Most mortgage lenders require a 25% deposit, based on the amount you’re paying for your property. If you’re planning to get into property that can be a big hurdle to get over.
The days of no-money-down mortgages are long gone and are unlikely to return. Leveraging credit cards is a decidedly dodgy way to raise funds, so where does that leave you?
This strategy blows apart the preconception that a 25% deposit is required to buy an investment property. Better still it works in a variety of situations.
This strategy can turn around a property quickly – and make your profit fast. Not only does this reduce the deposit you’re investing, but allows you to get your money out quickly too – even more so when you’re buying-to-sell as you can get the property back on the market at the point of purchase.
This works for both buy-to-sell or buy-to-hold strategies. If you use bridging finance to complete the purchase, can exchange contracts in days and have a solicitor that can complete in 28 days or less you can turn around your money really fast. You can start your exit strategy from the day of purchase, putting the property on the market if you plan to sell and starting the remortgage process if you’re keeping it.
A good rule-of-thumb to work on is that you sell the properties that need no work doing, but hold on to the ones that need refurbs.
The critical differentiator is that when you have a bridging lender that will lend on the true current value; the discount that you negotiate to buy the property below its true current value becomes part of the deposit.
Most bridgers will lend 70%, meaning the deposit required from you is 30%. When that 70% is of the true current value, and you have negotiated to buy 20% below that true current value, that discount of 20% becomes part of your 30% deposit, meaning you only have to put in the remaining 10% yourself.
But what if you managed to negotiate a 25% discount to the true current value? That would be 25% of the 30% deposit taken care of. Now your cash into the deal is just 5% of the purchase price.
This really is massive and this fact alone will set you apart from the vast majority of property investors out there looking to do deals. They have the limiting belief that properties can only be bought with a 25% deposit.
This is part of the Fast Funding Formula I teach in our Ninja Investor Programme.