Trouble starting, no money and bad credit.

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Trouble starting, no money and bad credit.

Rodolfo Varo
Member since 2022 · 1 post · 0 votes

I feel the need to start something else besides my job and I really want to jump into real estate (passive income) and I believe that's rental properties.

I recently put my house for sale hoping to get the equity to put it on the market.

Sadly I have bad credit but I want to work on fixing my credit and my finances.

Any suggestions?

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Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
3y

Do not invest in real estate yet. You need to get a strong base. Having no money and bad credit is not good. Selling your house can help get you in the right place but it won't fix what got you in your situation. You need to budget and track your money. See what comes in and what goes out. If you need to increase your income do so. Once you get your personal finances in order you can invest. If you can't manage your money now when you invest you won't be able to manage that well. 

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  • Tim Johnson
    Real Estate Agent · Skagit Valley, WA · Member since 2021 · 256 posts · 283 votes
    3y

    @Rodolfo Varo Sounds like you have your own answer. If your house sells, and you have equity, pay off your debts and start saving. If those two sound strange or difficult you might want to reconsider jumping into REI.

    4Reply
  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    @Rodolfo Varo

    Before starting a business (real estate investing), I would suggest getting your personal finances in order. Get on a budget, fix your credit/pay off debts, and start putting some money away. Possibly there is a way to get extra time/income from your job or start a side hustle.

    3Reply
  • Kalyn Catlin
    Omaha, NE · Member since 2023 · 7 posts · 4 votes
    3y

    Talk to a good lender! They are able to tell you exactly what you will need to do in order to reach your goal. Most importantly though, don’t lose hope, anything you want to do in life is possible!!!

    0Reply
  • Travis TimmonsPro Member
    Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
    3y

    The last thing that you need to do right now is borrow more money. Get your finances in order and start from a position of strength.

    3Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    3y

    Do not invest in real estate yet. You need to get a strong base. Having no money and bad credit is not good. Selling your house can help get you in the right place but it won't fix what got you in your situation. You need to budget and track your money. See what comes in and what goes out. If you need to increase your income do so. Once you get your personal finances in order you can invest. If you can't manage your money now when you invest you won't be able to manage that well. 

    5Reply
  • Zachary Ware
    Member since 2022 · 405 posts · 455 votes
    3y

    I agree with others here. Do not rush into investing until you have built a strong base. You should have a great handle on your own finances before you start to handle the finances of a business. Paying off bad debt, especially credit cards can be on the the best returns you can get. Building your credit, paying off debt, and gaining confidence by handling your own finances will go a long way once you do start buying properties.

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    3y
    Quote from @Rodolfo Varo:

    I feel the need to start something else besides my job and I really want to jump into real estate (passive income) and I believe that's rental properties.

    I recently put my house for sale hoping to get the equity to put it on the market.

    Sadly I have bad credit but I want to work on fixing my credit and my finances.

    Any suggestions?


     >really want to jump into real estate (passive income) and I believe that's rental properties

    This comment to me shows you need to educate on residential RE.  It is not passive.  Depending on strategy chosen, it can be far from passive.  

    >I recently put my house for sale hoping to get the equity to put it on the market.

    I question your strategy. Are you planning on house hacking? You have to live somewhere. Highest LTV is owner occupied (FHA up to 96.5%) versus investment typically maxes out at 80% LTV. are you hoping to use alternate finance strategies (owner financed, subject to, etc)? The first thing required is very good credit. Not Mediocre credit, not good credit, but very good credit.

    >Sadly I have bad credit but I want to work on fixing my credit and my finances.

    Do you think this should be step 1?   Why would you first put you home on the market?  Most LL do not report your rent payment to credit bureaus.  Paying the mortgage on time, every time could help your credit score.  Paying rent is unlikely to help your credit score.  Attempting to purchase with poor credit will be very challenging and if happen to find a way to make it happen, you will be paying for your poor credit in the loan terms.


    Take the time to learn about RE investing while improving your credit score.  Not only address your poor credit, but also save.  Maybe you will be ready in a year or so. Doing it now is unlikely to work out great.  

    Good luck

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Rodolfo Varo

    As others mentioned stay out of real estate for now and focus on your existing problems of why you have bad credit. Chasing shiny objects without fixing your current problems will only lead to more problems on the future.

    Fix what is broken now and take baby steps later to build passive income

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    1Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y

    One more voice in the crowd.

    Get your personal finances in order. Read Dave Ramsey. Hustle. Increase earnings. Reduce expenses. Pay off your debt, repair your credit, save up, and educate yourself (for free!) at the same time. Invest from a position of strength and you will dramatically increase your odds of succeeding.

    The DIY Landlord Book4.7248 Reviews
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    1Reply
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