Real Estate Agent · Lompoc, CA · Member since 2021 · 18 posts · 6 votes
Hey y'all my name is Zach. I'm brand new to real estate investing. My credit isn't the best and my capital is zero, aside from our life savings and emergency fund which is also low. I've tried almost a dozen different lenders, mortgage companies, and other ways to get funding but keep striking out. Either I need a huge amount of money down (one lending company said I need $50k down for a 100k property) or my credits not good enough. Im finding good first deals and I know there's a way to get em with no money and bad credit. Any suggestions
Real Estate Agent · Skagit Valley, WA · Member since 2021 · 256 posts · 283 votes
4y
@Zach Fridrich - much of this can happen simultaneously:
work on your credit.... why not?
get that emergency fund to the level you need - what if you have an emergency?
find a great lender who will help you get started. Ask yourself.... would I lend myself money?
don't believe every success story on BP about super deals with NO money needed - sure they exist. But listen to the solid advice of investors who have lived frugally and gutted it out... and put in the time studying and finding other investors and mentors. There's the real path...
And if you've read this far....and feel like I'm trying to take the wind out of your sails - you're wrong. The beauty is that my first sentence is correct - all of these things can be worked on right now - and all at once. You could be in a TOTALLY different place within a fews months.... go for it.
Real Estate Agent · Skagit Valley, WA · Member since 2021 · 256 posts · 283 votes
4y
@Zach Fridrich - much of this can happen simultaneously:
work on your credit.... why not?
get that emergency fund to the level you need - what if you have an emergency?
find a great lender who will help you get started. Ask yourself.... would I lend myself money?
don't believe every success story on BP about super deals with NO money needed - sure they exist. But listen to the solid advice of investors who have lived frugally and gutted it out... and put in the time studying and finding other investors and mentors. There's the real path...
And if you've read this far....and feel like I'm trying to take the wind out of your sails - you're wrong. The beauty is that my first sentence is correct - all of these things can be worked on right now - and all at once. You could be in a TOTALLY different place within a fews months.... go for it.
Real Estate Agent · Frederick, MD · Member since 2021 · 18 posts · 21 votes
4y
Possibly try and find someone that is willing to go in with you on a deal. If you are well educated then you can leverage that. Find a property that you have confidence in and write a business plan that can be shared. With that you can go to potential partners with numbers that show they will be able to get x return. Alot of ways to get started without your own money, you just have to be proactive! A good book to learn more is " The Book on Investing in Real Estate with No (and low) Money Down" by Brandon Tuner. Good luck!
Lender · Columbus, OH · Member since 2020 · 202 posts · 214 votes
4y
Have you considered house hacking? With little capital and a less favorable credit score, it is much easier to get into a property being owner occupied. There are also grants and down payment assistance for primary residences.
Real Estate Agent · Lompoc, CA · Member since 2021 · 18 posts · 6 votes
4y
@Ashley Cross even with house hacking I've ran into some road blocks. I think sitting tight and working on my credit score might be the best answer for now.
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
4y
Agree with @Tim Johnson start working on everything at once! Get a couple small CCs and pay them off every month. If you want add a partner to get started more quickly, you must think like them.....i.e., what is Zach bringing to the deal? So what can you bring to the deal? Do you have any construction or RE skills? If not, go get them....sign up for a RE license class and a B1 builders license class. Study your arse off. Go work on houses for charity like HFH or WW. Make yourself desirable to a Partner, a Lender, a Realtor. Right now it sounds like you got nuthin'.....
If you're serious you can do this. There is no easy way and with all the talk of no-money deals, they are in reality few and far between. Starting off in the hole like you are doesn't mean you can't do this, it does mean you have to work harder and be smarter than everyone else.....
There's really only two kinds of people who think they are finding good deals in these market conditions- experienced, connected professionals and people who are brand new.
@Bruce Woodruff 2/3 done with my RE license. I'll definitely look into the B1 license. Never heard of that one
Its a General Contractors license. You will not qualify to actually get one, but take the course and learn anyway.....there are Trade and Law sections, learn both, they will come in very handy.....
Investor · Las Vegas, NV · Member since 2021 · 20 posts · 9 votes
4y
I'd recommend finding partners, form an LLC, and hunt down your first deal. You all can pool capital together. If you underwrite conservatively, lenders will be much more open to your needs. This is what I did with my first multi family property. Also makes it much more efficient to scale with a team to land more deals. I'm not an expert and still learning the craft. But this is what my team and I have been doing since in the last 2 years. I hope this helps and good luck!
Lender · Calabasas, CA · Member since 2021 · 25 posts · 28 votes
4y
Hey Zach,
It sounds like you're caught between a rock and a hard place. But you are exactly where you need to be, now it's up to you to put in the work to get to where you want to be. As a Private Money Lender with experience working at a conventional lender, you either need to have enough verified income or verified liquid assets. If you have neither, focus on building your income outside of real estate investing 1st and the capital will follow as a result. If you have a decent income, but your credit is poor my recommendation is to look for an FHA loan and start with house hacking. You'll only put around 3.5% in down payment but you'll have to live in the property for at least a year and you'll need a 580 FICO to make that happen. This is your best bet to enter the space as a 1st time investor with no experience, no capital, and poor credit.
If you don't want to go the HH route and desire to have this be a pure investment play, then you will need a business partner / to Joint venture with someone willing to be on a loan with you so that you can use their credit and your combined assets for qualification. Then you may have a shot at 100% financing, but that is still not guaranteed.
