This is an interesting question. Somebody has asked me ‘does no money down really exist and if it does how do I do it?’.
First things first. One thing I have noticed when I have been online looking at the forums and looking at the Facebook groups is that occasionally you will see somebody saying, ‘no money down is illegal’.
It often seems to be the case that when they say that they have heard no money down is illegal, it is usually because the no money down techniques that they are referring to involve mortgage fraud. Clearly if it involves mortgage fraud then it is illegal, so don’t do it.
But not every no money down technique involves mortgage fraud, which is why you can do plenty of no money down techniques that are legal.
This includes the use of options, which will allow you to do no money down and which is becoming more recognised, and mainstream in the UK. Other ways of doing no money down can be using delayed completions, again perfectly legal. It could be doing assisted sales. There are all sorts of techniques that you can use to do no money down deals.
Often times these are easier to negotiate with a vender direct, but there are some estate agents that will understand how to structure a more ‘creative’ type of deal., However, not all estate agents will; don’t assume that just because they are ‘property professionals’ they’ll know about this.
A newbie mistake is to walk into an estate agent’s office and say, ‘I’d like to do a no money down deal with you’. They are going to look at you and think, “Who is this person and what are they talking about?” And probably show you the door.
Not all estate agents will understand it, but some will. Often whether they do or not will comes down to the choice of language you use, because essentially what a no money down deal is trying to arrange is the right to buy the property, at an agreed price, but not buying it today.
So I’d say something like “I’d like to buy the property, and I’m happy to agree a price, but I don’t want to buy it for 2 years/5 years (whatever time frame you are thinking of). Is there some way we could make that work? Perhaps I could rent it off you in the meantime?”
A delayed completion can work well as well. With a delayed completion you can exchange contracts today, or at least when your solicitors can produce the contract, and then you can defer completion for a year, 3 years, 5 years, whatever the time period happens to be that works for you and which you can agree with the vendor.
Rent to rent really is a form of no money down particularly if you add rent to rent to an option agreement. In that instance you can say to an agent ‘I would like to rent the property for 3 years, or 5 years, and if it all works out perhaps I could buy the property at the end of the 3 years or the 5 years? And perhaps we could agree the price today?’.
There are many ways of doing it.
Perhaps you may not have even realised anything like this was possible. In which case there is a whole exciting world out there to explore as to how to do property deals using very little or even none of your own money.
Peter Jones B.Sc FRICS
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