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‘No money down’ investing – there is no such thing!


I have been investing in the residential property market for a while, and I am constantly reading books, magazines, online articles, and Facebook property groups, as well as listening to podcasts, to keep up to date with new strategies and changes in regulations, laws and best practice. I am also part of a property networking group and have previously attended various property seminars from some of the biggest property ‘training’ companies in the UK, although I would in no way endorse or promote any of those ‘training’ companies. In fact, my advice to anybody wanting to start property investing would be to stay clear of the property seminars, unless they are run by reputable landlords’ organisations such as NRLA, EMPO and the like!


Over the years, one thing that winds me up more than anything else, is when I hear so-called gurus or property experts talking about ‘no money down’ property investing! They tell new investors that they can get into property without investing any money, and all they need to do to find out how is attend one of their training days or seminars…



What will they be told on such training courses or seminars? From personal experience, they will be told that anybody can invest in property, even if they have no money or a bad credit score and bad credit history! Sounds too good to be true, doesn’t it? According to these property experts, you can invest in property by using ‘other people’s money’, or by joint venturing with somebody who has money, or by sourcing properties for investors and charging a fee, or even build a portfolio of properties on a ‘rent-to-rent’ basis. All of these collective strategies will be termed ‘no money down’ – which will appeal to the vast majority of people attending such property courses or seminars who may only have limited funds available.


Here’s why I can’t stand those proponents of ‘no money down’, and why there is no way you can actually invest in property without having any money…

1. You need money to buy a property. Period.


Training companies often tell students to buy properties using ‘other people’s money’, so that they don’t have to have any of their own money. For example, they could ask a family member or close friend to lend them money. However, the fact remains that this is still somebody else’s money! It might not be your own money, but it’s highly unlikely that somebody will just gift thousands of ££ to you to let you buy a property. That money will need to be repaid and therefore it isn’t ‘no money down’.


In the same way that you can’t walk into a supermarket and tell the cashier that you won’t be paying for a tin of beans, similarly you can’t just walk into an estate agent’s office or into a vendor’s home and tell them that you won’t be paying for the property that you want to buy! You will need to pay money for property (unless you are fortunate to inherit it), whether that is now or in the future.


If somebody claims that you can do ‘no money down’ strategies like lease options, or assisted-sales, or rent-to-rent, then you technically aren’t buying the property, and in any case see point 3 below.


2. Why would somebody lend you £thousands, or joint venture with you, if you have no experience in buying, renovating, renting or selling properties?



It’s all well and good claiming that you have been to a 3-day property course and learnt different ‘mind-blowing’ strategies, or that you have the guidance of an experienced ‘mentor’, but do you really think that somebody will lend you tens of thousands, or hundreds of thousands of pounds if you do not have any actual property experience, or a proven record of successfully completing deals?! People who are extremely successful and who have accumulated significant wealth (as opposed to those who have inherited large sums of money), are more likely to be astute with their money. They aren’t just going to lend you money off the back of one seminar or weekend course. If you ever watch Dragons’ Den, the dragons will grill you about your business, experience and future prospects before handing over a penny! Expect the same from your contacts who may be wealthy enough to have such funds to invest.


Similarly, joint ventures are not the panacea that they are made out to be by property trainers. Think about it – if somebody is putting down all the money to purchase and renovate the property, and all you are doing is dealing with builders and estate agents, do you think they will agree to split the profits 50-50?? Yes it may happen in a few cases, but it certainly isn’t as widespread as they make out on property courses. People that have hundreds of thousands of ££ will value their money much more than your time and effort in putting a deal together and project managing a refurbishment. So if you assume that you can simply do a 50-50 joint venture with high net worth individuals, then you might be in for a nasty surprise.


3. Even ‘low cost’ property strategies require some capital



There are a few ‘low cost’ property strategies that you may be able to implement, such as sourcing properties for other investors, or doing rent-to-rent deals, or slightly more complicated strategies like assisted sales or lease options. However, even in those cases you will need to have funds to start with.


Sourcing properties for investors is like starting an estate agency, so you need to be regulated by either The Property Ombudsman or the Property Redress Scheme, and you also need to have professional indemnity insurance and be registered with the ICO and HMRC for anti-money laundering. All of this costs money – hundreds of ££. You can’t just start a sourcing business legitimately without funds. Then there are marketing costs to attract leads (letters, leaflets, conducting viewings) as well as creating a business website, getting the documents drawn up (terms of business etc) and attracting potential clients. All of this will involve spending money up front, with no guarantee that you will generate enough business to make the venture worthwhile. It’s certainly not as easy as they tell you on courses!


Similarly, rent-to-rent will involve marketing to existing landlords (letters, leaflets, phone calls, visits to letting agents) which take time and effort, as well as cost money. If you do manage to secure a property on a rent-to-rent basis, the chances are that you will have to pay a month’s rent up front, as well as a deposit, and you are also going to need to spend a bit of money updating or upgrading the property. After all, if the property was in mint condition, it would attract good quality tenants who stay for a prolonged period of time, and so the landlord would probably not be considering offloading the property to a rent-to-rent operator.


Then there are also rent-to-rent contracts, which ideally should by drafted by solicitors. It is also arguable that rent-to-rent companies should be members of The Property Ombudsman or the Property Redress Scheme, as well as having public indemnity insurance. As you can see, even doing rent-to-rent legitimately can set you back thousands of ££.


'No money left in'



What a lot of property gurus deliberately do is confuse ‘no money down’ with ‘no money left in’ – which is where you may be able to recycle all your initial investment (deposit and refurbishment funds) at a later date by re-financing the property at a higher value. ‘No money left in’ property deals can be achieved (a) if you are an astute investor and can source properties below market value, and then subsequently refurbish properties at a low cost to allow for a big enough uplift in the property value, or (b) if you operate in an area of high capital growth, where after a period of time the market value of the property has increased sufficiently to allow a re-finance which results in all the initial investment funds to be released.


Property trainers will also create the impression that this is a magic art, and that you need to sign up to their mentorship or training programme to learn how to do it. It isn’t a difficult concept, but the huge difficulty is actually finding properties at a low enough price to enable you to refinance all your funds out. They certainly don’t exist in the way the trainers suggest!


All in all, I hope this blog shows that ‘no money down’ is just a pipe dream and an attention-seeking headline for property trainers, and that in reality all forms of property investment require capital to get started. Sorry to burst the bubble!

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