5 steps to purchasing a buy to let property with little or none of your own money

Property investment is an exciting business and there’s nothing more exciting than making your very first purchase. Along with the thrill and anticipation of taking your first step onto the property investment ladder, there are bound to be a few nerves to go along with it. We’d be lying if we said it wasn’t a little daunting too! But there are ways and means to make the whole process as plain-sailing and as smooth as possible, ensuring that your feeling of excitement continues to outweigh all others.

At Alexandra Fern, we wanted to share with you our own success story of how we purchased our first by to let property with no money down, so you can see for yourself how best to go about it.

Step 1: Find private finance

Through a lot of careful research, networking and communicating with all the right people, we were able to find ourselves a private investor to work with and part-fund the purchase. By funding, we mean covering the costs of things such as the property deposit, stamp duty, surveys, any legal fees and all refurbishment work that needs to be done before it’s ready to be let out to tenants.

Step 2: Agree an interest rate

Once we’d found the most fitting investor for our project, our next step was to agree on an interest rate that suited both them and ourselves. If you’re completely new to property investment, then this interest rate is what we pay back to our investors in return for them loaning us the money to make the purchase in the first place. In addition to the original amount we borrowed, of course.

Step 3: Bridge the gap

Depending on the amount needed in order to make the purchase and the amount of funding that can be lent from an investor, it may be required to cover the rest of the costs with a bridging loan. This is what we did for our first property purchase, but we won’t always do things this way and you don’t have to either. You may well find an investor who can fund the whole project, in which case, there’ll be no need to use bridging finance.

Step 4: Get the work done

Now, it’s time for the bit we were really looking forward to. Once everything had gone through with the purchase and we owned the keys to the property, it was time to get all the work done to get it to a point where it was ready to be rented out. This is where building relationships with different contractors is so important when it comes to property investment. We’ve enlisted the help of all the people we know and trust to do the best job possible, with the end goal of letting out a property that people will feel truly at home in.

Step 5: Pull the funds back out

Once all the required refurbishment work has been completed and the tenants have been found, it’s time to refinance the property with a mortgage. After six months, this is when we pull the initial funds back out of the project and pay off our loans; first the bridging company and then the investor, with their additional interest rate on top. With both cash sources having been repaid, we now own the property outright and the purchase is complete – no money down.

So, what’s in it for the investor?

In this instance, the purchase of this buy to let property is a pure loan agreement, whereby the investor loans their money but doesn’t have to get involved with the finding, renovating or letting of the property. It’s what’s known as hands-free investing and it’s the perfect solution for anyone who’s investing from overseas or who just wants to put their money to good use without having to get their own hands dirty. At Alexandra Fern, we do all the hard work and earn you money in the long run.

If you’re interested in funding a project and letting your money work harder for you so you don’t have to, feel free to get in touch. We’d love to have a no-obligation chat.