I can't leave Square 1 ! Minimal Capital & Low Credit

38 Replies

Hey BP,

It's me again and there is so many questions I have that I know I could probably find here on the BP forums, but I find myself in the same rut. Money & Credit.

I myself come from a very poverty stricken area in Cincinnati, OH. Recently relocated for my business to Parkersburg, WV. I currently run a cleaning service but I am not rich by any means. It's just a locally owned cleaning company.

A little about myself is I am 21 years old, and I have had a passion for Real Estate Investing for as long as I can remember. At first it just seemed like a gateway for me to earn the financial success that I've always dreamt about so that me nor my family would ever have to struggle again. However, within the past year I've become obsessed with it. I've read books, I get on BP religiously, I have been studying different ways to get into REI with little to no money because essentially that's my biggest downfall is no capital. Due to identity theft issues, which I won't get too far into, my credit score is sitting pretty low right now which is terrible. Banks will literally laugh me out of their offices.

Since coming to BP, I stumbled across Wholesaling. I know Wholesaling is for individuals who lack the funding to be a cash buyer themselves, or lack the credit to get a HLOC. I was going to try my hand in it, but I had more people telling me that it was flirting with illegal issues than people telling me to go for it. Not to mention I just didn't feel comfortable doing it.

As of right now I make around $2,000 a month after I cover all my overhead for the business, and that $2,000 has towards my monthly bills (Rent, Gas, Electric, Water, Food, etc..) So I am on a pretty tight budget. It's when I do these number crunching that I start to get discouraged because I feel so far off from being able to do what I want to do with REI which is building my own rental portfolio. My goal is to one day have 100+ rental properties of my own, and right now I feel like i'm just walking in a circle.

Do you have any suggestions for me? I have low credit, though I am working on it daily -- and I have minimal money. Any advice helps, and I appreciate you taking the time to read my post.

I look forward to hearing from you all! 

Well you can try wholesaling or get another job, but itll essentially come down to earn more money or spend less. For right now I’d fix your credit. That doesn’t require much money but requires time.

Can you save anything per month? Even a hundred bucks is somewhere

Where you come from doesn’t dictate where you go! Keep your head up! Fix your credit, and work more! To complete any goals you set you must make them a priority and MAKE the time to complete them. No matter what step on the ladder to success you’re on, make the time and you’ll make it to the next step!

Originally posted by @Caleb Heimsoth :

Well you can try wholesaling or get another job, but itll essentially come down to earn more money or spend less. For right now I’d fix your credit. That doesn’t require much money but requires time.

Can you save anything per month? Even a hundred bucks is somewhere

 I started saving a little bit each month to go towards my Real Estate passion, and right now I have about $3,000 in savings. 

Took me 5 years of saving to buy my first rental.

If it takes you 5 years, that will be plenty of time to become a subject matter expert, and fix your credit.

Everyone starts at different points. Most don't start with any advantages, and it takes time to build some.

You're doing the right thing, working on it every day. You'll get better as you go.

My advice would be to get rid of the cleaning company if it is not growing rapidly. If it is not growing in leaps and bounds you should let it go and find a job. Your primary goal now should be to increase your income and to do that you need to apply yourself. If you do not have a degree or a skill go into the trades. Give yourself five years and in that time you should have the income, savings and a spotless credit rating you will need to begin.

Do not tie yourself to WV, search out a good paying job with upward potential and move to where it is.

Thanks for the post!

You're closer to success than you think. The best way to build a book of real estate assets AND gain credibility is to partner with a more experience investor who has connections to equity investors. Bring a good deal to an experienced investor, and most will be happy to give you some ownership in the partnership.

Let me know if I can help!

Find a way to market yourself and demonstrate your value to someone who needs your skill set. If you can't then maybe learn a new skill set and then use that. This won't be easy, you're going to need to network and put yourself out there. It'll be time consuming if you have to learn a new one and it'll probably have lots of rejection. You're going to need a little bit of luck too, but if you grind it out you'll find a way...

I wouldn’t quite get rid of this cleaning company you have built up. I think your passion and effort in hindsight is focused too much on real estate when right now what you need is to improve your credit, which will take time. I would suggest focusing on scaling your cleaning business, growing it while your credit score improves and if real estate is your true passion, you can potentially sell the cleaning business in the future that would give you enough capital to start real estate investing. It may take years but your credit will take years to improve. Remember REI is not a race.

Why not combine both? Landlords have turnover, turnover involves getting units clean so they can be re rented..............

@Aaron Phillips

First, the home purchase is usually the most expensive purchase you will make in your lifetime. This purchase is not suppose to be easy, as if it was, everyone will be doing it. Your starting point is like most everyone else here on BP. 

Here's a funny but real post that deals with your situation.

Terry

https://www.biggerpockets.com/forums/12/topics/511...

AS @Thomas S.   many people move to better their position.. why do you think so many people come from all over the world to Canada and US.. to better their position.

I have had many clients who came here with nothing actually  less than nothing ,  did not even speak the language and are multi millionaires  not over night ,  but by using their work ethic which surpass's many of us americans.

WV is the only state in the US I have never set foot in.. so I don't really know more than I see on TV and it looks pretty depressed.. so a change of scenery might be in order.

but your so young 21.. I did not buy my first property ( other than my personal residence which I bought at 19 )  until I was in my middle to late 20's it was all about experience and building up war chest so I could pay cash.. my system was to buy foreclosures and such.. so financing was not anything I even looked at..

Its a looooong game..

@Aaron Phillips ,  I have a couple of thoughts that may or may not help you, but I hope they do.   

