No money down deals? How?

If you are within the age of 20-45 years old, live in Kuala Lumpur or any other prominent city/town within Malaysia, working professional and/or are constantly connected to the Internet, which in this day and age, is practically every living person, at least those that I know of, would have heard of the group buying phenomenon of real estate or properties.

What it is is a person or a company, generally headed by property investment coaches, who hold seminars to sell to you the idea of buying a certain development or a group of properties, as a group, thus entitling everyone to a bulk discount. Now, I cannot vouch for the effectiveness of whatever strategies these groups are using as I have never participated in any group buying although I have personally attended some of these seminars. However, in theory, the strategies that they advocate are, in my opinion, sound and genuine ideas, and I also have some personal friends who have benefited (made money) by going into investments with these organisations or groups.

Personally, being a property investor, I have not participated in any of these as I find the issue of having little or limited say in how I want to manage my property or how much I want to make, or how long I would like to hold the property not to my liking. Many of the property investors who have made serious money solely from property investing that I know of are individual investors or companies who make their own choices, and deal with their own consequences. I am talking about individuals who hold or control tens of millions of ringgit worth of properties, and in some cases hundreds of millions. Now, I am not saying that these people do not participate in group buying, but they do it on their own terms, hence they have more control over the choices that they make.

Anyhow, one of the ideas that I agree with on what the group buying investors are doing is their preference for no money down deals, meaning you do not have to come up with money out of pocket, or minimal amount of money out of pocket, in order to gain control of a property.

So, how do you do a no-money-down deal?

One of the simplest, and most common forms of doing a no-money-down deal is to link up with other investors who have the money, commonly referred to as a JV. Now, I know what you are thinking; how is this any different from group buying?

Firstly, group buying organisations GENERALLY tend to go for new developments as they are looking to buy in bulk. In the case of a JV, one need not necessarily be going for buying under construction projects directly from developer, but can also opt for buying completed properties, better still if in a prime location at a good price, but the best is it would also be tenanted and providing some form of cashflow. Whether the cashflow generated is worth the price is something which I will elaborate on, but know that group buying organisations will not tell you to go for these deals even if it is a super good deal, as it will not fit their modus operandi of going for a bulk discount when negotiating with the developer. If anything, the company might buy it for themselves.

A typical example I can provide you is with my own experience. I had identified a property located in one of the prime areas of Kuala Lumpur, which was owned by a Malaysian staying overseas. Now, this property was then being put on the market for a price which I deemed relatively cheap compared to its full net value. The reason why this was being sold at that price at that time was that the owner had owned this property for quite some time and being overseas, was most probably finding it a bit troublesome to maintain, and also maybe not as in touch with the local market and how it was doing. I saw my opportunity, and brought this deal to a partner who had invested with me before. Long story short, I came up with the loan financing from the bank, and my partner pledged the upfront cash (hence I did not have to come up with any money out of pocket). By the time the booking deposit was paid and before the SPA was signed, I made RM 150,000 on the deal, hence making me money in a minimal amount of time, with minimal effort and minimal risk (as I had done my due diligence on the property in terms of its demand for sales and for rentals).

Now, this is just one of the ways that one can make money by purchasing real estate using a "no-money-down" strategy. It is extremely useful for those investors who have limited cash to throw around or invest, however, the pre-requisite is that your credit rating is sound. I will share the other "no-money-down" strategies in another article.

The other strategy for growing your money through investments with a limited amount of cash is through......TRADING!!! For info on that, read the rest of the articles on this blog or email me at traderbuffalo@gmail.com.