{"id":77596,"date":"2016-04-01T11:00:35","date_gmt":"2016-04-01T17:00:35","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=77596"},"modified":"2024-02-23T16:14:43","modified_gmt":"2024-02-23T23:14:43","slug":"2016-04-01-3-ways-to-invest-with-no-credit","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2016-04-01-3-ways-to-invest-with-no-credit","title":{"rendered":"3 Ways to Invest in Real Estate With Little to No Credit"},"content":{"rendered":"

Doesn\u2019t it always seems that banks are willing to lend you money (or a particular type of money) when you don\u2019t really need it?<\/p>\n

When I think back to when I first got out of college, I was having trouble building credit and even getting a credit card, but today I\u2019m solicited for credit cards by banks nonstop. It\u2019s similar with lines of credit too, especially business lines of credit.<\/p>\n

So, if your access to capital is limited and you have little to no credit, how can you invest?<\/p>\n

Well, there\u2019s a few options.<\/p>\n

3 Ways to Invest in Real Estate With Little to No Credit<\/h2>\n

1. Utilize a different type of capital.<\/h3>\n

You don\u2019t necessarily have to use traditional financing. For example, years ago, credit cards were issued for people to buy primarily consumer goods, but I was using them to purchase and fix up properties. Then, banks would give me a business line of credit much more easily\u00a0than a mortgage. So, guess what I was using my business line for? Purchasing and fixing up properties.<\/p>\n

Another example is using OPM (Other People\u2019s Money) to invest. By using private money<\/a>, you\u2019re not using your credit to do deals and you\u2019re limiting your overall risk.<\/p>\n

\"find-mentor\"<\/p>\n

2. Use someone else\u2019s credit.<\/h3>\n

This can be done in a few ways.<\/p>\n

By this, I mean that I\u2019ve joint ventured with people on properties, where we were able to use their credit or status to acquire the real estate. Once, my sister-in-law bought a property with my wife, where we were able to use my sister-in-law\u2019s FHA eligibility. On another deal, I\u2019m using my son\u2019s ability to purchase a home through a joint venture since I have too many units in the eyes of the bank and he doesn\u2019t. After all, it\u2019s about trying to build the family\u2019s overall wealth.<\/p>\n

Related:<\/strong> No Money? No Credit? No Real Estate Experience? Read THIS Before You Do Anything Else.<\/a><\/em><\/p>\n

A different example is that of my buddy, who was buying a lot of commercial real estate. Since he previously had a failed business, he used a joint venture partner\u2019s credit to get the loans. But he handled all of the acquisitions, fix-ups, and day-to-day management of the student housing he was buying. He still owned a nice percentage of the entities, but none of the loans were in his name.<\/p>\n

3. Invest in another way.<\/h3>\n

Sometimes, we can just invest without needing credit. This can often be done when we take control of an investment without it being in our name. A perfect example of this is the \u201csandwich\u00a0lease option<\/a>,\u201d where you lease a property from an owner then turn around and sublease it to someone else. Now you\u2019re getting a security deposit and a monthly cash flow on a property you don\u2019t even own.<\/p>\n

Another way to invest without needing credit is in \u201csubject-to<\/a>\u201d deals. This time you\u2019re taking title to the real estate with the existing loan remaining in place, and the beauty of this is that it\u2019s not attached to your credit. What\u2019s cooler than having ownership and control and not using your credit?<\/p>\n

\"house-hacking-tax\"<\/p>\n

Cash Flow Investments That Don\u2019t Require Credit<\/h2>\n

There are some other investments as well that give off cash flow without requiring credit.<\/p>\n

The easy one to think of here is notes. The one beautiful thing about buying or investing in a note is that you just need the money. So, whether you\u2019re just starting out with a small amount of money (e.g. $25), using a platform like Lending Club, or you\u2019re purchasing a secured first or second mortgage, you don\u2019t need credit to do so.<\/p>\n

Related:<\/strong> The Practical, 3-Step Way to Get Started in Real Estate With No Money<\/a><\/em><\/p>\n

Another one is tax liens.<\/em> When you go to buy a tax lien, they don\u2019t check it either.<\/p>\n

A third way is hard money. If you\u2019re lending out money to fellow real estate investors for their rehab deals, I can\u2019t picture the borrower asking to see your credit.<\/p>\n

As you can see, there are many ways to invest in real estate without using one\u2019s own personal credit.<\/p>\n

So, what are some of your favorite ways?<\/em><\/p>\n

Let me know with a comment!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

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