Can you buy investment property with no money down in Australia.
The good news is that the answer is yes.
The bad news it's not just as easy as going out and asking your bank for 100 to 110 percent
loan like you might been able to do approximately 10 years ago.
Hi I'm Ryan Mclean and I'm from positive cash flow Australia where I help people like you
find and invest in positive cash flow properties.
Can you purchase property with no money down in Australia?
As I mentioned before the answer is most definitely yes, but it's not as simple as going out and
just borrowing money from the bank, you need to work out a way to do it, I'm going to show
you five different ways that you can purchase property with no money down in Australia.
The first way is using existing equity, if you have existing equity in your home or another
investment property you may be able to borrow against that and use those funds to finance
a new deposit into purchase a new property.
Accessing equity can be great because it means that you pull the money out of an existing
property and you don't actually have to find money for yourself, from your own pocket and
the more properties you have and the more capital growth you are getting the faster
your equity grows the more equity you can access and the easier you can compound the
effect and build your property portfolio.
Let's say you don't have an existing property that you want to get equity from, how can
you invest with no money down, well one way to do it is to get a guarantor loan from the
bank, banks have started offering 100% guarantor loans if a friend or family member is willing
to guarantee a percentage of the loan.
In the past they would have to guarantee the full loan if you DE folded then they would
have to sell their house in order to cover the cost of your mortgage, however now many
banks and other lenders are allowing the guarantor just to guarantee 20% of the loan or anything
to the value of 20% depending on how much you put in.
The goal of the bank is to have an 80% LVR against you as the investor and have 20% secured
otherwise either in cash you've given them or through the guarantor loan, if you give
10% the guarantor may only need to support you with another 10% of the guarantor on that
loan, if you offer 5% then they offer 15 and so forth.
Once the property goes up in value or once you pay down the debt that your loans of value
ratio becomes 80% then there's the option to remove the guarantor from the loan which
can be great.
Number three is own a finance, this is not common in Australia as it is in other countries
like the United States, but is still possible and is still legal in most states please check
your local state laws as to whether you can do this or not I think that they're some restrictions
in South Australia.
Basically instead of you going to a bank securing your loan accessing the funds and then giving
that money to the person who owns the property that you can buy it from them, you go directly
to the person who owns the property and you offer to buy the property but assume a loan
with them.
Let's say they have a $500,000 property and you have no money down you go to the person
selling the property and you say I'm willing to pay full price for your property however
I'm not going to provide you with the deposit and you need to finance the deals, basically
I will assume a loan with you for $500,000 and I will pay you on ongoing basis, I will
pay you the interest rates and so forth.
I have a whole another post, another article about own a finance and about how it works,
if there's something you are interested in I will suggest that you look into it in more
detail.
Number four is property options, I haven't done a lot with property options from myself,
they do seem very difficult I suggest that you checkout Rick Orton and he's website,
if you are interested in investing using property options but what you do is go to a person
selling a property or someone regular and say I would like to pay you a certain amount
of money in order to buy a property for a certain amount of price for x number of years.
What can happen if you are investing using this option, is that the property can go up
in value, but you still have an agreement to purchase the property at a lower value,
when the property is worth more than you can purchase it for there's a chance that you
can get a full loan for your purchase amount because the evaluation of the property is
higher, obviously this is going to be more difficult than the standard purchase and in
some cases the banks will look at the evaluation and the purchase price and they will only
give you a loan for the lower of the two.
You will need to secure financing with the lender who will be happy to fill in based
on the higher evaluation, I suggest that you speak to a mortgage broker if you want more
advice on that.
Number five is partnerships, this is where you team up with someone else who has money
and you do a lot of the lake work for them, let's say there someone who is money rich
but time poor and they really want to invest in property, they really want to invest in
positive cash flow property but they don't have the time to go out and find them.
You could go to them and say I'm happy to find the property for you to do all the diligence
to do the negotiations and to maintain and manage the property when we own it.
You need to put out the deposit I will help you finance it with my wage and we will go
in 50 50, you create a partnership arrangement where they put up the deposit, you don't put
up any money and you can purchase the property.
There are some legal requirements surround this and is advised that you seek professional
legal counsel before entering a partnership around investing in property because if the
things go pear shaped or even things go well, you need to understand exactly how to split
the profits or how to cut the loses.
There you have how to buy an investment property with no money down in Australia, I hope this
has helped you get some ideas about how to invest without putting any money out of your
own pocket, if you are interested in learning more about how to save your deposit then head
over to the website look at the archives and I will have a few articles on saving your
deposit over there.
I'm Ryan Mclean from positvecashflowaustralia.com.au and until tomorrow which is when our next
episode is coming in, stay positive.