6 Ways To Buy Real Estate Without A Deposit
...... under the conditions of the contract was enough to ensure you don't need the money anyway ' the value had increased enough to give you the equity without a deposit.
By working this way, you don't forfeit the 'opportunity cost' of not having access to your money for other opportunities that come up. Letting it sit idle in a trust account doesn't help you at all!
Lets look at the RETURN ON INVESTMENT.
How important is it for you on a ROI basis to not put down a deposit' (ROI = Return On Investment)
1.EG, You buy a $100,000 property for cash. What is the ROI on it, if increases by $10,000 over 12 months' 10%
2.What if you only put down $10,000 and it increased by $10,000' 100%
3.What if you put NOTHING down and it increased by $10,000' Infinity. An infinite return on investment. Truly, something for nothing!
The same property ' but we used 3 different ways to buy it. And remember, your $10,000 was earning perhaps 6% - 10% PER MONTH in a share portfolio while you didn't need it. What is the opportunity cost, to miss out on it'
So now that we have established that it IS worthwhile to buy real estate without a deposit, is it possible' Absolutely. I will list 6 methods now that are eminently suitable, although there are more. However, as we are limited by space here, full details and the critical warnings are fully outlined in the associated e-book on the www.atozebooks.com website.
1Full Vendor finance
2Part Vendor finance
3100% bank finance
4Long Term Unconditional Contract
5Long Term Conditional Contract
6Deposit Bonds
Important point - not every method is suitable for every property. Not every method is suitable for every vendor. The methods CAN be combined to make their application simpler and better for everyone. Each has a small minefield attached for the unwary, so please again ensure you have your legal and real estate buying team ready to support and advise you BEFORE yo make a move.
Each of these methods has been around for quite some time and are not new to the industry. However, what is not generally known by the people you would regularly go to for advice is the list of pitfalls associated with each of them and how, where and with whom they are applicable and relevant. More importantly, where they should not be used!
The potential problems arise from the fundamental fact that if you use these strategies, you need to understand the implications of being 100% geared. That's right, in one form or another, you have borrowed 100% of the purchase price. There is NO LEEWAY for mistakes and if anything goes wrong, you can kiss your butt goodbye and often some of your other securities as well.
A Guide To Finding Cheap LoansFinding cheap loans isn't always easy it seems like every time you turn around new rates and fees are added and the loan process becomes increasingly .....
The buying price of the property, when purchased at your leisure, is MUCH HIGHER than the selling price if you have to unload it in a hurry. You need to follow the guidelines for property purchase outlined in the e-book to ensure you get it right. Follow the formula and you will generally be fine. Step outside and it's like walking around on a rope ladder - you are very close to the edge at all times. Having said that, I have NEVER bought property the traditional ways because these ways offer so much opportunity and profit potential!
In simple terms, the property has to pay for itself. If it doesn't, you are going backwards from the start. It cannot be a sound investment, whether you live in it or rent it out, if it costs you to own it! OK, I hear the negative gearing gallery screaming. Yes, in some cases there are tax advantages with interest etc on some negative gearing situations.
Just remember, A LOSS IS STILL A LOSS, NO MATTER HOW YOU DRESS IT UP!
The first thing to remember is that the property must be capable of making a profit for you.
Second point, it must also be capable of growing into something better. The "worst house on the best street" is a phrase that comes to mind.
Finally, you need to be able to offload it instantly for a profit if the worst does happen and you need to sell it in a fire sale situation. By using a combination of the above strategies, which I fully detail in the e-book, you are almost assured of that.
Who can you buy from' Who can you not buy from'
By definition, the vendors need the flexibility to negotiate and that means they need equity in their property or outright ownership. They need to be free of commitments on the property and be making their own decisions, rather than doing as their financiers tell them.
Financing HousesWhat Real Estate Lenders Look For Lenders control many programs -- some make use of over 200! Generally, lenders look for .....
The people you cannot negotiate with are distressed property owners who urgently need to sell at any price to get out! They are no longer the owners of their property; they are virtually acting on behalf of the banks!
WARNINGS:
Yes, there are a few to look out for. Banks don't like you taking control of your finances and do all sorts of things to tie you up in a deal. For example, you may already have an investment property, purchased with the equity in your residence. About 95% of people would have those properties tied together with a clause in the mortgage that says the bank controls both properties under either loan arrangement. In other words, if you want to sell one, they decide where the proceeds of the sale go and can decide to apply the funds to whatever part of your loan portfolio they deem appropriate! Now, who did you say was in charge of your investments'
Keep your investment loans separate - rule number 1.
Keep equity available - rule number 2.
Stay away from Interest Only Loans - rule number 3.
I again hear the "professional" investors screaming that this is what they have been taught! Except for ONE situation, which I outline in the e-book, I NEVER use Interest Only loans. They maintain your debt at artificially high levels and greatly hinder your ability to increase your property portfolio.
What if you could reduce your debt and increase your portfolio, with more flexibility and growth, for the same repayment level' You would never go back to Interest Only loans again and you would see the peddlers of them for what they are. You can do so much better!
For more information and a greatly expanded explanation of all the above headings, please visit the e-book on the website www.atozebooks.com. DO NOT INVEST without studying this in depth and with your advisors.
About the Author Ray Jamieson runs a goalsetting program, which requires him to be the font of knowledge and resources for the participants. Each is there to achieve their dreams and goals - he must have their answers and solutions! Ray is at www.executivemastermind.com for the goalsetting program and www.atozebooks.com for a series of e-books taken from his workshops.
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