NMD, BMV …. RIP?
Pssst! Fancy a real bargain? A property at well below its genuine market value? And how about nabbing it without using any of your own money?
Ok. Now find a few more cut-price lovelies, repeat the process, and you, me old mucka, will be well on your way to becoming a champagne sipping, Ferrari driving, villa-in-the-south-of-France-owning … PROPERTY MILLIONAIRE!!!
If you’ve attended property investment shows in recent years you’ll know that what I describe above has been a much touted way of making mega bucks from bricks and mortar.
Two acronyms became buzz words in the trade: BMV and NMD – Below Market Value and No Money Down.
The cunning plan involved finding desperate sellers, buying at, say, 20 per cent below the market value, and then using a bridging loan to pay for the property.
You then remortgage the next day for the real market value and you have, in effect, generated instant equity. And bought a property using none of your own dosh. Nice!
In the boom times this made some people – mostly full-time professional investors - very rich indeed, but when Mortgage Express – the main lender providing the remortgaging service – pulled the plug, it was, many thought, RIP for NMD.
Or was it? Last week I received an email from Simon Zutshi, the man behind The Property Investment Network. It included a link to a report he’s written called, ominously, The Death Of Property Investing.
Zutshi is a bit of a guru – he’s written a best-selling book called Property Magic: How to Buy Property Using Other People’s Time, Money and Experience, is a regular at property investment events and runs seminars for would-be investors.
He’s long been a big advocate of the BMV/NMD route to riches and his report remains ferociously upbeat - the BMV/NMD folks sometimes sound like they’re recruiting you into a mysterious cult!
I’ve read the report and I can’t find much to quibble with in his argument that if you can get your hands on financing, now could be a very good time to buy. Bargains are available, rental demand is high and yields are on the up.
Absolutely right.
But what about the financing? Zutshi has less to say about this, though he does tantalise with the promise that he’ll soon be unveiling a crafty new way of making NMD remortgaging work - “My latest strategy leverages clever loopholes to overcome problems in the mortgage market..”
Hmmm. Haven’t seen any sign of that yet, and I do wonder if it’s really possible in the current credit-crunched climate - if any of you out there are buying using NMD, I’d be interested to hear how you’re doing it.
In the meantime, if you want to read a carefully sceptical assessment of NMD and BMV, I’d recommend David Lawrenson’s recent blogs on the subject – they’re sensible, down-to-earth and they highlight many of the potential pitfalls.
Related Tags: NMD, Buying & Selling, BMV, Property InvestmentRelated Posts:
Posted by 
Loading ...
I have read the guide above, there are some good comments in it. BMV property is on the increase and so are reposessions.
Well lets start with the BMV.
In order to establish the ‘Below’ you have to establish the real ‘Market Value’.
Show me a property developer or builder who sells their units at BMV and I’ll show you someone who’s about to get fired.
Developers/Builders are not benevelent societies there to make BTL landlords rich.
Secondly, NMD, buying a property in this way is often ‘Mortgage Fraud’ and potentially one could end up inside a ‘big house’. At the very least, I think if your Bank/BS knew about it, they would refuse the apllication.
Can’t long term wealth be built without breaking the law?
Hi Mike,
I am glad you enjoyed reading the report and thanks for the mention. I wrote it to stir up the market and as you know managed to get a great reaction.
As promised I have created a follow up video which you should have received on Tuesday. I would be interested to see you comments on that. You will aslo see that I talk about No money left in rather than no money down.
As far as the comment from smell the coffee, I completely agree no one should be buying from developers now as prices are usually high initially so there is not a genuine discount. This is why lenders are very reluctant to lend on them at the moment. I find your comments about Mortgage Fraud very interesting. I am one of the few people BMV experts at the moment who is saying that invetors should not be using the various NMD schemes, especially when there are ways of buying with no money left in that are with the fiull knowledge of the lender.
The fact still remains that prices are coming down, great discounts are available from motivated sellers and so as long as you know what you are doing now is a great time to buy.
Kind regards
Simon Zutshi
I’d agree that any schemes are not naturally sustainable. They may allow the odd BMV deal here or there but the moment they start landing on the doormat of the IR 18 months downstream they leave the scheme holder open to investigation.
For the interim, property investors can still get BMV NMD if they are particularly creative although it is no way what it used to be. Most will either exit the market or those with business accumen will resort to the same strategies employed in commercial finance - ie presenting business plans and raising equity.
Graham Brown
http://www.LoveProperty.org
Have also read Simon’s report and agree that now is a great time to buy cheap property if you can overcome the very real finance problems. Simon does not advocate using NMD schemes but rather suggests it is possible to buying without tieing up large amounts of your own capital for extended periods. Many investors got too used to doing deals NMD and are now paying the price from overtrading.