If you've personally been touched by the pain and embarrassment of bankruptcy you may think that your life will never be the same again. You may also believe that real estate investing is a thing of the past because lenders will forever consider you to be damaged goods. Fortunately, life does go on and you will recover from this. However, it will take time before some lenders will consider lending you money for your real estate investing activities, although you do still have options. Here are some steps you can take today to begin the recovery process - while you invest.
Credit won't be as readily available to you, so the first order of business for you will be to try to quickly build some positive credit. There are several good ways of doing this. Here are just a few:
• Secured Credit cards - After a bankruptcy your personal credit rating is in the tank. Most traditional credit card companies - even those that charge an annual fee, won't want to touch you right away. However, it won't take long for them to be willing to take a chance on you. You can grease the credit wheels by getting a secured credit card, which is simply a savings account with the issuing bank with a deposit equal to your credit line. By requiring this deposit, the issuing bank has some assurance that they'll receive the lion's share of their money in the event that you default. You'll want to utilize the card regularly and pay at least part of the balance off each month in order to generate positive credit report entries on a monthly basis.
• Personal loans - By going to one of your local banks and explaining that you're trying to re-establish credit after a bankruptcy you should be able to convince your banker to lend you a small amount of money, say $1,000 or so, backed by a corresponding savings account or Certificate of Deposit (CD) account. You'll be paying a small amount of interest for the privilege, but the expense you'll incur will be well worth the points your credit score will gain.
• Credit aging - Do you have a family member or a friend that would be willing to add you as an authorized user on their credit card account? They don't need to actually give you a card to use; the simple act of adding you as an authorized user will give you the benefit of "hitchhiking" off of their payment history.
While you're implementing some of these credit rebuilding strategies, you should also be actively investing in real estate. Traditional avenues of financing will be off-limits for awhile, but there will be numerous avenues you can utilize that will make real estate investing not just a possibility, but a certainty:
• Bird Dogging - As a bird dog you work as a real estate scout, doing the leg work of locating available properties for investors who will actually close the deals. You won't be placing these properties under contract - your job simply involves sniffing these properties out and letting the investor know what you've located. When he or she closes the deal you'll receive a "finder's fee" for the project, which puts cash in your pocket and gives you practical, real-world real estate investing experience.
• Wholesaling - This is a step up from bird dogging. You take the same steps of locating the available properties, but you also incur more risk by placing the property under contract and "selling" your contract to another investor for a profit. Depending upon how good you are at this, you can realize a substantial income by wholesaling.
• Partners - Your credit may be badly bruised temporarily, but if you stay motivated you can find partners with cash to lend on a real estate transaction. You can utilize partners for their cash for a short term loan for buying distressed properties at rock-bottom prices, rehabbing them quickly, and re-selling them for below market prices for a quick profit - and a fast payback. There's also a possibility that you can find investors that are looking for an ownership stake and a portion of the cash flow generated by properties in which you invest. You can locate prospects among your family and friends, your local REIA meetings, or even by advertising on Craig's List.
• Private Money lenders - You can also locate private individuals that have cash they would like to invest in real estate. If the deal is sweet enough, they'll lend you money for your real estate investing activities in exchange for an equity stake or a quick payback.
• Hard Money Lenders - As your credit score increases you'll also be able to turn to hard money lenders for financing. The terms aren't very good, but if you've found a truly good deal on a property it won't matter. Plus, these loans will show up on your credit report which will allow you to qualify more quickly for institutional financing.
The steps you can take to rebuild your battered and bruised credit report after a personal bankruptcy are limited only by your imagination and your willingness to work hard in achieving your real estate investing dreams. So go ahead, get moving today and begin the process of rebuilding your credit score and building an investment portfolio. If you have limited real estate investing experience or you're not sure what other techniques you can utilize in coming back from financial disaster, consider finding a good real estate investing coach who can show you the ropes and teach you a multitude of techniques that can ramp up your career and have you on the right track in no time. Success is yours for the taking, but you need to get started to reap the rewards. Get started now!
Aug 21 '08, 09:33 PM
