Using owner occupied rent as deposit

[amimuir]

Hi, I'm just reading 'how ordinary kiwis profit from property' and Tina Chans story with one property she bought was to negotiate the price down to let the current owners stay in the property for 12 months. This equalled 25k which she used as a deposit. Essentially a no money down deal
I'm interested to do the same thing on a property ive just found, but does this mean that i will have to make the mortgage payments each month, on my own, with no rent coming in? Or is there some way to get that initial, say 25krent out and use it to pay for the mortgage?

[spaceman]

What you're really doing is getting 100% finance.... either you need to make the mortgage payments yourself and save the rent for the "deposit" or visa versa.

good luck

cheers
spaceman

[Conduit]

HI Amimur, I have not read 'how ordinary kiwis profit from property' so I might be off track here, but...

Does this work by agreeing on a price, say $250K and signing the sale and purchase at $250K and on paper you give the vendor $250 and they give you in rent immediately $25K (or in practice you only give the vendor $225K plus one years free rent. This way the bank see the market value of $250 and lend you $225 to settle?? Not sure how the fine print works but it could be negotiated with the vendor if they wanted to stay.

Maybe someone else has a better idea?
Cheers

[Choc]

So, if you can allow them to stay in the property rent free (I presume you are paying off the mortgage with other income in this time) - equal to $25k - why don't you just wait 1 year and save this?

[mortgage broker]

Wont fly with a lender in the current market,

[One]

Tina Chans story with one property she bought was to negotiate the price down to let the current owners stay in the property for 12 months. This equalled 25k which she used as a deposit.

... does this mean that i will have to make the mortgage payments each month, on my own, with no rent coming in? Or is there some way to get that initial, say 25krent out and use it to pay for the mortgage?

Sounds to me like you'd already have got that 25K rent out and used it as a deposit, in effect. So my guess is "no". The vendors aren't going to give you a 25K discount and pay rent.

You might be able to get the house revalued after 6 months, take any increase in equity out into a revolving credit account and use that to cover the mortgage repayments. Sounds risky, but might work if you were adding value through renovations.

In a rising market, could be a good move. In a static market like now, why do this?

[speights boy]

Essentially a no money down deal

How many properties do you currently own?

[amimuir]

Thanks everyone for their comments. I was wondering if there was something I didn't know about, regarding the money off and paying back rent, but it seems it's as it sounds - a lower price for the property but still needs to have the rent paid by (me) each week.

I currently have only one property speights boy...

[speights boy]

...and you still need the deposit on the reduced amount (which is what the mortgage will be based on)
All you're getting is 12 months rent in advance by means of paying less.

Can't see how that generates the deposit for you.