Buying Property With No Deposits
26 Feb 2009Some of you may have noticed that there’s a new form in the right hand sidebar which offers people with “No Money Down property deals”. It’s a service offered by the Ahuja group. Out of curiosity, has anyone heard of Ajay Ahuja before?
I hadn’t heard of him at first. In fact, when he first approached me, I thought he was a random schmuck selling me double glazing. Then I Googled his name and realised he was actually someone slightly more important than me. Imagine the shock! His picture even turns up in “Google Image” search. THAT’S BIG! Then when I saw his mugshot on the Daily Mail website refering to him as a “property guru”, I thought…”Oh shit, so Sarah Beeny isn’t the only property Guru on the planet”
Ajay owns approximately 200 properties (I’m assuming all BTL), currently worth £14.3m and has £0.7m worth of properties in the pipeline waiting to be added. He aims to buy 5 to 6 properties a week over the next few years or so. He’s currently investing in Scotland, Derbyshire and Lincolnshire. You can read more about his story here.
He’s doing it all without putting down deposits, and buying properties which are below market value (BMV). It all sounds pretty high risk to me, especially in this current climate. But then again, I play everything safe; I don’t even have sex without laying down waterproof sheets on the bed.
Ajay has what I call a high risk strategy (he may disagree- even though I’m right), while my strategy is the polar opposite; I’m playing the low risk game. I prefer buying propertis that are below market value slowly and putting down big deposits. My strategy suits me fine because I don’t plan on getting rich fast.
I’ve seen a few of these “buy property with no deposit” companies circulating around the scene lately, but I’m not entirely sure how to take them, or how they actually work. How it all works is explained here, but to be honest, I didn’t really understand it.
Ajay, if you read this (the Property Guru assures me reads my blog- we’ll see about that!!), help a brother out and explain what your company actually does for an average Joe that wants to buy a property without laying down a fat deposit. Additionally….how much will your services cost?
Just to clarify, I’m not endorsing or censuring the concept of “buying property with no deposit”, I’m just putting the idea out there. Why?
1) I think it’s a good time to think about buying
2) this kind of “no money down investment” may appeal to some people
3) Ajay approached me with his services
4) A lot of people are renting currently, and while they’re renting it’s pretty tough to save money. So while they can realistically afford mortgage payments, they can’t necessarily afford the deposit, which is where companies like this come in
Anyone had any experience with these types of companies?
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Talk / 16 Comments left so far
Which I suppose it IS slightly :o)
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There is no such thing as BMV there is only MV, market value, which is the price a buyer and seller agree on the free market.
You are getting 100% of the value of a property as a loan. This is why banks need bailouts. The mortgage assets are worth less than par on the banks balance sheet, making them 'insolvent'.
Your plan to go slowly and pay down debt while it is cheap 'may' well work. Ajay Ahuja is holding down the fast-forward button to insolvency. His balance sheet is being annihilated.
Down go down with ajuha's ship.
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Just to assure you that I do read your blogs! And yes you are right that buying many properties with very little money is a high risk strategy but come with it are potential high returns.
I think of it like this:
The more you buy, the more you have in debt but the more you have to receive in rent. If you do your figures right (which I do because I used to practice as a chartered accountant) then your profit grows the more you buy. Simple.
So to your specific question about how my clients buy properties with no deposit. It works like this:
1. We find a property advertised and worth £100,000.
2. We haggle with the vendor and get the vendor to accept £75,000.
3. We structure the deal as:
Agreed selling price £100,000
Selling Fee £25,000
Net price to vendor £70,000
4. We get the property surveyed up to £100,000 which is the agreed selling price.
5. The lender offers 75% of the agreed selling price as a loan which equals £75,000.
6. This £75,000 is then used to pay the vendor £75,000 and there you have it a No Money Down Deal.
Please note in the above there has been no deposit monies involved. We simply get the lender to pay 100% of the purchase price of £75,000.
The whole system depends on the property valuing up at £100,000. if it does then everything else slips in to place.
There are a number of other steps that have to be followed to keep the right side of the law (which is our USP) but effectively we obtain the property for our clients with no money down.
We charge anywhere from £1,200 to £3,500 for deals like these. We can even acquire properties which result in a cashback even after our fee depending on how much discount we are able to get on a property.
I hope that answers all your questions but more importantly wetted your appetitie and pushed up your risk profile!
Ajay
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Not the kind of thing i would recommend in a falling market...but a great strategy to have in a boom.
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Any solicitor following Law Society guidelines would be required to disclose the 'side payment'
You should ascertain the true net cash price to be paid, to comply with the CML handbook and Land Registry requirements. You should consider any direct payments, allowances, incentives or discount in ascertaining this price.
You should state this amount as the consideration in all of the following documents:
contract
transfer documents
mortgage instructions
certificate on title to the lender
Land Registry forms
You should seek to understand any discrepancy between the value recorded in any of these documents, or if you are asked to enter a different value.
If you discover discrepancies in the valuation of the property between any of the relevant documents, you should consider your obligations to disclose this information to the lender.
Part one of the CML Handbook says you must report such changes to the lender. However, individual lenders may vary this obligation, either by using part two of the handbook, or through the specific instructions they provide.
Also consider your obligation to the lender to disclose any direct payments between the buyer and seller either already made, or proposed, that are not included in the mortgage instructions.
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1) Who is your lawyer?
2) Which lenders do you use?
I have seen this gifted deposit type scheme before and thought it was stopped. The bank are basically 100% funding the deal and most will only lend on the purchase or valuation price which ever is the lower. Are there any lender left that really believe the finders fee is not part of the purchase price?
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Did you decide to go with Ahuja? And if not, any particular reason?
As someone trying to increase my property portfolio i'm tempted by Ahuja, but money for nothing.....seems to good to be true to me!
Thanks
Newbie09
Ps. really enjoy reading your blog.
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http://hubpages.com/hub/My-US-Property-Nightmare
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Hope you get him can you Email me, johnrichardstandring@ yahoo.co.uk, maybe we can help eachother.
Regards John Standring Or call 07973322589
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Emailing you today. I've done another hubpage - with links to help others get their money back from people like Ajay...
http://hubpages.com/hub/Scammed-By-Ajay
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Ajay 100-25 = 75 not 70 as shown..
There are a few mistakes in your books also sorry mate but accountants hardly ever make 'silly' errors like this.
This was the usp that finally made us say NO to your deals.... But goodluck.
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I am a victim of AJAY AHUJA.
Waiting for court decision regarding my money claim.
please be warned this: He is big fraud please don't hand him you hard earned cash as i did (stupid of me!)and i am now crying running after him and he is enjoying life with my money and of other innocent peoples, but i trust in GOD and unfortunately he is also a son of GOD!!! but he will have to pay!!!!i would like to get him face to face to say something to stop him doing these to other peoples but i am doing this to warn all peoples to be carefull.
thanks
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How much did he take you for?
He owes me 25k ++++
Mey Email address is johnrichardstandring@yahh.co.uk
Got lots of info for you.
Regards John 07973322589
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Please leave a comment
I initially started this website because I wanted to document my every step from property idiot to property landlord,
in hope that people would find my site and help me along the way. I literally didn't have a clue about being a landlord
when I started this website.
He is pretty well known in the property investment community, suffice to say I have not heard to many positive things of his services but then again I haven't used his services myself.
Buying Below Market Value with no deposit isn't new and has been a common way to buy multiple properties without cash. Personally I don't see the need to buy when you can control a property with the existing loan (another far more efficient and true win win strategy for everyone involved).
By the way love the blog posts. Its good to see someone who says how it should is.
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