There are various unconventional ways to buy properties. So many people have tried these methods in the United States and they got an opportunity to jump start their property portfolios. These methods can also be done in other countries with a little twist.
Typically when we buy a property, we tend to think that we need to come up with the deposit or equity to purchase the property. This is usually the case and it may seem like the only way to buy a property. The purchaser will have to accumulate some 10 to 20% of the property purchase price, and the bank will require some documents for a good 80 to 90% loan that they will lend.
What if we can’t accumulate the deposit in time? What if we get demotivated to accumulate the deposit over a period of time? Do we give up the dream of becoming a property investor?
Now, there are some solutions to these problems. There are various ways to acquire properties with a low deposit or without a deposit entirely. Hence the terms “low money down” or even “no money down”.
These methods may not be for those who are not comfortable exploring various creative strategies to acquire assets such as properties. These methods are completely legal and require outside-the-box thinking. I personally have used some of these techniques to purchase my first few investment properties. What we need is to be friends with some lawyers who can see our creative methods in order for us to purchase our investment properties.
There is a big difference between buying a property for your own self and purchasing an investment property. To purchase an investment property your mindset must be of that an investor.
Becoming a property investor requires you to do due diligence and pay a lot more attention to numbers and financial equations than to the process of purchasing any property. This indeed requires hard work and mental agility. Not everyone can be a property investor!
Let’s look at some creative techniques for buying properties with no money down and you can set your goals to purchase one within the next one year. I can assure you that it’s going to be thrilling and it’s all legal mind you. It’s just unusual – unusual is the style of creative entrepreneurs.
1. Purchase with the support of family and friends.
Family was a great support when we were kids right? When we got into trouble, we always turned to our parents to help get us out of trouble. Or we asked our siblings for help. Yes, they were very supportive.
For this method to succeed it is best to make an agreement upfront for the deals that you are making. Perhaps you can draw up some percentage of profit-sharing with those who provide the capital for investment. And for you – well, your offer of goodwill will suffice to make you cut the deal with them. You provide the know-how and they provide the means to make it happen.
2. Purchase with personal loans for the deposit
A personal loan will carry some weight as a commitment from the bank that will offer you a property loan. You probably need to apply for a personal loan way before you start to apply for a property loan.
Once your personal loan is approved, you can wait for a few months before you submit your property loan application.
3. Purchase with credit card or overdraft facility for the deposit.
Credit card is a great source of deposit if you can use the cash facility of the credit card. The only catch is that the amount of cost on the usage of cash is very high (I am talking about Islamic credit card).
This method can also be replaced with Islamic overdraft facility. The concept is still the same. For you to be eligible for an overdraft facility the bank may require you to have some amount of cash in the bank, or any investment with them to start off with. This overdraft facility can be helpful when you start to accumulate cash in your later years as a property investor. You need to ask around for these facilities.
The only advantage of using this method is that you can split the payment of the cost together with the principle over a period of time.
4. Purchase items with credit card for your friends or family to get the deposit.
Let’s say your friends want to purchase a set of furniture for their home. They already know what they want and they have the cash to buy it. Furthermore they have a price that they are willing to pay.
For example, they plan to buy the furniture set (or TV or whatever) for say RM 5,000. They have to agree to give you the money once the items arrive at their home. (Perhaps you can ask for the money upfront if you wish or simply make a simple IOU agreement). You then go to the shop with them. You pull out your wallet and swipe your card to buy the set.
Once done, you ask them to give the cash to you or deposit into your account. Lo and behold now you have that cash in your hand (or banked into your account or whatever) as a deposit.
You can now go around and do the same thing with other friends and keep doing it until you accumulate enough deposit for your investment property. One last thing about using this method. You really have to do the numbers to ensure your return is within your targeted ROI.