So you’re still looking to buy property No Money Down (NMD) despite the fact every lender out there has withdrawn their support for the strategy, and dropped their maximum Loan To Value (LTV) to typically 75% or less.
And you’ve seen a great deal, a property that you really don’t want to pass up, but you just don’t have the 25% deposit to put in.
A very good friend of mine found himself in just this situation last week. He did as we all would and asked anybody and everybody he could think of for advice and help. One of the people he asked, who we’ll call Stuart, is a well-known name in property investment circles and even runs his own property networking group. He’s somebody for whom I have hitherto had the greatest respect, and trust.
But not any more.
Stuart responded to my friend by forwarding an email he had stored on his BlackBerry; I’m guessing that this is a standard email he keeps on there for forwarding to anybody who expresses an interest in buying property NMD. My friend forwarded Stuart’s email to me, to get my opinion before taking the plunge (remember that Stuart is well-known and respected, not some shady character on the fringes - to a limited extent you could even call him a public figure - so there are undoubtedly many people out there who TRUST him …and who TRUST what he promotes).
More fool them!
I’ve tidied up the formatting of the email I received from my friend (it was almost unreadable before) and also obscured the contact details as this is not a witch-hunt to shut down one man’s business (although it probably should be, along with the so-called ‘broker’ that sits behind and does the real work, but we’ll come onto him later) but rather something I wish to use as a general guide and example so that you can see the risks everywhere …even from well-known people that you TRUST! So, formatting and contact details aside, it is exactly as I received it including where the T&Cs end mid-word.
I suggest that you now read through the email below and come to your own conclusions about the deal that is on offer. I will then give you my OPINIONS on it (and they are opinions, NOT FACTS).
If you’re not certain where to start, then grab this FREE report (from elsewhere on our website) to help you:
==> NMD Property Finance Advice - 10 Questions To Ask Your NMD Scheme Provider
Anyway, here’s the promotional email:
——————————— email begins ———————————
——Original Message——
From: Stuart ******* & Huseyin *******
Sender: ********@aweber.com
To: Stuart *******
Subject: Stuart, Who Else Wants To Buy A Property With NO MONEY DOWN
Sent: 2 Jun 2009 08:42
Hi Stuart,
Have you been asking yourself “how do I raise the finance to buy below market value properties?”?.
We’re sure it’s a question most people have asked somewhere along the line and it makes for an especially tricky problem if you do not have a team of private investors backing you. But, for those of us who don’t, there is now an easy and cost effective solution. We have partnered with some very well established brokers who can assist you in purchasing an unlimited number of properties using 100% finance based on the value of the property and not what you have agreed to pay (no matter how far below market value). And the costs are fixed, however big the deal is.
How Does It Work?
It’s very simple and straightforward. Let’s say you want to buy a property no money down worth £100,000 and you can get it for £65,000:
1. The mortgage broker will help you apply for a 75% mortgage on the property based on its value of £100,000.
2. The finance company will arrange to lend you the 25% deposit (so you get 75% from the bank and the remaining 25% from them).
3. You will arrange for the vendor to sign an option agreement provided by the broker stating that they are happy to sell the property for £65,000 and anything above that will be payable to you.
4. On completion the sum of £100,000 will be sent to the vendor’s solicitor. The vendor’s solicitor will then pay the vendor £65,000 and the remaining £35,000 will be paid to you.
5. You will then return the £25,000 plus fixed fee of £1,495.
6. You keep the remaining cashback
Real Example
Market value of property £100,000 Purchase price £65,000 Equity £35,000
Purchase costs
Legal fees for purchase £695 Legal fees for vendor £595 Bridging fee £1,495 Mortgage broker fee £0 Valuation fee £350 Total costs £3,135
Mortgage @ 75% £75,000 Deposit @25% £25,000 Total Borrowing £100,000
Less pay vendor - £65,000 Less deposit - £25,000 Less Purchase costs - £3,135
Cashback £6,865 Built in equity £25,000
The cashback is yours to keep The property now belongs to you No Money Down
There are special conditions attached which will be sent to you on request.
