Acquiring a No Money Down Property

More and more people are opting for the no money down option to purchase properties. Buy to let investors engage in no money down deals all the time and some of them even benefit from cashbacks on the day of completion. The strategy is used to purchase properties priced below market value (BMV) without having to tie up any of the investors’ own funds. The secret is to find a property priced genuinely below its true market valuation and borrow against its actual market value instead of the below market value (BMV) purchase price.

More opportunities

The present condition of the UK’s property market presents more opportunities for property investors to find below market value properties. The reason for this is that the market is displacing many homeowners – more than one million overstretched borrowers are expected to struggle with their mortgage payments as the credit crunch bites deeper and banks continue tightening their lending requirements. As a result, many are motivated to sell – affording investors with the opportunity to earn instant profits of up to 40% of the property’s value.

While news of repossessions may be glum for homeowners, this puts property investors in a good position to take advantage of the rising number of repossessed homes and the leveling off of property prices. As the property market continues to stabilize, a greater number of repossessed homes are likely to wind up at auctions at even lower prices. Thus the market has numerous properties on offer for investors looking to find BMV assets.

The "no money down" catch

With a no money down deal, the property to be sourced must be purchased at least 17% below market value. Obtaining no money down property should be about the amount of equity that will be obtained from the purchase. For the usual buy to let setup, the equity will act as the deposit that would typically be put into the property. By buying property priced well below its market valuation, the deposit will automatically be in the property as equity when it is purchased.

No money down solution

Many property financing services provide investors with no money down solutions. Usually, these services provide bridging loans that allows the purchase of a property without needing to use an investor’s own financial resources as a deposit.

Bridging is a type of loan that usually has a fixed repayment date although it is often left open. It allows for a faster completion of a sale and is more affordable compared with the traditional mortgage as it only requires a borrower to mortgage only once which means he has to deal with only a single set of expenses. Additional expenses will be incurred with the bridge but these are often offset through a quick completion. The traditional method normally requires two sets of costs: an open and a re-mortgage after 6 months or so. Furthermore the setting up of two mortgages for valuations, credit checks and a deposit tied up until the remortgage is completed will require more time from investors.

Through open bridging, property investors will be able to purchase bargain assets and acquire a no money down property without having to use their own funds. More importantly, it provides a quicker way of obtaining properties thus giving them the upper hand over the competition. There are many other creative options for financing investment properties using little or none of your own money. Our newsletter and website describe many of them.