Buying Below Market Value Property with No Money Down - Does it Work asks Lawrenson of Letting Focus?
The answer is yes, of course it can.
But to buy with “No Money Down” you have to find someone desparate and willing to sell you their property for at least 20% below its true market value so you can make the financing work. And that’s the hard bit, of course!
The fact is it’s really hard to find a seller willing to sell you property at 15% below market value (or BMV as it’s called in the trade!) let alone more that that.
OK, the credit crunch has meant it has got a bit easier but its still very hard work to find these deals.
Sure, professional investors can find ‘em at 25% BMV if they spend many hours a week and lots of marketing costs ……and if property investing is their full time job too… but even for them, their own time has to be factored into the equation.
For some property investors it IS definitely worth it and I personally know of a few property millionaires who do this type of investing for a living & many of them read this column. Some have been to my seminars. Many are friends.
But for every one of these, there are many other people who buy with no money down, because they are stretched financially and they think that buy to let is somehow going to be their financial salvation and route to fast riches.
Many of these people have no other siginificant assets and they don’t understand what being a landlord is all about - the hassles, the costs, the laws.
For these people, I’d really question whether they should be in property anyway, because for many new investors who don’t have spare accessible capital, I’d argue the risks of property investment with no money down are just too high.
The fact is that professional BMV investors I know have lots of equity in existing properties or in shares, just ready to pounce in the credit freeze – they don’t have to go No Money Down.
OK, they sometimes do No Money Down deals to buy property when cash flow is tight but the fact is they can access cash, if things get hard and stuff goes wrong – the roof falls in, tenants default -that kind of thing.
For the newbie investor I would say unless you have got £20,000 stashed away for a rainy day or a very kind Uncle who can help you out if things get tough, I would be wary of buying No Money Down.
If you do, you could end up with a house on a very high loan relative to value and if your “Sale and rent back tenant” defaults on the rent you or the boiler needs replacing, you are really going to have hard times indeed।
We are away for a week’s holidays -see you in 2 weeks!
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of landlord experts lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling property investment book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert property journalist , property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords advice
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property mentor programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property coach because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
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Once clicked, this link is added to your Bookmarks (or Favourites) drop down menu in the top toolbar. Thereafter, every blog published automatically appears in this drop down menu.
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But to buy with “No Money Down” you have to find someone desparate and willing to sell you their property for at least 20% below its true market value so you can make the financing work. And that’s the hard bit, of course!
The fact is it’s really hard to find a seller willing to sell you property at 15% below market value (or BMV as it’s called in the trade!) let alone more that that.
OK, the credit crunch has meant it has got a bit easier but its still very hard work to find these deals.
Sure, professional investors can find ‘em at 25% BMV if they spend many hours a week and lots of marketing costs ……and if property investing is their full time job too… but even for them, their own time has to be factored into the equation.
For some property investors it IS definitely worth it and I personally know of a few property millionaires who do this type of investing for a living & many of them read this column. Some have been to my seminars. Many are friends.
But for every one of these, there are many other people who buy with no money down, because they are stretched financially and they think that buy to let is somehow going to be their financial salvation and route to fast riches.
Many of these people have no other siginificant assets and they don’t understand what being a landlord is all about - the hassles, the costs, the laws.
For these people, I’d really question whether they should be in property anyway, because for many new investors who don’t have spare accessible capital, I’d argue the risks of property investment with no money down are just too high.
The fact is that professional BMV investors I know have lots of equity in existing properties or in shares, just ready to pounce in the credit freeze – they don’t have to go No Money Down.
OK, they sometimes do No Money Down deals to buy property when cash flow is tight but the fact is they can access cash, if things get hard and stuff goes wrong – the roof falls in, tenants default -that kind of thing.
For the newbie investor I would say unless you have got £20,000 stashed away for a rainy day or a very kind Uncle who can help you out if things get tough, I would be wary of buying No Money Down.
If you do, you could end up with a house on a very high loan relative to value and if your “Sale and rent back tenant” defaults on the rent you or the boiler needs replacing, you are really going to have hard times indeed।
We are away for a week’s holidays -see you in 2 weeks!
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of landlord experts lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling property investment book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert property journalist , property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords advice
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property mentor programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property coach because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
Want to be kept updated on our blogs?
It’s easy. The link to the RSS feed is at the bottom right of every blog we publish. Simply click where it says, “Link to this post.” Once you have done this, this will take you to the latest blog which will have a 'Subscribe' button at top of the page.
Once clicked, this link is added to your Bookmarks (or Favourites) drop down menu in the top toolbar. Thereafter, every blog published automatically appears in this drop down menu.
This means you won't have to visit the site to pick up latest blog, the headline of which will appear in your toolbar menu.
You can then click the headline and copy and paste the full article or a synopsis into your Latest News section - some software may be able to automate this process.
Please note we require the full links shown in each blog to also be shown at your site. Please contact us via our main site http://www.lettingfocus.com/ if you have any queries about this.
Labels: Below Market Value, Below market value property, BMV, No Money Down, property seminars
This entry was posted by lettingfocus, on
Friday, July 18, 2008.
