If you still would like to buy a flat or invest in real estate, here are some ways that it can be done with bad credit.
Trying a partnership:
Partnership is one of the best ways to invest in real estate because everyone has something, which they are lacking. Partnerships help fill this void. For you, perhaps it’s your not-so-great credit, but maybe you have something that your potential partner doesn’t have it. Time? Skills? Experience? Hustle? What can you give to the table that will help them achieve their goals while you achieve yours?
Of course, when it comes to partnership, everyone must be careful. Do your homework, check your partner carefully, and it is true with all these tips, only invest in good deals.
Considering seller financing:
Seller financing is the process in which Sellers agree to finance the property, rather than making you obtain new loans. In essence, Sellers agree to let you make monthly payment to them until the property is paid off (or the term of the seller-financed loan end).
Seller financing can be so powerful, because the seller typically will not ask to see a credit score. However, the best use of a seller-financed deal is when the seller own must the property free and clear. In other word, they shouldn’t have a mortgage on the property. If they try to “make the contract” on the flat that they have an existing loans on, their lender could foreclose due to something known as “the due date-on-sale clause.” So looking for deals where the owners have no mortgage.
Seller financing will likely to become increasingly popular in the coming next years, because small boomer owners of rental properties will be looking to get out of the games—but also looking to holding on to their monthly income. Seller financing offers a good win-win solution for all parties.
Considering hard money lenders:
Hard money lender is individuals or businesses who lend money at high interesting rates and short term to real estate investors. Hard money rates different, but typically fall between 11% and 18% interest, with less than two years terms (often it just six months). Aside from, hard money lenders also charge big fees, known as it’s “points,” which you can add anywhere from 2% to 10% of the loan amount. A lots of hard money lenders used to be investors themselves, but it have moved to the more passive method of simply lending.
Sound nice, doesn’t it?
Because of the high prices, high fees, and short terms, hard money is good ideal for flat and house flippers and those looking to do with methods: buy, rehab, rent, refinance, repeat of real estate. This way, the real estates investor can be in and out quickly, cashing out the hard money lenders and moving on to the next projects.
Hard money lenders rarely looking at the borrower’s credit score, though it’s becoming more commonly. In fact, the hard money lenders care most about the security in the deals. They want to know that no prolem what happens, they will make money. If the borrowers default, can they foreclose and they sell the property for more?
If you have a less credit score but want to flip houses and flat, hard money might be a good option. Just be sure to finding an incredible deal so the lenders feel secure, and then rock that flip and making your money.
Exploring private money lender:
Similar as hard money, private money lender is individuals you might know and are looking to achieve a great return on their investment. Unlike hard money lender, private money lender is not typically real estate professionals who lend money for businesses. They are looking for diversify their cash into other investments. Private money lender might be your dentist, mom, dad, neighbor, or someone you have built a relationship with on Bigger Pockets.
The keyword with private money is good relationship.
When you dealing with other people’s money, it is unlikely they will ask you for your credit scores. However, this mean you must work even harder to making sure they will receive the kind of return on investment they are looking to make it.
This is when the discussion earlier about the credit scores being symptoms come into play. Do not take advantage of Family’s kindness and lose all their money. In reality, never taking money from anyone who could not afford to lose it. That would be make for a hard Thanksgiving dinner.
Checking out wholesaling:
Wholesaling are the business of finding good deals, putting them under contracts, and quickly “Witching them” to a cash buyer for than higher amount. A lots of wholesalers do this entire process without using a individual dollar of their own money or ever needing their credit checked.
This probably sound amazing to you, but before you head out the door looking for a great deal, understand a some things:
- Wholesaling is jobs. It is’t passive, and if you do not work, you don not get paid! Most would say that wholesaling is not even investing since you aren’t really buying or selling the property.
- Wholesaling is so hard. It requires time, patience, and good marketing skills. You also must have the ability to talk with the sellers on the phone, sell yourself as a credible solution to their matter, estimate rehab rates, find cash buyer, and put the whole thing together without it all falling apart. In words, wholesalers need to be good at the entire world of real estate investing. It’s not an easy task, and most people who try to wholesale never do a single deal.
- There are legal implications regarding wholesaling and the need for a real estate license. Simply put, you should probably get your license.
A low credit score doesn’t mean you can’t buy a house—or invest in real estate. It just means you need different strategies. And you should also carefully consider whether buying property is the right solution for you right now.
