Investing in property can be a profitable venture, but getting started requires considerable money upfront. Many people are intrigued by the idea of no money down property investing, often presented as a way to enter the property market without spending any money. However, the reality is that money down is more complex than it sounds. In this blog post, we will explore why no money down isn’t real, how it can be possible, why property investing is called investing, and why property gurus give the industry a bad name.
Why No Money Down Isn't Real
The term “no money down” is often used in the property investment world to imply that you can buy property without spending any money upfront. However, this is only partially true. While reducing the amount of money you need to invest is possible, you still need to pay for legal fees, deposits, and other upfront costs.
For example, if you are looking to buy a property using a rent-to-rent strategy, you still need to pay the landlord a deposit and put up the money upfront to refurbish the property. Similarly, if you want to purchase a property using a lease option, you must pay legal fees to draw up the agreement.
In short, while no money down may seem like a viable option, the reality is that you still need to spend money upfront to get started.
The Real Meaning of No Money Down Deals
While buying a property without spending any money upfront may not be possible, making a property investment with no money down after a successful project is feasible. This means that after investing money into a property and making it a success, the investor can refinance the property at a higher value, allowing them to pull out their original investment and still have cash left over.
For example, suppose an investor purchases a property for £100,000 and spends £50,000 refurbishing it, bringing the total cost to £150,000. If the property’s value increases to £200,000 after the refurbishment, the investor can refinance the property, releasing the original £150,000 investment and still having £50,000 left over.
While this may seem like a viable strategy, it’s important to note that it requires much hard work and investment upfront. The investor must be willing to take a risk and have enough cash upfront to invest in the property in the first place.
Why Property Investing is Called Investing
The term “investing” implies that you need money to get started. While there are various strategies you can use to reduce the amount of money you need to invest, property investing still requires a considerable amount of money upfront.
If you want to get started in property investing, it’s essential to have savings or a trading business with cash to move into the investment part of your business. It takes hard work to build up something successful, and it’s essential to be realistic about the costs involved.
Why Property Gurus Give the Industry a Bad Name
Unfortunately, many property gurus out there use the no-money-down strategy as a barrier to entry for those who might need more time to be ready to invest. These gurus often sell expensive courses teaching people how to get properties with no money down.
It’s essential to be careful when dealing with these property gurus, as they often sell the dream rather than the reality. Building a successful property business requires hard work, investment, and dedication. No money down is not a magical solution that will make you rich overnight.
How Much Do You Need To Buy a House?
The concept of no money down property investing can be misleading. There are several costs involved in purchasing a property, and it’s essential to be aware of them. Here are some of the typical costs involved in buying a house:
- Deposit: Most lenders require a deposit of at least 25% of the property’s value when buying for investment purchases. The higher the deposit, the lower the interest rate you’ll pay. Therefore, saving as much as possible for the deposit is advisable.
- Stamp duty: This is a tax on property purchases, and it varies depending on the property’s value and location. As an investor, you’ll also pay the 3% surcharge ontop of the owed amount.
- Legal fees: You’ll need a solicitor or conveyancer to handle the legal work of buying a property. They’ll charge fees for their services, including property searches, paperwork, and other legal costs.
- Valuation fees: Lenders may charge a fee to value the property to ensure it’s worth your borrowing amount. With commercial or buy to let mortgages, this will also likely include a broker fee.
- Mortgage arrangement fees: Some lenders charge a fee for setting up the mortgage. With interest rates so high at the moment, lenders are upping their product fees to be able to keep rates a bit lower.
- Survey fees: You may need to pay for a surveyor to check the property’s condition and identify any issues.
While no money-down property investing may seem like a viable option, the reality is that you still need to spend money upfront to get started. It’s essential to be realistic about the costs involved and the hard work and investment required to make a property investment successful. Property investing is called investing because it involves money, and it’s crucial to have savings or a trading business with cash that you can move into the investment part of your business.
It’s also important to be wary of property gurus who sell the idea of no money as a magical solution to make you rich overnight. These gurus often give the industry a bad name by selling expensive courses that promise to teach you how to get properties with no money down. However, building a successful property business takes a lot of hard work and dedication and can only be achieved after some time.
In summary, while the concept of no money down property investing may be intriguing, the reality is that it’s not entirely possible. While there are strategies you can use to reduce the amount of money you need to invest, you still need to spend money upfront to get started. Property investing is called investing for a reason, and it’s essential to be realistic about the costs involved and the amount of hard work and investment required to make a property investment successful. Always be wary of property gurus who promise to teach you how to get properties with no money down, as these promises are often too good to be true.