How do I buy property with no money down – the 30 second answer
Posted by markharrison on January 10, 2011
An answer I gave to a question on Quora asking how to buy property with no money down. My answer on Quora was related to the US market – this version is slightly tweaked for the UK.
Option 1: Vendor finance. You get the people selling you the property to lend you the shortfall between the price you are paying, and the mortgage you can get. Obviously, this means finding a vendor who is both in a financial position to do so, and willing to!
Option 2: Investor finance. You build up relationships with people who trust you to put together deals, and they lend you the shortfall (deposit.) The rates these people would charge you, though, are typically much higher than bank lending for the same amount (in the UK, typically 1-2% per month, payable monthly.)
Either way involves you assuming a lot of risk, and only works if either you are letting the property in a way that generates sufficient cashflow to pay off both sets of lenders, or if you have enough cashflow to make such payments yourself.
Either way also involves careful legal advice.
For Option 1, you also need to either directly source properties, or build relationships with estate agents who are comfortable to put a vendor-finance offer to a vendor. Most UK estate agents have no experience with this at all.
For Option 2, you will, obviously, need to source prospective investors willing to put down the cash. It is generally a good idea to build up relationships with such people before you find your deal, so that you can move quickly once you do.