If this is just you, For someone in your position with no experience at this, you will not be able to source 100% financing. Most lenders do not lend 100% of acquisition, my company is only comfortable lending up to 90% of purchase but that's not to exceed 80% of value. See what i mean? Only a handful of lenders are willing to expose themselves to that level of risk and there are compensating factors for why... most likely being experience and assets, which you have neither.
I am not here to shoot down your dreams of breaking into the RE market, but what i am gathering from your post is that you really are a brand new real estate investor and you do not have enough time in the space to know what you can and cannot qualify for. Keep talking to lenders, realtors, and other real estate professionals and get acclimated with the industry terminology. Keep looking for those good 1st deals and running them by the lenders you've made contact with to see what they'd be willing to lend you. Keep working on building your credit, saving money, and iron out your business plan and strategy so that lenders view you as an attractive investment.
Again Zach, you are exactly where you need to be and the fact that you are open to suggestions and looking for feedback is a great indicator to me that you will be successful at this. Stay hungry, you'll be just fine.
Investor · Las Vegas, NV · Member since 2021 · 20 posts · 9 votes
4y
You are correct with traditional big banks such as Wells Fargo, Chase, etc. Try contacting credit unions and smaller banks. The smaller banks and credit unions can be much more creative than larger banks that have more red tape.
Real Estate Agent · Lompoc, CA · Member since 2021 · 18 posts · 6 votes
4y
@Tanner Cohen Thanks Tanner! This is great stuff. This is definitely a post to read through once a week. Thanks for taking the time to give advice and encouragement. Grew up in a single parent home dirt poor. Lived in a trailer park, had fast food every day, hand me downs, the whole nine yards. I want better for my wife and future kids and real estate can definitely provide that.
Real Estate Broker · Columbus, OH · Member since 2021 · 203 posts · 247 votes
4y
We are glad to have you here Zach. Seek our a mortgage officer that can refer you to a credit counselor. Work on that credit while saving for your downpayment! You got this!
Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
4y
There are people making all kinds of suggestions on alternative approaches but it will be extremely difficult to get anywhere with limited funds, no experience and less than good credit. In so many cases, though you may not be, on paper you are seen as high risk. There are plenty of people with all those things listed so a lot of people will not even bother. If somehow you get a decent deal under contract, if you have a decent network you can structure it so you all benefit. Aside from that my suggestion would be to study up, ask tons of questions and join a local REIA to get tied in with other local investors. At the same time you can build on your credit and savings. Once you get the savings up, maybe explore investing in the project of an experienced investor. By investing, you are partnered in on it where you are gaining experience and credibility. As time goes on you will eventually have the credit, savings and experience.
Lender · Calabasas, CA · Member since 2021 · 25 posts · 28 votes
4y
@Zach Fridrich i find tons of people interested in investing in Real Estate because they think it's no work and they get passive income. Those are the people who fizzle out like new years resolutioners at the gym. I can see a real desire and active approach to your interest... and most importantly you have your why. You have a wife and future child that you are committed to not just provide for but create generational wealth for so that they don't have to experience what you had to. If you ever get discouraged, because you will if you haven't already, take a sec and remember your why. They are all the motivation you'll need to thrive in this business. And if you ever have questions or concerns about the loan process or if you want to say hi, you now have another resource at your disposal! Keep connecting with as many people as you can, you're not alone. Just think, your story / journey can inspire not only your loved ones but countless others who have come from humble beginnings just like you. I'm getting goosebumps just thinking about where you'll be in 5 years. :)
@Bruce Woodruff 2/3 done with my RE license. I'll definitely look into the B1 license. Never heard of that one
Its a General Contractors license. You will not qualify to actually get one, but take the course and learn anyway.....there are Trade and Law sections, learn both, they will come in very handy.....
This depends on where you live. In Michigan, all it takes is a 60 hour training course (state approved), passing a separate test and submitting an application, to be state licensed as a residential builder, i.e. a general contractor. I was planning on taking the class in February but now it will depend on if the schedule conflicts with the BP bootcamp I signed up for. I 100% agree this kind of training can make a world of difference if you lack other resources. Even if you don't get licensed.
I am in the same position as you are. Looking to purchase my first rental property in the next year. Thank yiu fir the post as I learned a lot from all the people that answered. I wish the best of luck to you and know anything is possible and your dream will become reality with hard work and dedication.
Real Estate Broker · Detroit, MI · Member since 2014 · 384 posts · 149 votes
4y
Wholesaling those good deals you’re finding will allow you to build cash reserves. With those reserves you can improve your credit. Once you exit a few deals and people know you’re serious, it will be much easier to obtain funding.
Some options to consider are partnering up with someone. Perhaps they fund the deal you manage the rehab.
Using hard money loan to acquire a property (do research and be careful on this one)
Consider owner financing! You can set up a deal and pay the owner directly if both parties agree to the terms set forth.
I’m sure there’s a million others I’m missing but those are just a few thoughts that and to mind.
Also I recommend using a secured credit card as a means to build your credit. I brought my score up from 580 to 6 something in 6 months or less. Basically it’s a pre paid debit card where you tell the bank how much you want to use. My bank offered $500-5,000 range to activate it. I paid them $500. You use it like a debit card and pay it off IN FULL every month before the payment is due. Then watch as your score goes up! You can cancel the card anytime and get back your $500 or whatever you chose to put down so long as you paid the card off. It’s easy to set up too.
I would love to chat sometime since I’m looking to buy my first multi family soon. Would love hear your story and hear how you found a deal and managed to find a business partner that’s a big accomplishment!