Home Improvement

The property market has always been a dream market for investors. Be it is a long-term property investment, a BTL property investment or even a student accommodation investment, it holds a good reputation for bringing handsome ROI to the investors.The latest figures from the government authorities tell us that the country is facing a continual shortage of houses. The Wall Street Journal reports that along the growth of the property market of the world, the lending on real estate, both commercial and residential, has also made a roaring comeback.If you are a novice who dreams of making a fortune in the property investment market or an established property investor, the following tips will keep you safe from taking wrong property investment decisions.1. Carry out proper market researchThe basic step, before doing any kind of investment in any sector, is that you should do your own research about the industry. The property market has always shown ups and downs and the nature and volume of the change fluctuate across the regions. Learn the current market trend and future predictions, made by the authorities, as well as gather information about the average market price of the properties in your targeted area. Conversing with the people living around your property area will help you to understand the current market price of the properties in that particular area. In order to understand the pitfalls and the future market trends in the property market, you can speak to people who have experience in the market and read journals and reports from various experts and authorities that are available both online and offline.2. Plan your budgetYou must be clear about your budget on your investment plan; otherwise you might end up spending too much money than actually required or even spending too less money that could have earned you more profit than anticipated. This is really an important matter to keep in mind that property investment is a long-term investment and you must make sure that you have enough cash reserves to meet the contingencies. If your buy-to-let property is lying vacant for a couple of months, paying the bills will seem impossible for you unless you have proper fund reserves. Never over-invest as it will make all your money tied up at one place when the market is down.3. Choose the right locationChoosing the property in the right location is a very important thing to remember while making an investment. When you target a property for sale or a buy-to-let investment, it has to be properly located considering its proximity to one’s basic requirements, such as shops, hospitals, schools etc. Buying a property within your accessible location will give you more control and confidence over your investment. The ‘location advantage’ is always directly related to the capital growth of the property.4. Use estate agents for finding the right propertySeeking the help of estate agents, to find your property, is never a bad thing if you are aware of the pitfalls very well. Being the professionals in the sector, estate agents know your targeted area very well and will be able to help you in finding the right property as per your requirements.5. Insure your property to avoid unforeseeable damagesYou do not personally know your customers of your property, so it is always better to insure it in order to avoid any disastrous damage. In modern times, insurance can cover you anything, including full house insurance, protection from different calamities, and insurance for the appliances inside the house. You even have insurance option to the loss of your house rent!6. Always negotiate for a profitable dealThere are too many players in the investment market due to its global appeal. This fact always gives the buyer the advantage of negotiation. The agents also would prefer to finish the deal as smoothly as possible. Your agent can depict you fancy pictures of the advantages of buying that particular property, don’t fall for their words, instead, and make a move based on your research and understanding; bargain for a fair deal.7. Get social around the people of your kindAlways try to connect with people who are already in the property business to get updates and the latest news about the property industry. Things like, participating in online forums and groups of landlords and joining various associations of property investors and landlords, increase your insights and make you sure that you don’t miss any leads and clues. The National Landlords Association, National Association of Realtors etc. are some of such associations and in each region you can easily find similar local associations of investors.Hence, before investing all your money in the properties, make sure that you have completed all the aforementioned steps to build a successful investment portfolio.

