The Unique Property
How to Buy a House Without a Mortgage
Watch on Youtube: https://youtu.be/Z-LTjl9go8o
Last week I mentioned that I would tell you
how to buy a house without getting a mortgage. Let me give you
a real life example of one of my deals.
I bought a house in Burnley. Letís run this as an example of
what you can do and how you can do it. Obviously the figures
for you will be different, but you need to start where house
prices are low, but rents are not too low. What is important
is not necssessarily the prices I have used here, although
they are real, what is important is the principle.
The first point to be careful about is that you have to start
with as small an outlay as possible and aim for as high a rent
as possible after having done any necessary upgrading.
Before I get going let me deal with one probable complaint
about the example. My example uses a cheap house, but the
house you want to buy probably costs a lot more. Let me remind
you that this is an example about how to do things in such a
way that you get where you want to be within a relatively
short time. You donít start with the mansion, you work up to
Okay, letís get started.
I needed £30,000 to buy this house. You can get an 80%
buy-to-let mortgage, which means you need to put up £6,000 of
your own money, and then you will have a £24,000 debt at
roughly 5% interest. However, that will get you into a
dead-end situation. There is no way forward using that method.
Well, there is. You pay off the mortgage over twenty years and
then you can get onto the next deal. Thatís no way to operate.
You live in a capitalist society, make use of capitalism. Get
that money working. Hereís what you do.
If you go to the bank to get a loan to buy a car you will
probably find you can get a loan of £9,000 quite easily,
probably at a rate of about 6%. You can do this with three
banks. (Obviously you need to have accounts at three banks
which have been operated with money going in over a period of
at least six months, and preferably for about a year. You can
always set up direct debits from one bank to another so you
roll your money round. Remember, the further you roll your
penny the more money it picks up.
Okay, so you've been successfully running these three accounts
for ten or twelve months. You managed to have each account
holding about £1,000. Now you go in and ask for your loans to
buy this car. You now have three loans of £9,000, or £27,000
available, plus £3,000 in cash. You are now in a position to
buy this property in Burnley.
Okay, so you have bought and done up the property. Now you
rent it out, getting £130 a week for it. You can now get it
valued, and get a loan secured on it. Your existing loans are
costing you roughly £135 per week. Okay, you are losing £5 a
week, but you do have a mortgage-free house, so what do you
expect? You are at least in the position of being able to buy
your next property straight away.
Your house now values up at about £35,000 because you have
tarted it up. You get an interest-only 80% mortgage on it at
about 5%. You now have £28,000 in your pocket and you can buy
the house next door, only you donít. You go upmarket. You push
yourself. You go to a better area where the rents are higher
and you can get £145 a week.
Your new mortgage is costing you £1,400 a year. Your new rent
is bringing in £7,000.
So for the first few months you had a hard time because you
were running at a small loss, but by starting things the right
way round you are now running with a nice little profit. You
aren't going to be able to retire for a long time yet, but you
are now well on your way. You have a nice little business. You
own two houses, have a plus figure coming in, and a totally
mortgage free property. So you mortgage that second property
and buy something else, going upmarket again.
The important thing in the equation is to get the cheapest
possible house for the largest possible rent within your
means. Within five years you will be doing very nicely, and
can chuck in the day job. Do things the other way round and
you will be ready for your second mortgage after about twenty
years, and by the time you retire you will have perhaps two
You could add in the use of credit cards to help you buy a
more expensive property.
Normal thinking is to use credit cards for consumer spending.
You find something you want to buy but you donít have the cash
to purchase it so you use the credit card. The problem with
this is that if you canít afford the item in the first place,
then you most certainly canít afford to pay for it and pay the
credit charge on top, so you are, putting it bluntly, a total
The way to use credit cards is to use them for capital
expenses, and pay your consumer bills with cash.
There is no earthly reason why you should not be able to get
cards with £6,000 limits. You would need five such cards to
get £30,000. Although not all issuers allow you to take out
cash up to the limit on the card, so six cards would be a
better option. Some lenders only allow you half of your credit
limit in cash. You need to be careful therefore when you apply
for cards. Telephone the issuers and ask them some searching
questions. Ask what their policy is over credit limits. Ask
them how you can use the cards and whether you can take out
cash, and up to what limit. You donít want more than a couple
of cards that donít allow cash withdrawals up to, or almost up
to the credit limit.
You also need two cards that you can use for shuffling.
Shuffling is the way you handle credit card debt. No
professional will simply use a card up to its limit and then
calmly pay the interest. The professional shuffles. To do this
you need to telephone the issuer, probably every three months,
to check what promotional deals they are offering. As
mentioned above I regularly get interest free deals, and deals
at low interest rates. You are specifically looking for deals
at 5.9% or less, but you should be hoping to get some at 0%.
First, check out the opening deals. Then check out the
A judicious combination of car loans and credit card cash will
buy you a cheap house with relative ease. Naturally you dont
buy a wasting asset (the car).
By using a combination of bank loans and credit cards you can
probably buy two properties a year without much trouble, and
then get normal mortgage finance on those mortgage-free
properties to expand. Within five years you can not only chuck
in the day job, but you could also start to live to a much
higher standard. However, the sensible person takes a view on
this. The object of the exercise is to reach a certain level
of income before you start to use it. In the early stages of
growing your business you should be putting up with a poor
life, working hard, and ploughing all your money back into the
business. When you reach what is for you your magic income,
then you can start to relax and spend some of your gains.
You should now be able to see the importance of rolling your
penny through as many hoops as possible so that as it rolls
through each hoop it picks up more money which can be
channelled into your pocket. The more convoluted the deal, the
more possibilities there are of extracting profit at each
point of convolution.
Remember the golden principle. Money is your servant. Put it
to work. And then put other people's money to work for you as
well. You will be surprised how quickly you start to become
Next week we'll look at buying investents.