ONE MINUTE READING: How to Buy #property with $0 of Your Own Money

Take a look at this example:

– Property price: $500,000

– Payment: Cash

– Stamp duty + purchase costs (~4%): $20,000

– Total funds required: $520,000

You managed to buy that property for 25% less than market price. Either this, or the value of the property has gone up by 25%. This means, the property is now valued at $667,000.

So, you go to your bank for a cash-out and take 80% out of the valuation of the property. Bank normally can only allow you to take 80% out, not the full 100%. $667,000 * 0.8 = $533,600.

You have now got your original $520,000 back. And from this moment onward, whatever return the property is giving (either rental or capital growth), it’s pure profit.

It’s the same case if you use bank loan originally:

– Property price: $500,000

– Deposit 20%: $100,000

– Stamp duty + purchase costs (~4%): $20,000

– Total funds required: $120,000

– Loan 80%: $400,000

At $667,000 valuation, during cash-out, bank can increase your original $400,000 loan to $533,600 and transfer you the $133,600 cash. This means, you got your original $120,000 funds back.

And that is how one can own a property with $0 of his own money.