Hi Guys,

Not sure if you got to read my article in Think Big magazine last week so thought i’d post it here for you guys!

How to Get Finance in a Financial Crisis
In the last issue I spoke about the current property market and how the current economic climate is providing a phenomenal opportunity for educated investors.

So lets say you read that article and decided that you would like to jump on board and start snapping up some of the fantastic property deals that are sitting out there waiting for someone like you to make them your own.

Well the next question is how do you get the money to buy the property in the first place. Banks aren’t lending as readily as they were and they are generally asking for bigger deposits - these days you will generally need anywhere from 10-30% deposit when purchasing a property. At an average property price of $500,000 that means you are going to need anywhere from $50,000-$150,000!

Well lets get real for a second, there are not a lot of people out there that have a lazy $150k sitting in the bank ready to throw into their next property purchase. And if you start saving now then you could be ready by about 2019!

So how do you get around this? Get creative! Well that’s what I like to call it, Creative Finance. For most property deals I do I will use the banks money for most of the purchase but I will use Creative Finance for the rest.

Creative Finance usually means using other peoples money, also known as OPM. There are plenty of different ideas and ways to be able to do this, but probably one of the best in today’s market is Vendor Finance.

A “vendor” is the person that owns the property, the person that is selling you the property. So vendor finance means that the person who is selling you the property lends you the money so that you can buy their property from them. Well that’s just ridiculous, I hear you thinking. But hear me out because I’m going to show you how you CAN do this.

You need to look at the deal from the vendor’s viewpoint. In this property market most vendors are not getting the price that they want because the demand has dropped in the market. For this example lets say we are wanting to buy a $500,000 property and the bank has approved us 80% finance. So the bank will give us $400,000k and we need to come up with $100k ourselves for the deposit.

1. Approach the vendor and let them know that you have a bit of a different proposal for them, that this will end up with them getting more for their property than what they are asking. Immediately you have their attention.
2. You let them know that you would like to buy the property but don’t have the deposit just yet. Explain that you can give them 80% of the purchase price now.
3. Tell the vendor you would like to pay them more than $500,000, perhaps $520,000. That’s $20,000 more than they are asking. And they probably weren’t even going to get the $500,000 in this market.
4. Explain that to be able to do this you would need them to leave in $100,000 equity for now, and you will pay them back in 2 or 3 years, agree on an exact time frame.
5. Agree that also in 2-3 years (whatever the agreed upon time was) you will pay them back the extra $20,000 you offered.

This means that the vendor gets $400,000 now, and you get your property now. In 2-3 years the vendor gets another $120,000 and you get 2-3 years to either save it up or if you’re lucky the property would have experience some capital growth and you could pull the money out of the property itself – this is more possible if you are renovating or developing the property as that will inevitably increase the value.

Vendor finance is a win-win situation for both parties, and many vendors are willing to do this if it means that they get the price that they want and in some cases even more. It wont work for a vendor that is desperate to sell and needs all the money now – but not many vendors are in that position.

To see more examples of creative finance, get my free DVD Property Development Secrets of the Wealthy by visiting www.cdevelop.com.au.

Don’t let no deposit be your excuse for not getting into property, I didn’t use any of my own money for my first few property purchases and today sometimes I still don’t use any of my own money!

Carly