No Money Down Deals in Real Estate – How Do You Structure Them? Part 1
No money down deals in real estate have been talked about and promoted by property gurus. For the amateur investor, no money down deals sound too good to be true. If such a deal is possible, it seems then, that anyone can start investing in real estate. This article sets out to explore the possibility of such deals and how it can be structured.
A no money down deals means that the purchase of a property is done with the buyer spending only a little or totally no money of his own at all. This would mean that there is minimal or no capital outlay by the buyer at all, which is the wish of most property investors. To be able to structure a deal, you should have a good credit record so that you are able to source for financing from several sources in a shorter time period. So where is the source of funding? The sources can be a combination of personal loans from the bank, credit card loans, funds in account 2 of your Employee Provident Fund, monetary gifts from your parents and so on.
Some developers allow you to pay the down payment or booking fees with your credit card. Check which credit card provider offers zero percent installment plan for charges made. Also, check what the installment period is i.e. 12 months, 24 months or 36 months. Credit cards can be a dangerous way to finance your property purchases and I would only advise investors to use this method if you have complete control and confidence over your finances. The idea is to pay off ALL your balances at the end of every month. Not only will this give you good credit rating with the banks, you will be their most valued customers. Over time, and with careful monitoring and planning, you will increase your credit limit, which will enable you to fund for more properties purchases.
If you do not own a credit card, you may want to look at personal loans offered by the different banks. Compare the interest rate as different banks will have different interest rate; also check how long the loan processing time is. Of course, it makes sense to go with lowest interest rate. For those who are residing and working in Malaysia, you may utilize all your funds in your Employee Provident Fund Account 2. Just place your booking fees to secure your unit before applying to withdraw from your EPF account. Then, you are good to go.