Sounds crazy and virtually impossible I know right?! When I first learnt the tricks of the real estate trade, nearly a decade ago, I thought the same. And the extremely harsh truth of the matter is, not everybody can do this. Now when I say that, I don’t mean particular individuals. I literally mean not EVERYONE can do this. Both property and money are a game. And sadly in all games there are winners and losers. Sorry folks, I didn’t make the rules. I am just here to help you understand the game, and how to better yourself at it. The truth remains that 90% of the wealth across the world resides with 10% of the population. You have heard the phrase “the richer get richer” right? Well sadly, it is true.
Anyway, lets get back to helping you discover how you can buy property without having a single cent yourself.
Lets go over the basics here -
Property costs money. And a lot of it. Money you don’t have. So where can you get this money from? The first fairly obvious place to look is through applying for a mortgage. The beauty of a mortgage, is that they are no win no fee. As I am sure you are aware, if you don’t get a mortgage it doesn’t cost you a thing but your time.
Now the situation currently is that the government are sat on several billion euros worth of property. How are the government going to sell off most of this property? Because lets be truthful here. Not many of us walk around with 200,000 euros in a our pockets. Meaning 99% of us require funding of some sort.
So lets say the bank are fairly open to offering mortgages to people. Without doing so this wealth of property will probably never come down. Thats the first positive sign that is going to help you out. Sadly, because of this pesky recession lenders have tightened up the amounts they lend and whom they lend too.
Generally mortgage lenders will now offer 70% of a properties sale price to residents who wish to purchase a property for “first residence” (I.E you want to live in the home). And 60% to those who are interested in buying property purely for the purposes of an investment, which is known as a “second residence”.
Meaning depending on which you choose you need to stake 30 – 40% of the purchase price as well.
Firstly, getting this mortgage accepted requires several key features which I am going to explain very very briefly for you.
Mortgage lenders worldwide look for two key traits in purchasers.
1) Your Income to Expenditure ratio.
Mortgage lenders require (in most circumstances) for you to show at least a third of your monthly income as available to pay for your mortgage.
For example if the mortgage repayments are 400 euros a month, you must show you have at least 400 euros available to pay for this ongoing. My recommendation would be, look for a property which has a monthly repayment similar to that of your rent. Possibly a little more.
Once you buy a home you will no longer be renting, and the rental money can be transferred as mortgage payments. Banks understand this.
2) Credit Rating
Your credit rating is a score from 1 – 999 (the higher the better) which shows money lenders how trustworthy you are with money. If you have had a series of debts which you have failed to pay, or haven’t paid back credit cards on time, your credit rating is likely to be lower.
We want to look at writing a document on how to improve your score in the coming weeks. So keep your eyes peeled. Fear not if your score is perhaps a little lower than average, steps can be taken to improve this over time. The Credit Rating system is very forgiving in that if you can show a fresh and clean approach to debt then your score is likely to increase.
Okay, so lets assume you have a great credit score and you can show a third of your monthly income as available funds which you can assign to your mortgage repayments.
You apply for a mortgage and are granted it. Congratulations.
However, what about the other 30-40% you need to pay for the property. This is where the creative element comes in. Here you have a few elements -
1) Borrow the money from a friend or family member
2) Get a loan
3) Enroll in a private property equity agreement. There are several of these on the net. Where people with money are looking to invest 30 – 40% into properties all over the globe. With property prices eventually always likely to go up, most investors give you two options pay them off monthly or quarterly. Or allow them to own 30 to 40% of your property. Allowing them to charge you a slight rent each month and make a profit once the house is sold.
Personally my favourite option in Spain. Is as follows -
1) Get a 60% mortgage for your property of choice. Apartments tend to work out better than villas / town houses.
2) Get a small loan to cover the remaining 40% and tax etc on top.
3) Rent out your apartment for holiday lets all year round allowing the income to pay for the entire mortgage, loan and all costs. Giving you a profit on top as well.
If you can rent out a small apartment for £600 a week over the summer, and £300 in the winter you are looking at bringing in nearly three times as much as your outgoing mortgage costs.
After several years I guess you have a few options.
1) Pay off the loan and increase your monthly profit. Loans tend to have higher interest than mortgages.
2) Sell the home
3) Use the profit to buy apartment two.
All elements in this article are fairly speculative and are based on our experience and knowledge. We can only show you the door. You know the rest.
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