This is the Cash Buyer Mind-set at work – and it’s a technique very few investors use. Most of them wouldn’t even consider this kind of negotiation – leaving the field free for the Ninja Investors who have the knowledge and know when and how to use it.
This Ninja strategy lets you buy properties with a minimal deposit and leaves your cash free for refurb, simply by delaying completion.
Delayed completion bridging is also referred to as ‘Exchange, with delayed completion’ (EDC). The objective is to have no money left in on the day you complete – or at least a lot less than the 25% deposit plus your refurb money.
Here’s the strategy in a nutshell:
One major advantage with bridging finance is that it allows you to exchange contracts quickly, often within a few days. This doesn’t mean you have to complete quickly.
The key is to know that it’s possible to exchange contracts with any sum agreed by the vendor and purchaser. That could be £1; it doesn’t have to be 10% of the asking price. This is what you will need to negotiate with the vendor – and convince them that the deal is dependent on them agreeing to your terms.
This strategy requires you to hone your negotiation skills to ensure you can get the vendor onside. Clearly there needs to be something in it for them and that you reassure them that if you don’t complete you will forfeit the deposit and their property will be worth more after you’ve refurbed it.
Exchanging contracts shows your commitment to buy, but must be dependent on delayed completion until after the refurb is done. The contract must also reflect that, if they don’t complete, they can’t just give you your minimal deposit back and waltz off with their newly refurbed property. Make their default fee payable something much higher – like 20% of the purchase price.
Even if you can’t get a mortgage because of your credit record – you could use this as a buy-to-sell strategy to build up your bank balance. There are many ways to operate a property investment business.