Let me start with full disclosure - I love No Money Down Deals! I've used them many, many times throughout my Property Development journey, and I will most certainly use them again.
That said, I'm also not going to lie - adding other people into the deal does increase the level of complexity. When you have enough money in the bank to support a deal yourself, you don't have to expend any energy keeping other stakeholders happy.
Once other people are involved, it will most likely mean extra legal paperwork, more communication to keep stakeholders informed and a sense of responsibility as custodian of other people's money.
So is it worth the hassle?
Probably the best place to start is to take a look at the different ways you can do No Money Down Deals. Here's a list to get started:
There are a couple of others, such as finding deals or project management, but I'm sticking with scenarios where some serious cash is required on your side of the deal to secure it.
Also, although I've said "No Money Down Deals", what I'm really going to talk about here is being able to do deals without always having to come up with all the money or serviceability yourself. There will be times when you do deals where you still provide part of those.
Now, given that I love these types of strategies so much, it won't take much digging to find various other articles or videos I've done detailing how they work, so I won't explore each one in-depth here.
The point is that all of these choices involve other people coming on board for at least part of the Property Development ride. Some may be total newbies to the concept, like a property owner, and others may be professional lenders (apart from a regular mortgage). It's not just you.
The key word to keep in mind here is SCALING.
When you're starting out, you may well have the resources to fund a property development deal yourself, and that's great. Go for it! I always recommend that new Property Developers start small while they learn all the ins and outs of a project.
The problem is that projects tend to take a while. If you're doing a very simple splitter or subdivision, you might be able to turn the deal around and cash out quite quickly.
But at some point, you're going to want to scale by moving on to bigger deals. Realistically, it doesn't take that much more effort to turn 1 lot into 4 than it does to turn 1 lot into 2. Same with 1 into 6, 1 into 8... And if you've done your research and feasibilities properly, the returns get bigger every time you scale up.
Logically, now you've got one property development deal under your belt, you will probably start looking for something bigger. Again, maybe you have the resources to fund that yourself. Good for you! But what if you don't? Bigger deals require bigger dollars to complete - and that's when having access to other people's money can help.
Here's another scenario. You're into your second deal now, using your own funds, and it's going to take 18-24 months to complete. Chances are, you're going to start getting itchy feet at how long it's taking.
Your first development deal was successful, your second deal is going well - it'd be great to look for a third deal. Dang it! You don't have enough equity or serviceability to fund another one until your second deal finishes. Wouldn't it be handy to access funds from somewhere else so you could start to scale up how often you can do a deal?
It's a very rare property developer indeed who doesn't run out of money at some point if they want to start scaling up their business. And let's be clear here - I'm not only talking about scaling from a deal size perspective. I'm also talking about scaling up how often you can do another deal.
In a nutshell, doing no money down deals by using other people's money gives you the ability to do multiple deals at the same time, and it means you can start your next deal sooner. Definitely a good property development strategy!
"Aha!" I hear you say. "If I bring in other people's money, though, I will also have to give up profit in return. I want to keep all the profit for myself." I'm sure we'd all like to keep all the profit, given the work we put into finding and running a deal.
In the long run though, it's better to keep a percentage of the profit from as many deals as you can handle, than to keep all the profit from one deal.
If you're really methodical about it, you can also stagger your development projects so they finish at regular intervals and as a result give yourself a relatively stable income. For example, you might plan it so that you start a deal every 6 months, ending up in a situation where a deal pays out every 6 months or so. Much better than one payout every 2 years!
So to answer my original question - are No Money Down Deals worth the "hassle"? If you're happy chugging along doing one deal every couple of years and have the financial resources to do that - great, go with it.
But if you're like most of my Property Development Formula students, with a 5-year Action Plan for financial freedom, at some point you will need to scale up. And the easiest way to do that is without having to supply all the money yourself.
That said, I'm also not going to lie - adding other people into the deal does increase the level of complexity. When you have enough money in the bank to support a deal yourself, you don't have to expend any energy keeping other stakeholders happy.
Once other people are involved, it will most likely mean extra legal paperwork, more communication to keep stakeholders informed and a sense of responsibility as custodian of other people's money.
So is it worth the hassle?
Probably the best place to start is to take a look at the different ways you can do No Money Down Deals. Here's a list to get started:
- Vendor finance
- Delayed settlement with early access
- Joint ventures
- Private loans
- Option contracts
There are a couple of others, such as finding deals or project management, but I'm sticking with scenarios where some serious cash is required on your side of the deal to secure it.
Also, although I've said "No Money Down Deals", what I'm really going to talk about here is being able to do deals without always having to come up with all the money or serviceability yourself. There will be times when you do deals where you still provide part of those.
Now, given that I love these types of strategies so much, it won't take much digging to find various other articles or videos I've done detailing how they work, so I won't explore each one in-depth here.
The point is that all of these choices involve other people coming on board for at least part of the Property Development ride. Some may be total newbies to the concept, like a property owner, and others may be professional lenders (apart from a regular mortgage). It's not just you.
The key word to keep in mind here is SCALING.
When you're starting out, you may well have the resources to fund a property development deal yourself, and that's great. Go for it! I always recommend that new Property Developers start small while they learn all the ins and outs of a project.
The problem is that projects tend to take a while. If you're doing a very simple splitter or subdivision, you might be able to turn the deal around and cash out quite quickly.
But at some point, you're going to want to scale by moving on to bigger deals. Realistically, it doesn't take that much more effort to turn 1 lot into 4 than it does to turn 1 lot into 2. Same with 1 into 6, 1 into 8... And if you've done your research and feasibilities properly, the returns get bigger every time you scale up.
Logically, now you've got one property development deal under your belt, you will probably start looking for something bigger. Again, maybe you have the resources to fund that yourself. Good for you! But what if you don't? Bigger deals require bigger dollars to complete - and that's when having access to other people's money can help.
Here's another scenario. You're into your second deal now, using your own funds, and it's going to take 18-24 months to complete. Chances are, you're going to start getting itchy feet at how long it's taking.
Your first development deal was successful, your second deal is going well - it'd be great to look for a third deal. Dang it! You don't have enough equity or serviceability to fund another one until your second deal finishes. Wouldn't it be handy to access funds from somewhere else so you could start to scale up how often you can do a deal?
It's a very rare property developer indeed who doesn't run out of money at some point if they want to start scaling up their business. And let's be clear here - I'm not only talking about scaling from a deal size perspective. I'm also talking about scaling up how often you can do another deal.
In a nutshell, doing no money down deals by using other people's money gives you the ability to do multiple deals at the same time, and it means you can start your next deal sooner. Definitely a good property development strategy!
"Aha!" I hear you say. "If I bring in other people's money, though, I will also have to give up profit in return. I want to keep all the profit for myself." I'm sure we'd all like to keep all the profit, given the work we put into finding and running a deal.
In the long run though, it's better to keep a percentage of the profit from as many deals as you can handle, than to keep all the profit from one deal.
If you're really methodical about it, you can also stagger your development projects so they finish at regular intervals and as a result give yourself a relatively stable income. For example, you might plan it so that you start a deal every 6 months, ending up in a situation where a deal pays out every 6 months or so. Much better than one payout every 2 years!
So to answer my original question - are No Money Down Deals worth the "hassle"? If you're happy chugging along doing one deal every couple of years and have the financial resources to do that - great, go with it.
But if you're like most of my Property Development Formula students, with a 5-year Action Plan for financial freedom, at some point you will need to scale up. And the easiest way to do that is without having to supply all the money yourself.
