also include monies required for conveyancing and surveyor fees etc. These additional expenses can be paid for using interest free credit cards and low interest loans. You can repay these loans later on using the equity in your property especially if the market is rising. Obviously, in a falling market, some of these strategies become more difficult to implement and you may need to use other methods. This is why it is so important for you to keep your eyes on the ball and ensure that you remain educated to the latest techniques and standards.
Any good property investor should not focus on just one method of sourcing below market value property. Employing clever marketing techniques to source property is the intelligent way of buying below market value property. Here, we discuss various sources of cheap property and how a property investor can use different techniques for quick profit.
Buying properties that will ultimately be repossessed can be a great way to harness quick profit from property. These are properties where the mortgagors are adjudged in default and are held liable to pay the mortgage debt. Hence, the property is already a subject of a repossession proceeding. The owners of these properties will often sell for below market value rather than face the consequences of repossession.
It is also profitable to buy properties that have already been repossessed. These properties are usually owned by banks and financial institutions after the repossession proceedings, but before they have been sold on.
Some property owners end up in financial trouble because they have secured debt on their property. Unable to pay their debts, their house faces imminent repossession. An investor can often come in at this stage, pay off the secured debt and buy the property from the current owner for a much reduced price.
Another source of good value property is to buy direct from the property developer. Here, it is always better to deal with the senior manager rather than the admin staff who sit in the office. Using clever negotiation techniques you can often secure property for over 20% discount of its true value.
A lot of property developers also purchase land with potential for development. There are various things you can do here. For example, you could obtain planning permission, subdivide the land and resell lots for profit. This is definitely a lucrative way to earn a living and definitely worth considering. Alternatively, you could obtain an option to purchase land and only exercise the option if you are able to secure planning permission. If you do purchase the land, it is then up to you whether you want to build on the land yourself, or resell at a heightened price, achieved as a result of the planning permission obtained.
Buying properties and not immediately disposing of them is another income generating strategy. Here, you could hold the property and allow its price to increase as a result of market conditions or you could obtain cash flow from rental income. Whichever strategy you do choose, you will need to be aware of any maintenance, taxes and financial factors which come into play. Alternatively, rather than holding the property, you could choose to dispose of it immediately for market value and pocket the difference in prices.
One of the most important jobs of a property investor is to source below market value property – that is, a property bought for less than its value if it was to sell on the open market.
For example if you were to purchase a 100,000 pound property for 80,000 pounds you will have bought it at 20% below market value. This property will have 20,000 pound of equity which is yours to keep. Furthermore, since the property is under valued, theres a strong likelihood that you will be able to buy it with no money down.
In other words, without requiring a deposit. Theoretically, you can buy as many properties as you desire without ever using any of your own money whatsoever! If you are able to do this repeatedly, your business will experience phenomenal growth.
In contrast, if you were to buy a market value property, the traditional routes of property purchase would demand a deposit of anything from 5-10%. As a Property Investor, if you were only to buy property at full price, you would soon run out of money and your business would come to a stand still.
This is why it is so important for a Property Investor to invest as much as possible in properties below their true value.
So, how do I find below market value properties?
Regardless of what people say, I find estate agents to be a valuable resource when it comes to buying below market value property.
By being persistent, and proving to an estate agent that you are a serious investor, you will have them ringing your phone of the hook with potential deals. Initially, an estate agent may pass you deals that are not below market value.
If this was to happen, thank the agent for calling you and let him know that the margins dont work for you. However, you are still looking to buy several properties that month and he should contact you again if he receives anything.
At all times, remain polite and check with the agent at least once a week. Over time, a relationship will develop with your estate agent and he will start passing on good property leads which meet your investment criteria.
Once you have completed on a couple of deals why your specified agent, you will find that he places you on his preferred list of contacts. This is where you need to be to receive the great deals.
Ideally, you should be a preferred contact for several agents in your area. This way, you will ensure that you will hear about any potential property deal first.
