[?]I have been avidly reading the book by Steve McKnight: 0 to 130 properties in 3.5 years and I realise that property IS the number 1 way to become financially independent.Being a newbie to property investing I have a question for those who are experienced in this arena….so many times I have read about buying property with no money down…not having to use any of your own money…even for a deposit.For the life of me I can’t see how you can do this…what lender would borrow 100% of the purchase price? Please can someone explain how this is possible?
Welcome to the forum Coondoo.
There are several ways to get 100% finance that I will list off the top of my head. Hopefully otheres that read will add to the list.
1. Use equity in other house/s you own to provide the deposit and costs, and borrow 80-90% on the investment.
2. Have a ‘partner’ who puts up the money. None in for you, and half the pie.
3. Get the vendor to ‘leave some money in’ the deal. You then borrow the rest.
Remember, No Money Down doesn’t necessarily mean there’s no cash – it’s just not YOUR cash.
Cheers
MelHi Mel, I just ‘discovered’ this oldish post. I am wondering what you mean by:
“Get the vendor to ‘leave some money in’ the deal. You then borrow the rest.”
I haven’t heard of this yet, but would love to find out how this works, sounds interesting.
Cheers, CeliviaHi Celivia
I guess it’s a bit of a slang/jargon term for vendor finance.
Buy for $100K, at settlement, give vendor $80K to complete, title transfers etc., but now you owe vendor $80K. 100% financed. (I’m ignoring costs, but they can be part of the vendor finance bit).
Cheers
MelMel,
I am new to all of this…
Can you please elaborate further on ‘leaving money in the deal’ – I am still a little confused, but very interestedHi James
Basically, if I really needed/wanted to sell my house, but didn’t need ALL of the money right away, and you were interested in buying it, could get a loan for say 80% easily, but had no deposit, we could possibly work out a deal.
For a $100K house (let’s add $5K for costs) you would need a loan of $80K plus cash of $25K to cover deposit and costs. You don’t have this $25K. I need $80K for whatever reason, and can wait for the $25K. Basically I ‘lend’ you the $25K at say, 10% interest over 3 years. You have just bought a house for ‘no money down’ but need to pay interest on both loans (unless we worked out a different arrangement on my loan, which can be done – anything can be done), and need to come up with $25K to pay to me at the end of those 3 years.
Hope this makes it clearer. If not, please ask specific questions so I don’t crap on and say lots of stuff, except what you want to hear.
Cheers
MelHi Mel,
I’ve talked to a finance broker about this and he came back and said that the lenders would not consider the vendor finance as a deposit from me but I still had to come up with 10% (or whatever). Is this true of all lenders?
Cheers,
David
OPM – use Other People’s Money and learn from Other People’s Mistakes
[email protected]Thanx Mel, well explained!
SO I guess this arrangement has to be drawn up properly by a solicitor. Will that solicitor also work out and help decide the exact monthly payments you gotta make to the vendor? Sorry if I sound dopey, but I never really ‘got’ what vendor finance really meant, so this is new to me.[
]
Appreciate your patience [^]
CeliviaSome lenders would consider vendor finance. The ones that do not require genuine savings should be able to do it! But they will have to take into account the interest you will be paying on the second mortgage into account for serviceability calculations.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
How would a purchaser go about finding a vendor who would be willing to ‘leave money in the deal’?
James.. Just ask every vendor you see.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry…
Would it be easier to approach privately advertised properties, instead of involving R/E agents when doing this type of deal?
Thanks for joining in Terry and supplying good mortgage broker type advice.[
]James, ask everybody. In a booming market, such as we have had, the vendor can generally get their price the standard way, so probably would not be interested. It’s a common practice in America where they’ve had not so good times for a long time, and generally do things differently.
However, if and when things change, and the properties take much longer to sell, you might find a few willing takers. Ask private sales, real estate agents, everybody. It will take lots of no’s before you get a maybe, and probably quite a few maybe’s til you get a yes.
Then I would definitely get everything drawn up with a solicitor to cover both parties. If you are the borrower, and agree to a 1,2,3,5 year term etc., make sure you buy yourself a little time, and put an option to extend for a year for $1000 (or whatever fee you can negotiate). The last thing you want is for the payment to come due and not to have it.
Cheers
MelAlthough it is American, it covers this concept in great detail, and I would suggest reading ‘No Money Down for the 90s’ by Robert Allen.
Cheers
MelThank you Melbear, I will put this book on my xmas list and see if Santa likes me…[
]G’day all,
Hope nobody minds if i revivie this interesting thread I came across….
I am very interested in the concept of 100% finance with the vendor “leaving in some $$$” as it sounds as if it can create a “win-win” situation.
I am looking for some additional “nut & bolts” details on this topic. Not sure if its best to ask the floor, or if members can direct me to a suitable book.
Basically my questions are:
1. Will lenders provide an 80% LVR if they know the other 20% is being left in the deal?
2. What are “typical” terms made with the vendor in relation to term/interest rates?
3. Does this mean that the vendor now has a 2nd mortgage over the property? If so what rights do they have.
4. Does anyone have an example such an agreement(or know where I could find one) with the vendor to give an idea of the sort of conditions that you would need to take into account.
I would love to hear from anyone whom have 1st hand experience with this.
Thanks for having a read…
Cheers,
Battz
Hi Battz,
I am a developer with stock to sell and would consider vendor terms. I too would be interested to know the exact ins and outs of it all – particularly with regards to a 2nd mortgage. I should think the debt would be suitable evidence to lodge a caveat over the property?
Extensive list of new Perth property available for sale.
Alternatively, become a joint venture partner in one of our property development partnerships – contact me to find out why our developments are unique. John – 0419 198 856
So why are your properties unique John ?
Pisces
I hadn’t thought of this application with “off the plan”, would that be a possible option?
>>I’ve talked to a finance broker about this and he came back and said that the lenders would not consider the vendor finance as a deposit from me but I still had to come up with 10% (or whatever). Is this true of all lenders?<<
Absolute balderdash. There is more than one way to skin a cat.
It is however essential that you will be able to service the loan AND have some cash reserves in case there are tenant problems.
I am sure that any of the brokers on this site can help you.
Getting a detailed explanation in this thread is something else again.
I cannot understand why so many people are so desperate to know all the ins and outs in great detail when the whole thing appears for most of these questioners to be merely a theoretical question.
Is it not sufficient to know that it can be done ?
When the time comes and you are ready go and see a mortgage broker and a solicitor. In that order.
Pisces
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