These are very straightforward and used by professional property investors ALL the time. For more info please give Stuart a call on 07884 ****** Or email us at sales@BMV*************.com
Kind regards,
Stuart & Huseyin
To receive all of our ready made deals straight to your inbox register at www.BMV*************.com You will need a clean credit rating.
Terms & Conditions
Viewings of the property will only be carried out After the valuation has been booked. The reservation fee includes an administration fee of £250 per unit which is non-refundable. A further fee of £1,000 will be due to BMV*************.com Limited once a surveyors valuation has taken place. All outstanding Finders Fees are payable immediately and in full on completion. All figures quoted (including, but not limited to costs, cash back on completion or cash required to complete) are for guidance only and may vary. They will also incur VAT where applicable. We do not accept responsibility for any expenses or losses incurred by you. The Market Value quoted is provided in good faith and will be confirmed by the lender’s valuer. The reservation and packaging fees are non refundable, except where a Director of BMV*************.com Limited agrees to a refund in exceptional circumstances. Please note that all the properties are unseen and the details above are taken as a guide. The properties are viewed at the time of survey. Surveyors work for the lender and are paid to be conservative. In some cases it may be necessary to undertake more than one survey in order to achieve the required valuation. That means your cost of acquisition may rise but this is minute compared to the gains you should achieve. The vendor(s) are effectively giving you quite a lot of their money in return for a quick sale. There will be occasions where they find other solutions to suit their needs and cancel or other factors may come into play. The nature of the industry is such that there will be occasional cancelations. However, we use our reasonable endeavours to minimise these. The vendor(s) can cancel at any time. If they do this will mean you incur some costs. This covers, for instance, solicitors costs, survey costs, brokers fees, and admin costs. No information presented in these particulars and/or displayed on BMV*************.com Limited’s web site constitutes or forms part of a contract, with the exception of the stated terms and conditions. BMV*************.com Limited is not a licensed investment advisor or a licensed estate agent. BMV*************.com Limited is not authorised by the Financial Services Authority to provide investment or financial advice. In paying the reservation fee you agree to these terms. Disclaimer: BMV*************.com Limited, its directors, affiliates, officers, employees, agents, contractors, successors and assigns (herein “BMV*************.com”) do not accept any lia
——————————— email ends ———————————
So, having read all that, what do you think?
If you’re not sure then, as I said before, our “10 Questions To Ask Your NMD Scheme Provider” report may help you to draw a few conclusions. You can download a FREE copy right now, from:
==> http://www.summitfinance.co.uk/nmdfinanceexposed/top10questions.html
OK, you’ve now read that and come to your own conclusions, right?
So before I get started let’s just say that I may, of course, be completely misunderstanding everything, and not have a clue what I’m talking about: so like any good reporter I have tried to discuss this with Stuart.
I exchanged a few emails with him on Friday 5th, asking questions to address my specific concerns, but he was consistently “too busy” to discuss anything with me. To use his own words: “I don’t have time … I am very busy at the moment.”
So I invited Stuart to respond to my two primary questions by email over the weekend (6th-7th), reasoning that it should be possible for him to find 15 minutes if he considered the matter even slightly important - and we are after all discussing millions of pounds of investor money and commitment here - but by Monday morning I had received no reply. I then phoned Stuart on Monday 8th to try and discuss my concerns and we spoke pleasantly for a few seconds during which he explained that he was unable to talk at the time for personal reasons (which is fair enough) and promised to phone me back after 5 minutes. Good news, I thought! After 20 minutes however I got a text message from Stuart to say that he couldn’t call me back personally because of his personal issues (again fair enough) but that his colleague “Aps” would do so “shortly” (the exact word in the text message he sent me).
That was 9:34am Monday and now, more than 3 days later, Aps still hasn’t called me back – some promise!!! Either that or Aps simply doesn’t care because, unlike Stuart, it’s not his face in the frame? And presumably Stuart doesn’t consider any of this sufficiently important to even bother asking Aps if he has contacted me - make of that what you will (it’s your money and ongoing commitment after all).
