Book: Nothing Down for the 90s
Author: Robert G. Allen
Nothing Down for the 90s is a revision of the original version of the book Nothing Down, but there is a more recent edition out, Nothing Down for the 2000s. The main difference between this edition and the original one is that there is an additional section added called WealthStrategy 2000.
Nothing Down covers the principles of finding, buying, funding and selling houses using little or none of your own money, hence nothing down.
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The book is written about the US property market and some of the concepts translate easily to other countries, but others do not. Take the concept of seller financing. This is an accepted and comparatively common means of funding a property purchase in the United States. It is where the seller finances some of the deal, by providing the mortgage for the property instead of it being obtained from a more traditional lending institution, such as a bank.
Credit: Barry Littman/Simon & Schuster/eGDC LtdIn the United Kingdom, although this is legal, bringing up the topic will, in most cases, be met with a response of "Huh?" as very few people have heard of it and, once explained, result in an answer that will boil down to "No," possibly with swear words included.
The vast majority of mortgages in the UK are done by "hard money" lenders; banks, building societies and other institutions and, as these are not assumable by the purchaser, the seller will need to do something about settling the existing mortgage on a property. If they do not pay the mortgage off, they will have difficulty getting a mortgage for their new property and, should they get one, it will probably be at higher interest rates and a lower percent to value than they would get if the original mortgage had been settled.
Because the mortgages cannot be assumed by the buyer, a way around this is by not notifying the mortgage company. This is rather dubious legally and, if the mortgage company discovers that the loan is being paid by someone else, who is also living in the property, not by the person they lent it to, they are quite likely to demand that the outstanding balance be paid off in full with a very short deadline - possibly too short to arrange alternative financing. For all intents and purposes, therefore, seller financing does not work in the UK.
It should be noted that the methods described in the book are a very highly geared (leveraged) method of purchasing property. This greater gearing means greater gains but commensurately greater risks. By buying property with none of your own money, including expenses that are on top of the price of the property, such as legal and other fees, this will mean that the borrowing taken out to purchase the property is greater than 100% of the purchase price. In this situation, property should definitely be bought well under the market value to provide a cushion of equity which will cover the extra borrowing.
This book is most useful for investors in US property, or countries with a similar system, but not as useful in those with a dissimilar system, but there is still a fair amount of useful information. Nothing down means none of your own money down, it does not have to mean seller financing, and other methods such as partners are a viable solution to this.
Even if you don't intend to pursue the high risk/high reward methods outlined in this book (and risk can be reduced by proper research and preparation) it is still a useful addition to any current or potential real estate investor's library. Nothing Down is not simply about such methods as seller financing, even though they take up a good proportion of the book, and the methods of finding properties to invest in can still be useful.
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