Understanding Low And No Money Down Investment

Let's start our exploration of Low and No Money Down investment by making sure that we agree exactly what it is, and is not!

It might be obvious to you, but I frequently talk to investors who have a different understanding of exactly what it means. This can lead to confusion.

What No Money Down Investment is NOT...

It does not mean buying a property without needing any money of your own! In all the property purchases I have completed, and in those which Axis has sourced for our investors, it has always been necessary to contribute some cash during the purchase process, prior to completion.

What No Money Down Investment IS..

It is a situation where you end up owning a property, without any of your own cash in the deal.

A No Money Down deal can be arrived at in three different timescales:

1. Immediately on completion of the purchase: For many investors this is the ideal scenario as it means the fastest recycling of any funds used to support the purchase process in the NMD deal.
2. Within a reasonable short time after purchase, let's say 6-12 months. Whilst investors may have to wait longer to re-cycle their money, the inclusion of this timescale for a No Money Down deal opens up a number of additional, profitable, approaches to investing which we will discuss throughout the next few pages.

3. Over a medium term timeframe, let's say 3-5 years. This timescale means locking scarce cash up for considerably longer, and is probably the least popular technique for No Money Down investors. However, if other methods fail then this remains an option.

And Low Money Down?

A Low Money Down deal is where you invest considerably less than you would in a property purchase structured in a standard way, but you haven't quite achieved a No Money Down deal.

In general investors in 2010 have to contribute between 25-40% of the property price using their own cash resources if they purchase using 'standard' mortgage and purchase strategies.

Our expectation is that Low Money Down transactions would require a maximum of 10% of the property value as a cash contribution.

These percentages include both the cash contribution to the mortgage and all fees and costs.

We’ll show you the detailed calculations later in this Smart Guide, but as a quick summary, on a property with a market value of £150,000 you may need to invest:

·         £40,000 if using a standard approach

·         £15,000 using Low Money Down techniques, or

·         ZERO as a No Money Down purchase!

A reminder that in all these cases varying amounts of cash are needed during the purchase process itself, the figures above are after completion of the purchase.

Next Steps

Learn More... Why No Money Down Is Important

Browse our UK Investment Property

Download the No Money Down Smart Guide

Download The 100% No Money Down Finance Guide

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