There’s a myth out there that you cannot buy property in Australia for no money down. The myth is wrong. You can buy property for no money down (or for very little money down). However, as they say, there’s no myth without fire (that’s the right expression isn’t it?). What I’m trying to say is that buying property for no money down is not the “normal” way of doing things. This means that you have to go about things slightly differently to normal to achieve it. By the way, as only 4% of Aussies reach retirement age with enough money to live off their reserves, doing things differently is a great approach as far as I am concerned!So, let’s get on with it!Approach 1 – Use Existing Equity In Your HomeIf you own your own home (with or without a mortgage), you may have equity in your home that you can use.So, let’s say that your home is worth $400,000 and that you have a mortgage on it of $250,000. You therefore have $150,000 of equity in your home ($400,000 less $250,000 = $150,000). Let’s also assume that you have found a great investment property that you now want to buy for $200,000. If you go along to a lender and offer both properties as security, it is likely that they will lend you 80% (or maybe more) of the value of both properties. So, the combined value of the two properties is $600,000. If they were to lend you 80%, that would be $480,000. Of this, $250,000 would cover your existing home loan leaving up to $230,000 for the purchase of your new investment property. This would not only pay the cost of the property but would also leave an extra $30,000 for costs (legal fees, stamp duty, etc.).Approach 2 – Buy At A DiscountIf you have found an investment property that is worth $200,000 and you can negotiate a purchase price of, say, $160,000 then you may be able to get the lender to lend you, say, 80% of the value instead of 80% of the purchase price. This would cover the whole purchase price and just leave you to pay for the costs.While this sounds great in theory, most lenders these days take the approach of only lending based upon whichever is lower, the value or the purchase price. You will usually have to have a very good relationship with the lender for them to lend based upon a higher value.If you are unable to convince any lenders to lend based upon valuation, then an alternative approach is to initially borrow based upon the purchase price and then re-finance as quickly as you can with another lender. The new lender will use a valuation to determine how much they will lend. Obviously, the disadvantage of this is that you will need to find additional funds for a short period of time until you re-finance. However, can you borrow these funds for a short while from family, or friends, or credit cards, or personal loans, or … ?If you have a small pool of funds that is just enough for you to purchase one property in this way, you might decide that you would keep re-using this pool of funds to keep buying more discounted properties, each time converting them into no money down deals as soon as possible after you own them. A large property portfolio can be built this way with only a small pool of money.Approach 3 – Renovate and RefinanceApproach 3 is similar to approach 2. The difference is that you purchase at a fair price (not necessarily discounted) and then do a cosmetic renovation that adds substantially more value than the cost of the renovation, and then you re-finance.So, if we again take our $200,000 investment property. Let’s say you buy it for $200,000. You then spend $5,000 doing a few cosmetic improvements (a lick of paint, tidy the yard, clean the kitchen, etc?) that brings the property up to a value of, let’s say, $250,000. If you then re-finance it at 80% of $250,000, the lender will give you $200,000. You have a short term outlay, most of which is repaid from the re-finance. The cash you eventually leave in the deal in this example is the renovation and purchase costs. Of course, if you were able to get a 90% loan, you would not need to increase the value as much as this and you would still achieve a no money down deal.Approach 4 – Vendor FinanceI like this one! And it’s more common than you might think. Let’s take our $200,000 investment property again. You would offer to purchase the property for $200,000 but on the terms that you would pay, say, 80% now and the balance in, say, 2 years. So, the bank loan covers your initial payment and a refinance 2 years later (when prices have increased) may cover the extra you need to pay then.This approach is more common with rural and agricultural properties but there is no reason why you should not apply it to residential property too.To make it work best, remember that it has to be a good deal for the vendor too. They have to have a good reason to go for the deal. So, maybe you will choose to offer them slightly more than its current value or maybe you will pay them a higher than normal interest rate on the amount you still owe them, and you will offer them the security of a second mortgage, won’t you? etc.Also, it is a very good idea to put your offer in on the basis of two options. Such as: “I’ll buy the house in the normal way for $180,000 or on vendor finance terms for $200,000″. This clearly demonstrates the extra that you are offering for the vendor finance terms.Approach 5 – Off The PlanHere’s another good one. If you agree to buy a property off the plan, you will normally have some time before it is finished and, if the property market is rising, it may have risen enough to get a normal mortgage that covers 100% of the purchase price.Let’s take an example. Say the property price is $200,000 again and let’s say that building is expected to complete and the property will be ready for you to move into (or rent out) in 18 months time. However, by the time it is ready to be occupied, it might have increased in value. This could be simply because the market has moved up or it could be for other reasons, such as the price to buy at an early stage of the development process can be at a discount to its true value. So, let’s say that the property is worth $250,000 by the time it is ready. Getting an 80% loan on the property would give you $200,000 – just enough to buy it for no money down (excluding costs). And, if you were to get a 90% loan, you might even get money back from the deal!There are a couple of great extra twists you can use with this approach. Normally you would need to put in a 10% deposit when you agreed to purchase the property. You would get this back at settlement from the cash from the bank loan. However, if you are interested in no money down deals then you are unlikely to want to put 10% in up front and leave it sitting there for 18 months! So, the way round this is to get a deposit bond. A deposit bond acts like a loan for the deposit. So, you do not need to pay the deposit! Instead you pay a small fee to the deposit bond provider. Your mortgage broker will be able to help you find a suitable deposit bond provider.There’s a second great twist to this strategy. And that’s to buy in Victoria. The stamp duty rules in Victoria say that duty is payable on the value of the property at the time that contracts are exchanged. If you enter the deal at an early stage, the value at that time might be land value only. You can save a lot of money in this way.There is one thing to watch with this approach though. Only enter into the contract to buy if you are sure you will want to purchase the property when it is finished. A few years ago people were entering into these contracts and re-selling the property before it was finished for a higher price. Some people made a lot of money from this and started entering into lots of contracts to buy off the plan with no intention of ever actually buying the properties. This was working terrifically until over-supply caught up with them. They found that they could not sell the property for a profit and they could not afford to buy all the properties they had entered into contracts for. They lost money – some of them lost lots of money. Please, only use this strategy to actually buy a property you want. Remember you are entering into a legally binding contract to purchase the property.Of course, if circumstances change for you and you no longer want to proceed with the purchase at the time of settlement, then you can often find a buyer who will want to buy the property from you and there’s probably a good chance that you will make a profit out of it. But please do not enter into the contract with the intention of never actually buying it.Approach 6 – 100% financeThis is probably the most obvious one. Ask the lender to lend you 100% of the purchase price. Competition amongst lenders is increasing and 100% loans are becoming more available. However, lenders tend to withdraw such products when the property market stalls and make them available again when the market is rising.Also, they will be very particular when assessing your application. They will only offer 100% loans for what they perceive to be very low risk people and very low risk properties. And, they often charge a premium for these loans with higher fees and higher interest rates. Nevertheless, this might be the best approach for what you want to do.Approach 7 – Service ProviderA service provider that structures itself specifically aimed at helping people to buy property with no money down can be a great way for many people. The service providers will work with you to help find the right property and the right finance structure.Some service providers will charge you a fee for their services. However, often they will have direct arrangements with property developers and mortgage brokers that means they can package up a no money down deal for you. The property developers and mortgage brokers like the arrangement as the service provider will do much of their sales work for them – which saves them money. This can be a substantial saving and many property developers and mortgage brokers are very happy to pay a commission to the service provider as this will still save them a considerable sum. In this way, the service provider can often work for you without you having to pay them anything.There are a growing number of these service providers and it is worth checking out a few to see the range of services they offer and what (if anything) that they charge.I would strongly advise you to ensure that you obtain an independent valuation before you enter into any contracts. Some service providers will automatically do this for you. For other you will need to organise this yourself.There are probably many more ways of buying property with no money. The key is to start thinking outside the square and ask yourself and others involved (e.g. the vendor and the real estate agent) “How could I buy this property without putting any money into it?”. You might be surprised by the great answers you get!I wish you great investing!

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