BiggerPockets

Today I see a lot of montelongo, legrand, dc fawcet...They all preach no cash no credit. Let other people do this and that..creative financing. Is this all mumbo jumbo or can it be done? Have any of you done a creative financing deal where you didnt use your own cash or credit? Id love to hear.

ideally id like get into the business of flipping sfh's as well as holding apartment buildings with positive cash flow.

There are ways to do it, but they are not easy, per se. You could borrow from a friend's self directed IRA. Since your friend knows you and presumably trusts you, you don't have to meet income and qualification like you would a bank. The deal would still have to be structured above board though.

Of course it is possible - that is how I got started in this biz - no cash and no credit. I found partners with cash and other partners with credit - I did all the work and split the profit 50/50 until I had enough to work on my own.

A lot of those guys also talk about a sub2 deal - where you find a distressed homeowner who needs to sell and you lock up their home on a sub2 deal and then you do a lease option with a buyer or sell to an investor and you make some cash in the middle.

You can search sub2 in this site for lots more info.

But yes - it can be done - but as others have said not the easiest way but a way lots of us started out.

I stand by my statement!!!

People have been taken to court and had their credit runied because they could not purchase after the buyer backed out.

These cases becomming more common as the economy turns south along with compliant to the government about being screwed out of some of their money by someone who was supposedly working for them who knew the business. ( This is always their viewpoint even though we know it is not true.)

This alone by happening shows that your credit is tied to your good name and that your credit is on the line, even though you do not borrow any money on credit of yours.

You make an offer to a bank or anyone and you are liable to complete the offer. It does not matter to them if your buyer backs out or whatever happens to cause you not to complete your part of the arrangement. Neither do the courts care. Yes this has happened many times and credit has been ruined because they can not pay as required by the courts.

I am supprised that you do not remember these cases. You can look up the warnings right here on BP from many members that you had better be ready with a backup buyer or ready to pay cash if your buyer backs out. It has been stated many times and there are penealties if you do not follow through.

Credit is more than what you get from the bank or financial institution, it is your reputation as well. Credit was started by a handshake and your word. If your word is no good neither is your credit. So everytime that you give your word on any deal it does affect your reputation and your credit.

Nothing that I said was incorrect.

I even spoke of homeowners complaining to the government of those who they felt were in the business that treated them improperly. This is also true and is the reason that there is so much more regulations that we are having to endure everyday (so it seems) with our actual lending and borrowing practices.

Thank you Jon, I stepped in here to try to show some of the newbies that the full story is not told by most of those who claim "No cash No credit".

There are things that you must have in those contracts or you will lose your reputation, which in this industry, does affects your credit.

Ryan, these are the type things that I want to bring out to most of the newbies, as this is an area of guru influence that I am afraid they do not have the full story of, which is why I put out some things that can and will happen if they are not careful.

I do value your judgement and most of what you said is correct, but the cases that I spoke of have also happened to some who were not taught to be diligent in their contracts.

CAN it be done? YES., most definately but be sure to have the approiate clauses in any contract that you use. This is of the utmost.

That maybe a few hundred dollars a month for 6 months or so but that beats having to use all of your own money and you don't need any credit.

That said, this thread is about having no money and so your suggestion is certainly on track. Congrats on your successful wholesale deal. Are you implying Ryan trained you? If so, you had a good trainer, hence your success.

look back to some of the posts prior to mine. Someone suggested using a friends self directed IRA and someone else a company that you own to solicit those funds needed. All under the SEC guidelines of one form or another.

And yes, guru's do mention "subject 2" clauses but do not go into what each one is for and what areas they will work in and how to modify them for the other areas because they do not want to be charged with legalities of giving legal advice. So even somewhat explained most newbies are still clueless and do have problems implementing them.

Everything done properly is ok, but anything left hanging and you might as well be also because you can loose your shirt and credit and reputation.

Any contract with any clause in it is subject to that clause. This is one of the "secrets" of those guru that are not explained well. Which subject to clause to use and when. If the wrong subject to clause is used it will not protect you from that you think it does and litigation can follow.
That leads us to agreement in that you must have the proper full legal advice about those contingencies or you may face legal troubles which will in fact hurt your credit and reputation.
And todays far reaching governmental regulations can be used to affect those business who are using their credit as proposed to influence a friend who has an IRA to invest with them since they trust that friend, especially when the investment does not return what they thought it would. There have been several of these complaints filed with the SEC who investigated and applied their laws or turned over to the proper authorities and there are several proposed legislation changes in the works currently.

Some of which affect "small business" according to the SEC because those small business have an investor relationship with some regulated securities.

Now my use of the SEC may be premature for the beginning investor as they are not traded companies in most likelyhood. But on the other side of things the SEC is and has been going after brokers/companies who use others funds and reap a commission/fee in mortgage securities.

From the SEC site:

Washington, D.C., May 28, 2009 - The Securities and Exchange Commission today charged 10 brokers with fraud for falsely marketing investments in derivatives of mortgage-backed securities as safe

It is my contention that with all the current losses and complaints of homeowners upside down because of the recent economy that if the SEC can not reach the mortgage securites (trust deeds) with their regulations that the current governmental forces may try to accomplish something similar with their regulations for the homeowners losses. So we all need to keep privy of those proposals of such new legislation SEC and goernmental wise by the use of a competant local legal advisor despite what those guru's say because they have always done it. THINGS ARE changing and rapidly.

Especially in the "creative financing" areas. This term is what really triggered my red flags and why I feel the need for the warnings here.