I know this post will be popularly unpopular.
BUT
Contrary to what many self-proclaimed “property gurus”, property network meets and exorbitantly priced “teach-me-how-to-buy-property-for-nothing” courses say: property investment requires money.
It doesn’t have to be mega-bucks, but property investment does require SOME money.
The fact is, no matter what anyone says – whether it’s a claimed Lease Option Deal, a No Money Down Deal, or a Below Market Value Deal – to buy any sort of property deal you NEED money.
Money is the lifeblood of ALL property deals.
And I know that’s unpopular: because there is a whole industry built on trying to convince people you don’t need money to invest in property – it’s the “No Money Property Investment World”.
And the fact is, it’s hugely aspirational. And it’s hugely in demand.
Of course anybody in their right mind would want to own something for nothing which they could make money from. I mean, how ideal is that – I get to own something for nothing and then make money from that something? Where do I sign?
But the fact is, property cannot be owned for nothing. Property always costs something – how much of a “something” all depends on your investment criteria and where you want to buy.
But let me ask you a question: if you have no money and are trying to buy property – why are you trying to buy property?
If you don’t have any money to buy property in the first place, how are you going to find the money to maintain it, or fix the problems when they go wrong? And they will go wrong.
Don’t kid yourself.
Properties always go wrong – and I have yet to find a plumber who will accept buttons in return for fixing a temperamental boiler (although I haven’t yet tried that ruse with the electrician).
And you may think the “ideal tenant” who is going to rent your “free” property is going to pay you a shed-load of money on time and keep your head above water. You may think there is enough net income left over every month for you to squirrel away the surplus and start saving towards your next property purchase (what am I saying, that will be “free” again, of course) but the fact is: sometimes tenants do not pay rent. It may be for a whole raft of reasons that the tenant is not going to pay rent – but then what?
What are you going to do?
With no money and non-paying tenants how are you going to reclaim your “free” house?
The fact is: solicitors and court cases cost money. They have not attended the same network meets and “buy-property-for-free-and-everything-will-be-allright” courses. They have not met the “property guru” who knows how to do everything for free.
Because the truth is: they live in the real world of property investment.
The real world of property investment is a mean, bad, money-grabbing world which most novice investors cannot get their head around. They do not want to hear the truth of “property investment requires real money to invest”. Content with living a lie, these novice investors would rather attend a network meet, course or buy a book and be told how they can buy property for nothing. How they can buy property for less than a can of Tesco Value Baked Beans.
They do not want the harsh reality that property investment actually requires REAL money.
Because that is not the dream of property investment.
Well, now it is time to wake up. Get real.
If you want to invest in property, get some money. It doesn’t have to be much. But you do need a few grand to start with.
Only then, when you have actually got some money in the bank can you start thinking about investing in property.
Until then – enjoy your dream of buying property for nothing – coz that’s all it is.
Vanessa Warwick (@4_Walls)
Bravo Sam!
This is such an important message to get across, one that Property Tribes has championed for the past four years.
Only today on a FaceBook property group someone posted: “My friend has no money and a dreadful credit rating, and wants a property. How can he buy one and rent it out?”
The problem is that too many gurus spout that you can buy property for nothing and people want to believe this dream and buy into these expensive courses. (irony?),
Money is the lifeblood of property … but so are tenants. These gurus never mention the 70 plus government statutes and regulations that landlords need to adhere to in order to be compliant. They never mention the tenant that stops paying the rent, or the cost involved when a boiler blows up.
Only through education can newbies learn that you don’t get something for nothing, and that, if it looks too good to be true, it is, every time, without fail.
If they come to the real world of your blog or Property Tribes, they will be exposed to the truth, not ra-ra and get rich quick. That has NO place in landlordism and is dangerous to tenants, as a get rich quick mentality will only ever end in tears … for tenants and get rich quick newbies alike.
We currently have a case on Property Tribes where one lady is owed £130K by a well known self proclaimed property guru. He promised her 5 properties all no money down (charged her £50K for his services to buy them) and four years later she has not a single property!!!
Perhaps NMD is not as easy as the gurus would have newbies think!
Rant over. Thanks again for a great blog.
Simon Topple
Nice rant Vannessa!
Simon Topple
Bugger replied to the wrong thread! Sam – can you delete my last post?
