Mark,
If we think of a property deal and its funding requirements, we can break it down into 3 broad categories;
1) The deposit (generally 5-20% of the purchase price).
2) The purchase costs (application/bank fees, conveyancing, stamp duty, etc - about 5% of the purchase price).
3) On going costs (interest,rates, insurance, repairs, etc).
Let's use the definition for "nothing down" as not using your own money. Rather, using OPM (other people's money).
Step 1, in my view, would be to see that the on-going costs are covered, this means that the cashflow (rent, etc) covers these costs. Your biggest cost will be interest payments.
The bigger the LVR (loan to value ratio), the more interest you pay. This is where using a bigger deposit may help.
Some methods of tweeking the numbers is by increasing the rent, via a renovation, subdivision, etc
Now if we consider a deposit, there are a few options here too;
- draw down from a LOC (line of credit using equity)
- use a JV (joint venture) agreement with an investor, they put up the funds you manage the deal.
- ask the vendor to finance the deposit. Remember this will increase your on going costs though because it will involve paying back the principal and interest for this loan.
- again a reno during settlement to boost the value of the property.
With purchase costs, the quick soluction is draw down of equity somewhere, be it in the same property or via equity in the property after a reno. Again a JV may work, or maybe a vendor financed deal.
The above is more related to a buy hold scenario. The sexier ways discussed in many seminars are;
- Buy OTP (off the plan) with a deposit bond, and resell before settlement.
- flip a property
- get a finders fee (think about that, get paid for your time)
- option a property, buy an option, sit on it then resell it at a later date.
BUT, the biggest problem is not crunching the numbers, it is getting the vendor's solicitor to agree to the deal. Because in the end they have the final say.
Michael G