This is the ‘deposit’ that you would normally put into the property if you purchased at full market value. By purchasing below market value the deposit is already in the property when you buy it. To purchase the property no money down you then cleverly structure the purchase to take full advantage of this.

You then end up putting none of your own money into the deal and having the whole thing financed 100% via a mortgage from day one. This is what gifted deposits, cashbacks, closed bridging etc all achieve in different ways.

Taking the above example, some property investors might choose to purchase the property for £83,000 with a deposit and an 85% mortgage. They would then aim to remortgage the property after a few months based on the true value of £100,000+. The problem here is you might not get a valuation of £100,000. It may well come back a lot lower.

This would mean having your money stuck in the property for a few months more!

With closed bridging for example you get around this problem by getting your remortgage valuation in place before you purchase the property. Therefore, if the valuation comes back lower than expected you may decide to walk away from the deal or renegotiate a better price.

So, taking the above example again you would first of all approach the bank with the aim of getting a remortgage valuation. They would then send a surveyor round to do the valuation. This then comes back at £100,000.

You would then get a remortgage offer based on this valuation. If you went for an 85% loan to value loan, the bank would be lending you

£85,000. Remember, this is a remortgage so you cannot draw the funds until you own the property.

This is where the bridge comes in…

On the same day, you will purchase the property cash using bridging funds and then remortgage later on that day. So in the above example, £83,000 of bridging funds would be used to purchase the property cash in your name and it would then be remortgaged later that day. The £85,000 remortgage would pay back the £83,000 + interest to the closed bridging company and you now own the property no money down. We do an incredible number of these closed bridging deals through my www.property-finance.com service – just last Friday I did four bridges for four different investors on the same day.

All of this manoeuvring has to take place because the bank will lend to you based the lower of either the purchase price or valuation. Therefore, the fact that you are paying £83,000 for a property worth £100,000 makes no difference to the bank. They will still expect you to put down a deposit when you purchase in the conventional way. The creative techniques I mentioned earlier all allow you to get lending based on the true value of the property and not the purchase price.

This allows you to put little or none of your own money into each property deal and therefore build your property portfolio much more rapidly!

You could of course purchase a property for it’s full market value, get an 85% mortgage and borrow the remaining 15% from other sources but then you would struggle to cover the interest payments on both loans from the just the rent alone– for a start

the 15% element will typically cost you at least 10% or more per annum in interest.

“Where can I get the deposit from without paying any interest?”

Some people I know use 0% balance transfer credit cards to constantly juggle one credit card balance to another just before the 0% interest period runs out. This allows you to borrow interest free unsecured funds for a period of time. Please do not even attempt this risky strategy if you are not highly organised and without reading through this website – www.stoozing.com

“What about private investors who can lend me the deposit?”

This is a good strategy. In fact, I kicked off my portfolio by borrowing the deposits from private investors. They would lend me either the deposit, or more commonly the entire purchase price at around 2% interest per month. I would then refurbish the property (quickly!) and apply for a regular mortgage from a buy to let lender.

This would be based on the true value of the property and not the purchase price since I’d already purchased the property several months earlier using the investor’s cash. Using the previous example, the bank would then lend me 85% of £100,000 = £85,000. I would use that to pay £83,000 + interest back to the investor and I would then own the property with 100% bank funding and having used absolutely none of my own money.

If you want a detailed blueprint for purchasing investment properties no money down and how to raise deposits, check out www.property-deposits.com for a lot more information on the subject.