One of his secret is by buying No Money Down (NMD) deal properties.
If you had already invested in property or even just about to invest in property, you may have heard of No Money Down Deal (NMD).
In order to do NMD, we need to have knowledge and leverage skills from other experienced investor who had done it before. Why? because NMD is a bit more complicated than to normal deal.
First, we need to identify the property is below market value (BMV)
Which means, we need to check bank value, and it is higher than market price or purchase price.
Example:
In 2013
Project: MF Condo, Sungai Besi, kuala Lumpur
Purchase price: RM380k
Bank value: RM450k
BMV: 15%
For RM380k property, we need to prepare the following fund:
1. 10% downpayment: RM38k
2. Legal fee (SNP and loan) @ SNP price (RM450k): RM17.5k
TOTAL fund: RM55.5k
If owner is kind enough and understand, and allows us to mark up the purchase price to bank value price, then we are allow to use the bank value price to apply loan
To calculate cash out:
cash out amount = 90% of bank value – 90% of purchase price
= 90% of RM450k – RM90% of 380k
= RM405k – RM342k
= RM63k
Nett cash out = cash out amount – total fund
= RM63k – RM55.5
= RM7.5k
The cash out money only can be obtained from your lawyer during the final disbursement, which is after 3+1 months.
For the above MF condo purchase, the fund that needed is actually less than the amount that being cash out. Thus not only we do not need to fork out any money for this purchase
In fact, we still earn RM7.5k from this purchase
This explain why some people are able to buy so many properties within short period of time?
In most of the case, when people buy property, their cashflow level will go down.
In our NMD case, the more properties we buy, the more cashflow we have
That is the whole idea and answer to why we are able to accumulate millions of properties portfolio within short time period of time.
However, not all NMD deal are good deal! We have to filter out the bad one.
If you are a successful investor, you do not want to do the NMD deal if there is one important criteria that could not fit.
What is that one important criteria? Stay tune for the next session…