What surprises me here is that most people who have confidence in a scheme they are offering would love the idea of free promotion, with a recommendation, to thousands of laser-targeted prospects. All Stuart and/or Aps had to do to obtain this free promotion and recommendation was answer my questions, and convince me that their scheme is legitimate. Surely that’s not asking too much of any honest and respectable business?
I note that Aps is not the man shown on Stuart’s website as his business partner, and I don’t even have his surname (yet – I have a vague recollection that I once met him at a networking meet and while he refused to give me his business card I may have obtained his surname and put in my notes – I’m looking) so he probably feels comfortable enough here …after all it’s not his good name and public reputation that is in the firing line. I SUSPECT that Aps is the scheme operator, whereas Stuart is merely a commission-based vendor of it. That’s another reason that I have obscured Stuart’s identity above, because I’m not 100% convinced that this is entirely his fault! That said, his attitude towards investigating it is, in my OPINION, extremely poor and certainly IMPLIES both knowledge and involvement.
Everything above is FACT (unless clearly stated otherwise e.g. “I’m guessing…” or “I SUSPECT” or similar) but what now follows is OPINION. It is merely MY PERSONAL OPINION, it has no foundation in law, and may well be entirely wrong. Furthermore, just like BMV*************.com Limited I am not a licensed investment advisor, and I am not authorised by the Financial Services Authority (FSA) to provide investment or financial advice. So the following OPINIONs should be read in that light, and you should do your own research afterwards.
And don’t forget, if you want to arrive at your own opinion before learning mine go and download your FREE copy of our “10 Questions To Ask Your NMD Scheme Provider” report from:
==> http://www.summitfinance.co.uk/nmdfinanceexposed/top10questions.html
Anyway, I promised you my OPINION on the scheme, so here it is:
It’s one of the most blatant and crude schemes that I have ever seen, bar none.
It lacks almost any sophistication whatsoever, and relies substantially upon the purchaser TRUSTing the scheme vendor/operator (because there’s no Earthly way it will stand up to independent scrutiny). What they arrogantly admit to in the promotional email is bad enough, so I hesitate to think what really goes on behind the scenes!
I didn’t really need to get past point 2 to spot what I consider to be the first and most obvious problems which are an apparent attempt to trick the mortgage lender into:
(a) lending when the deposit is not coming from the purchaser’s own funds; and
(b) lending more than is being paid for the property.
Without bothering to dress it up in flowery words, any attempt to trick the lender (whether by misrepresenting/concealing certain facts or otherwise) is mortgage fraud, and can result in stiff penalties for all involved. Fraud and deception are obviously contrary to Council of Mortgage Lender (CML) rules and (I am led to believe) brokers have been effectively shut down for it and solicitors struck off and even sent to prison for it.
Mortgage fraud really is that serious! And of course it’s the individual investor/purchaser, i.e. you the reader, that will be putting their signature on the dotted line of the application and committing the fraud (not the scheme-vendor / scheme-operator that takes your money - consider that point)!!!
And if the mortgage lender is led to believe that £100,000 is being paid for the property, with £25,000 of the purchaser’s own money ‘locked in’ (it’s the lender’s security buffer, and their perception of risk and thus rate offering is based on it), and lends on that basis… Well, I’m not sure how to describe the apparent deception other than to call it BLATANT FRAUD. That’s my OPINION anyway.
That obvious detail to one side, I wonder if you anybody has given any consideration as to how HMRC (the Inland Revenue’s new name – thanks Gordon) will treat the £35,000 cash back? Personally I’d consider it an incentive to purchase which, under CML rules when I last checked, the purchaser’s solicitor is obliged to declare to the lender if aware of it …and if the lender is informed then they obviously won’t advance the money …and I’m personally always wary of anything that involves me withholding information from the solicitor I am paying to represent me and my interests, especially where large sums of money for which I am responsible are involved.
The £35,000 cash-back certainly won’t be considered a capital gain because nothing has been sold, and as income it will be taxable (probably at 40% for most people – so £14,000 – but since the last budget at a higher rate still if they buy a few properties like this) in the same tax year that it is incurred.
The £25,000 loan may well not be considered an allowable deduction by HMRC (and I’d be amazed if it is because it’s a loan against purchase whereas the £35,000 comes from an entirely different source) so the chances are that the full cashback amount will be taxable, as above. Ouch!!! Even if it is allowed, there’s still roughly £10,000 of taxable income to consider.
