#10 How to Buy a Property with 100% Finance (no cash savings)

#10 How to Buy a Property with 100% Finance (no cash savings)



Here's the Video Transcript:

so how do you buy a property property investment with no money down well there's a couple of different ways to look at it so firstly I'm going to assume that you already own a property and we're gonna use some round numbers so I'm going to assume that your family home is worth around about 1.5 million dollars and that you've got around about a million dollars of equity so your mortgage is 500k so how do we buy a second property let's say you want to buy another rental property million dollars that's around about the average Auckland house price at the moment you don't want to buy something you know in the wop-wop s– that's you know quite rundown but you're not planning on buying something that's you know five bedroom in Flatbush you know that's probably more like 1.5 million so what we need is a deposit you're not going to be able to buy a property with no deposit and we've got to find somebody somewhere to get that deposit so you need a cash or a cash equivalent deposit and for investment properties with the new rules you need around about 35% now you can't get away with as low as 20% some of the main banks will do 30% deposit but for this exercise we're gonna do 35% so for a million dollars we're gonna need three hundred and fifty K there's a deposit on this property so we're where we get their deposit as we top-up your mortgage on your own occupied property and your family home and we use that as a deposit for the next property and so that money goes through the lawyers account and then you use that as a deposit and then what will happen is using a second bank or even at your main bank we get the rest of the money 65% his new mortgage so this property is effectively 100% financed using equity in your own home and then a mortgage on on the property so that's pretty basic right no cash and your bank account except that equity you've got on your home and you can buy another property now what if you didn't quite have enough equity for a 35 percent deposit now what what these non-bank or second-tier lenders offer is 80% financed on investment properties and this is you know kids taking into account the serviceability calculations so what will happen is let's say you can only your current mortgage was you know a bit higher and you are only able to get say 200 grand and use that down here so in that case that 200 grand come down here and be a 20% deposit with the non-bank lender cuz they're not bound by the same loan to value ratio rules that the Reserve Bank puts on main banks you can get 80% leaning on the investment property so it's still kind of percent financed but you don't need as much equity in your family home or or whatever home you're using a security to get their next property so you do have to be careful because when you're using the non banks you're you're equally is quite a bit lower because you've topped up higher but you are maximizing your leverage and there's a couple reasons that you might do that firstly you feel like you're buying this investment property under value or you may feel like your assets are in a strong position or another thing that might be a strong reason that you want to do this is that you're you've got strong income and you're confident in your ability to build a property portfolio if interest rates go up because just in this scenario alone using the non-bank lender in the scenario if you've got two million of mortgage debt at five percent a year five percent you know you can do the math it's it's like a hundred grand or more of interest expense annually and if these mortgages aren't covering the costs of that and you're going to be prepared that if people are missing rent or your places on rented or the rates keep going up you're going to be prepared for that and so the exciting thing about this is if you've got your family home got a lot of equity you can buy a property that has you know you might buy a six hundred thousand dollar property which are plenty of them there's a thousand square meters or there or there abouts and then you might try and build some properties so another house or free few units or you know we've seen cemeteries seven terraced houses going on a thousand square properties that you know they keep the existing home there so this is how you buy an investment property of work with you know no money down you're using their equity you've got so your top up your current mortgage and then you get approval so the other thing to take into account is this debt can be on interest only if it's investment property and if you know how to structure that application correctly the state here so all of the investment debt can be structured on interest only and you know when you're working with a compliment accountant you know is that tax efficient stuff in there so don't stress too much about the new rules the store plenty of advantages to be a

#10 How to Buy a Property with 100% Finance (no cash savings)