How Do You Invest In Property, When You Have No Savings?

It goes without saying that investing in property is easier when you have some savings tucked away. However, it’s not the only way and many people have become property owners with little or even no money to their name. If the latter sounds like you, then read on for some creative ways to enter the property market that may just work for you.

Invest with a partner or friend

If you can’t afford to come up with the down payment, then consider bringing in a partner or friend, or even partner up with a talented building contractor. You will need a contract to determine who pays what and what the benefits are for each party. But, if done correctly, it can be an attractive and beneficial partnership for both of you. Of course, the partner may be there for purely an investment in the long-term, at which point you will need to undertake the day to day management. Make sure that any partnership is rock solid as you don’t want to end up being responsible for the whole loan if the other person fails to uphold their commitment.

Seller financing

Seller financing may be rare but it is possible if the seller is particularly interested in having you buy their property even without some savings as your down payment. Motivated sellers, in particular, may give you a loan to cover a shortfall to the bank or even pay the total of your down payment to essentially reduce the sales price of the home. With this option, however, legally bound contracts need to be drawn up so all is fair and above board.

Consider a trade

Is there anything you could trade that would work in lieu of a deposit? Could you offer labour or specific skills, or do you have other items such as a camper, car or other large appliance that could work as a replacement for cash? This will only work in specific circumstances depending on your specific trade and current assets but it may be an option. Consider getting an outside appraisal on your asset and make sure that a contract is written up to cover both buyer and seller.

Rent or lease to buy

Renting or leasing to buy is more common than seller financing and this is where a portion of your rent ultimately reduces the purchase price of the property. Renting or leasing gives you time to save towards a deposit on your loan if necessary, and assists by reducing the final selling price of the house. It also means that you get to live in your house sooner rather than later reducing the need to seek out an additional property in the interim. Again legal agreements will need to be created to ensure that everyone knows exactly how much will be paid once the renting ends and the house sale begins.

Taking over mortgage payments

Before you consider this option, it is worth noting that this is not an option on all mortgage loans so you need to do your research with the bank beforehand. If it is possible, the deed will then be transferred to you in exchange for the balance of the mortgage. You may also be able to take over the sellers other debts such as non-mortgage loans or credit card payments in lieu of a down payment. This is a win-win for both as there is no need to find the money for a deposit and the seller’s debts get cleared as well.

If you already own a property, consider a home equity loan

If you already own one property and wish to buy a second or third property, then you may wish to consider a home equity loan. This will mean that your lender will allow you to take out a loan over and above the current loan or loans you have on your mortgage. Through this method, your home is essentially being used as collateral, so it is worth understanding that if you cannot make the payments, you could end up losing both properties.

Reach out to alternative lenders

There are other lending options other than a traditional bank and these may be able to help you finance your deposit if you cannot get a bank to assist. Make sure that you understand the agreement in full and read the fine print, as many alternative lenders have high-interest rates which mean that you end up paying a lot more than you intend to borrow. However, in some cases they can be very helpful if you have taken the time to research all your options.

Borrow money from friends or family

Borrowing money from friends or family can be as easy or as complicated as you wish to make it. Be sure you note how much you end up borrowing and when payments are due if you do borrow directly from those you know so you can keep track of how much you owe. Many relationships have been destroyed over an inability to pay back a loan, so enter into these kind of personal loans very seriously. This is often the easiest option when financing the deposit is difficult especially for those just starting out in the property game.