Sam
Done it but I can’t post as you about your Bulgarian comment 🙂
Sam
V, Thanks and pleased you enjoyed the blog – and that it prompted such an outpouring 🙂
You raise very important points which I wholeheartedly agree with. As you know I am a very proud winner of an NLA award for being a good landlord; being a landlord is a responsibility which people must take seriously – this is not get-rich-quick quick – but it can be a great business as long as it is treated as one.
rich greenland
Hi Sam I agree on the whole but disagree on the specifics. There are exceptions altho they are rare. It’s very hard to get JV finance but not impossible. I can only do it by getting VERY good deals and remaining visible on the internet.
You may recall you helped me buy my first property with none of my own money in Stapleton Rd. I’m still very grateful for that in spite of the problems so thanks! It gave me faith that it COULD be done and that 50% BMV really was possible! We have another buyer lined up… It WILL get sorted!
Then last year I bought the flat in WSM with a good friend and he even financed the refurb 100% and gave me a sub! Very generous that as I actually put MINUS money in!
I bought my 3rd property with none of my own money on 19 December 2012. Large 3 bed with additional basement flat, subsidence issues but nothing terminal and in a real state. I bought for £115K, did no work on it except 2 days clearing the crap out, then sold at auction 2 months later on 19 February for £141K. Nice! I offered it to my original JV but sadly he declined, complaining that the subsidence worried him (understandable) and that I wasn’t ‘selling’ it to him. Now I’m NOT a salesman (love marketing, hate sales) so I just took it straight to someone else. There are plenty of people out there looking for those sorts of ops, the hard bit is getting the trust between you – and I need to trust them too!
Most people doing these JVs have the charm and the blarney to PERSUADE folks they are good deals. They also produce fantastic glossy brochures, do ‘Investor Days’, aren’t shy about a little mild hype. Nothing against that as many are very good at what they do and basically honest, but I’m not a salesman so I can’t do even mild hype. This means my deals have to be VERY good. Yes it’s much harder to find them than the gurus let on and JV partners with cash don’t grow on trees but it’s not impossible.
I’ve got a bit of cash now which will make it MUCH easier as I can put some money into my next deal 🙂
Sam
Rich, while I appreciate what you have done is without “money” in the normal sense, the fact is you have offered “value” in return for what somebody else would have to spend money on.
In that sense, you have put “skin in the deal” so to speak. As a professional tradesman you worked for “free” in return for an equity share. If the JV partner you were working with used another trades person they would have to pay them with REAL pounds, hence this is why I believe this relationship has worked for you.
If you were not a trades person I doubt very much you would find any JV partners willing to share with you for “free” in the true sense of the word!
Jon Butler
Way to be controversial, Sam!
You are right, of course. The next action of someone who visits a “how to buy property for nothing” seminar is to find another “how to buy property for nothing” seminar.
It’s what I call “therapy”. They think they are on the road to becoming a property developer/landlord and it makes them feel better.
rich greenland
Here is the link to the discussion mentioned: http://www.facebook.com/groups/ukbmv/permalink/500194030039220/ The generic group link is: http://www.facebook.com/groups/ukbmv/ It’s actually a really good forum, altho I’m spending a lot less time on forums these days.
Sam
Jon, I love this: “The next action of someone who visits a “how to buy property for nothing” seminar is to find another “how to buy property for nothing” seminar”
I am sure you are probably onto something with the “therapeutic” benefits 🙂
rich greenland
Sam I agree you have to bring some value to the table, with the second deal it was my expertise in doing the refurb plus privileged information which I found out by not taking things at face value or believing what I’d been told. The sellers thought it had dry rot, I had it checked out by an expert and it was not ?
The value I brought to the 3rd deal was in finding the it and using my expertise to identify that the subsidence wasn’t terminal. I didn’t do any other work except 2 days clearing out rubbish. It reminds me of your Camberwell deal, £50K up for cleaning the flat and replacing the front door – nice!
The point is you CAN buy property even if you don’t have any money BUT you MUST have something equivalent to money to offer. In my case I had 30 years experience as a carpenter and builder, PLUS I have worked VERY hard to educate myself on finding great deals and the property business in general. So if someone tells me something is ‘impossible’ I see that as a challenge and try to find a way. There are some great opportunities with things most people think are ‘impossible’ because you have no competition!
I think it very unlikely that an inexperienced person would be able to replicate that, which is I suppose what you’re saying. One way they COULD buy property with none of their own money is to borrow privately, including money for all transaction costs and any refurb. That’s what I did with the first deal. But I knew what I was doing. Very unwise for an inexperienced person to dive in like that as private finance is EXPENSIVE!