Starting from minus 0

hi there, i would recommend reading steves book from 1 to 130 properties in 3.5 years. he talks about a few strategies.

hi Eloise
If it’s your first property I wouldn’t recommend anything too tricky. A bit daunting. Just buy one in a more ‘normal’ way first – go see a broker (wizard, ANZ, BNZ, etc) and go see how much you could borrow. Let’s say they do their fancy calculations and they come up with 100k. (probably more but let’s say worst case.) And let’s say they tell you they could only lend you 90 percent. So you either have to save up 10k or get a credit card with a 10k limit and cash advance it into your account to show the banks you have the deposit! – and then go shopping for a house under 100k. Preferably one you can add value to with not too much work. either Subdivide…then sell off the extra piece of land when it’s complete. subdividing is the sort of thing that while it’s being rented out you can do. Or get the sort of property that with a bit pf minor love i.e. paint, maintenance, new fittings, heat lamp in the bathroom, new lino, paint kitchen cupboards and put new handles on, new benchtop, that sort of thing. Not necessarily wielding the tools yourself of course but just ORGANISING the work and making sure it gets done. Or else you could sort of rough it for a while and live in a place you are renovating. Banks like lending people for their own homes and they might give you more than they would if it was an investment.

So the other option if you have no deposit and can only borrow 90 percent is to tell the real estate agent (when you see one you want to make an offer on) that you can only borrow 90 percent so the vendor would have to wait a year for the ten percent. But if they would be into that you’d make a higher offer to compensate. Then you may end up getting a vendor who hasn’t had any offers and they might take you up on it. You would have to get a decent lawyer ( a good smart one recommended) to draw that up of course especially if it was your first deal. But that can definitely be done, I know people that have done it.

However borrowing the deposit is kinda the easy part, family is always an option for some…personal loans…whatever!

Or just make yourself a goal to go and sell a whole lot of deals and save it up and then go for it.

Anyway good luck, and don’t wait too long or dilly dally, you’ll regret it if you do!
Go see a broker tomorrow!

cheers-
Mini

With all due respect to Minimogul I reckon using a cash advance on a credit card is a spectacularly bad idea. Even more so since the original poster already mentioned they have debt.
Having consumer debt is often a symptom of out of control personal finances and its my belief that the first step to financial success is getting your consumer spending and consumer debt under control.

Just looking at the numbers, $10000 credit card balance at 15% is going to be $1500pa. So lets say you were trying to pay that down in 12 months the repayments would be ~$1000pm. Anyone that can afford that kind of payment, wouldn’t have consumer debt in the first place, and wouldn’t have trouble getting personal loans from more reasonable sources such as a personal loan from a bank at say 10%.
So no. A credit card advance of $10000 to get started in investing is a bad idea.

My 2 cents. I know this post is old but this needed to be said.

Hi there,

Oh gee, little did I know I was being so contraversial. You know how there’s good debt and bad debt? Well, credit cards used for consumer goods is bad debt, but credit cards used for income producing assets – hey, nothing wrong with that.

Take the emotional baggage out of the word ‘credit card’ for a minute and look at it as an easily obtainable unsecured loan, a line of credit if you like. What’s the interest rate? 15 percent? Sure, if you want to earn fly buys or some useless thing. but there are cards with as little as 6.99 percent (for six months) and then up to ten.

I don’t see the problem at all especially as NZ finance will cost you 7.5 percent.

In fact, i think it’s a damn clever idea.

Yes, the axe is sharp and you could hurt yourself. But does that mean axes are bad? Or very good because the sharper they are, the better to use to chop wood?

I know that if I could get my hands on 100k credit card, I wouldn’t buy consumer good with it, I’d put it to good use. I’d be renovating..

In fact, can I just mention? I prefer to use my credit card as much as possible, simply because my tax returns are much simpler for my administrators if I have less cash receipts to process.

In Graeme Fowler’s new(ish) book there is a chapter with an investor who uses credit cards quite a lot in order to get started. It’s just another form of finance. I don’t even think it’s more expensive than lo-docs. (if you pick the right card of course.)

Basically people who are going to do a deal will do it. People that won’t wont’, and they will make excuses as to why they can’t. In the case of ‘but I don’t have the deposit’, well, that was just one of infinity workarounds. For a more experienced investor, I might have suggested some sort of vendor finance no money down type deal.

Anyway, feel free to sue me for posting on an internet forum, if I caused anyone financial ruin by suggesting such a radical and heinous thing!

I guess it’s sometimes better to not share different ways you can solve problems, because someone somewhere might not like it.

All I was saying is that you could either do the credit card deal now and get into a property, or else you could save 20 percent of your wage (if 50k per annum average income)for a year and save the deposit. but the way I look at it is what will you lose by staying out of the market for a year?

What would it cost you to borrow 10k for a year?
1 grand? even at ten percent per annum?

Can you make more than an extra grand by doing the deal now to justify borrowing the deposit as well? Sure you can! If you buy in a growth area, why not assume a nice low reasonable 5-10percent capital gains for a year? you get capital gains on the whole property remember, so you just made 5-10 k holding the property for a year – that’s more than the 1k it cost you to borrow the deposit. I rest my case…controversial though it may be – for now!

cheers-
Mini