The idea of coming up for deposits every time you buy is a real worry for most investors, and it is in fact why most are not able to buy more than 2-3 properties over their investing career.

I have found an investor who is very willing to sell the house he has had as an investment for a number of years. He only needs 80% of the sale price, and wants to go into another deal of a commercial nature. He only listed the property at the higher price because he thought that he would get close to what the agent said he would sell it for. The property has performed well for him and has increased over 40% in the past few years.

He needs the cash to get into another transaction, I want the property so we are all getting what we want.

So what happens to the 20% he leaves behind. Well the ‘deposit’ so to speak is credited on the contract as being paid. The banks come along and see that and are more than happy to lend on the basis of a 80% LVR or 80% loan.I am happy because i will not have to cover any deposit or Lender’s Mortgage Insurance. I will however have to pay some stamp duty and legal costs.

So why buy houses like this?

No deposit now, means I can let the natural market movement increase the value for me and I will refinance his loan out in a few years.

I lower my risk with none of my money in the house.

I can keep money in my pocket for when vendors need that added incentive to get the contract done on a regular sale.

This is a great income for a property you may have for sale, but still want to have money working for you. People charge close to 15% interest on this type of lending. Avoid being greedy, just make it work for the buyer. You will be rewarded nicely.

On a last point, you can set these types of transactions up and then sell them to another investor if you need your cash now. You just need to keep your ideas open when investing as you can make money from being open to various things, like selling your interest in a property to someone else or ‘wrapping‘ it to another investor. This is so you can take the money and do something else with it, like buy another house that is cheap, refinance some debt or take a holiday on the beach!

Just keep at it and success will come. The worst thing that could possibly go wrong is you are left with a negative cash-flow, rental property. That’s really terrible ?!

Don Christie

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