So, mortgage fraud and a probable £14,000+ tax bill …and that’s just my first impression, and MY PERSONAL OPINION, before the experts look into it more carefully.
I am extremely surprised, even astonished, that Stuart is putting his good name to something as blatant and crude as this. It may of course be that he has been misled himself (he seemingly has at least two partners in this, Huseyin & Aps) and has been suckered into this believing this NMD finance scheme (scam?) to be cleaner than it is?
On the other hand, perhaps Aps (who I SUSPECT is really behind all this as the scheme provider, with Stuart being merely the commission-based scheme vendor …but I obviously can’t PROVE this (yet)) has taken advice from a tax consultant or other counsel, or even run the scheme past both HMRC & CML and obtained their approval? I’m GUESSING not, because having been warned last Friday that I will be making a blog post, the chances are high that they would by now have told me of this if it was so.
Furthermore, if anybody did have a NMD Property Purchase Scheme that is approved by CML, with no bad tax implications, I’m sure they would shout about it from the rooftops. But that’s not happening here.
But I’d love that because it would mean that we have finally found a 100% LEGAL METHOD TO PURCHASE PROPERTY NO MONEY DOWN – and I’d willingly promote the socks off it as I have told Stuart – but I don’t THINK that is what we have here.
It may however be that the scheme is so far above board that it has, as the law requires, even been registered with HMRC as a tax avoidance scheme?
That’s probably not the case here though because it APPEARS that this particular so-called “No Money Down” scheme will result in a substantial amount of tax money going to HMRC somewhere along the line. That won’t be the scheme operator’s problem of course, or indeed the scheme vendor’s, just the purchaser’s (that’s potentially You by the way!). The perverse thing is that the likely huge tax bill could be avoided quite legally, just by avoiding schemes like this!
The above is, as I said right at the start, merely MY OPINION.
So always do your homework and get your own INDEPENDENT ADVICE – from your OWN solicitor, NOT a scheme operator’s – before committing to anything.
And if you can’t afford to do that, or even if you can, then really educate yourself by investing just £29.99 in a copy of our best-selling NMD Finance Exposed report…
==> NMD Finance Exposed Report
…if you have not already done so, as it may open your eyes and save you a small fortune. It’s a very small price indeed compared with what your so-called NMD purchase could potentially wind up costing you! If you think I’ve told you a lot above, wait until you read the full report.
And if you can’t afford that (in which case I struggle to understand how you hope to finance a property purchase, but that’s a separate discussion) then at least get our FREE copy of 10 Questions to Ask Your NMD Scheme Provider…
==> http://www.summitfinance.co.uk/nmdfinanceexposed/top10questions.html
…it may not turn you into an expert, but it will at least arm you with a few tricky questions with which to fend off the worst of the sharks!
Oh, and do your homework on the scheme vendor too, in this case BMV*************.com Limited. A quick FREE check on the Companies House website http://www.companieshouse.gov.uk reveals that their return due 04/02/2009 has still not been filed so is thoroughly OVERDUE (so pull your finger out, Stuart, before you get fined and struck off!!!) and most of the information on there will cost you just £1/piece to download. It’s a very small price to pay if you are planning on committing yourself to £100,000 or more on the basis of their say-so!!! Checking out the scheme-vendor and scheme-operator too is basic due-diligence.
But above all else, read our NMD Finance Exposed report and check out the scheme itself…
==> http://www.summitfinance.co.uk/nmdfinanceexposed
Stuart is now aware that I have made this blog post (and has had nearly a full week’s warning that I would be doing so as well) and is welcome to leave a comment below, as is the mysterious Aps, as is any other reader who wishes to do so (if you’re on the home page you may need to click the post title and then return here to get the comment box up).
If you know who Aps is, do please tell me because I’d love to contact him direct and ask him the questions that Stuart refused to answer. Obviously I’ll share his answers with you.
Finally, if you have enjoyed this post, please Digg It, or Twitter, or Stumble it etc… (you can use the links below).