When we talk about businesses working together to benefit each other, we talk about compatible businesses.    The Real Estate and the House/Property Cleaning  co. are compatible businesses.   Put this into your head- NOW:  You are not  just a "Cleaning service. " You are a PROPERTY CLEANING SERVICE.  You make properties more beautiful, or sanitary or more livable or more workable. You know about green cleaning solutions. You know about bathrooms and kitchens.  You know what solutions will dissolve what finishes.   You know when to use bleach, when to use ammonia, and when to just pitch the damn thing.  

Congratulations-- now you're a Tradesman, no different from a plumber or an electrician.   Absolutely do NOT drop this company-- it gives you a legit way in.  

Now,  I would do two things simultaneously:  1) attend all the REIA's you can and pitch your service.  No one needs Cleaning services more than people who are moving.  

Amend that-- if ANYONE needs cleaning services more than people who are moving, then it's the other parties to the transaction and the service providers-- Lender REOs, Selling Brokers, Probate Attorneys, and Heirs of Family members who would like nothing more than to sell Aunt June's house without having to rummage through her unmentionables, and YES, RE Investors who have just (ahem) "Stolen" the neighborhood Victorian.  You know the one-- the run down one with the carraige house that the hoarders and their posterity have occupied for over a decade.  Yeah that one.  Buyers need cleaners too.  That's for sure.  

Now, the important piece:  2)  GET YOUR LICENSE.   This will get you a real start in "real-Real Estate" for short money.  It'll allow you access to new  Owners, new properties, and yes, new clients for your existing company.  Others here have simply said "work more."  They're right, but that's an empty comment.  This method gives you an actual path.  Whether you work 20 hours or 50 behind the RE desk, you'll be getting that "in" and whetting your appetite.  Furthermore, you can build 2 compatible businesses simultaneously-- tell all your Cleaning clients all about your real estate passion; tell all your RE Clients all about your willingness to get your hands dirty on their behalf.    These businesses deserve to be built together.  

One last thing--  Credit aside, I offer you this final comment:  

$3K is 3% on a $100k home. I bet you can buy SOON if you want to. Others may say "no, wait..." and that may be prudent. But if you can find that risk-mitigating duplex where 1/2 is turning rent and the other is your contribution... then I bet an FHA Loan is more or less in line with your ability. Talk to a trusted loan officer before you write yourself off. Don't jump at the first thing they say. Deliberate well, but I bet you're closer than you think.

Good Luck.  You're gonna make it.  

REI is a long game and since you own a cleaning company look for tired property owners that don't want to keep the home anymore. Some might offer owner financing with a healthy down or no down payment depending on their situation. I have yet to secure owner financing, but always trying to find it. The other consideration is that some may make it look like real estate doesn't involve money or substantial savings. If a major system like HVAC, roof, plumbing, or electrical needs repaired, then it will require substantial capital for repairs. Search out multi family properties that cash flow and could obtain owner financing (unicorn), but you may find it. Another consideration is that you may fix your credit and be able to obtain a new home, but if you don't have the income or savings to cover repairs, then it can become a nightmare.

Not trying to discourage you, but real estate has been the most stressful and most fulfilling hobby in my life.  If you enjoy your job and company that you built then try to scale it and also consider moving to a higher demand area for your services or like another poster mentioned get in the trades (electrician, roof, plumber, etc.). Good luck with your journey and the first step towards your goals.

I'd like to cosign @Steve McGovern

Use your cleaning business to get you an "in". For example  I want to invest in apartment complexes.  If I owned a cleaning business, I'd offer to trade my cleaning services at a discount or free in exchange for thorough mentoring.  And I don't mean a chit chat over coffee I mean a practical apprenticeship.  I'd get the education and a new referral source for my business, which increases income, to fund future investments.  

@Aaron Phillips ,

Patience is the name of the game.    Start with your credit--- each year ask for a raise so your limits will increase.   

After you have 3-5% saved up, then go for a duplex and house hack!!   After 2 years... move and owner occupy another duplex. You need to realize, life is about how you play the cards you're dealt.. and you have to get creative!    It's not about saving 20% each time.. if you can move, you owner occupy more, and build it that way!     Find Owner Financed properties!   It's about hustle, if you want it-- make it happen.

Also, I'd suggest learning more trade skills, offer to volunteer to help do flooring, learn basic plumbing, basic electrical, the more you learn the better you'll be long term!   My partner still does side jobs, and it's crazy what he can earn in weekend!    If you learn basic skills, then offer to volunteer on a job site, and see if you like it.   Good luck!

@Aaron Phillips ,

Talk to a mortgage pro and they can guide you based on your specific situation. The guy I recommend takes a look and says "If you can put $600 on this card, fix this issue, Pay that cable bill from 2 years ago,  and save $1800 I can get you financed in 6 months".  First fix the credit and having someone look at you specifically is the easiest way to find out what you need to do there and get a roadmap. That will give you a plan and then you need to follow it. 

Good Luck

Welcome @Aaron Phillips

I'm 100% with @Steve McGovern on this one. First of all, you have an established business. Life is about branding and selling yourself regardless of your "field". It's clear you have found the best website in terms of Real Estate, why not start to brand your business as a company that caters to landlords? If you can build a business that generates $2,000 in profit a month, there's no reason you can't double, triple, quadruple that overtime with the proper drive and tactics. According to my high school test scores, I was never as "intelligent" as my peers. However, I always worked harder. I still stand by the fact I will out-work anyone. I think people fail to reason that hard work doesn't ALWAYS out perform Intelligence, but it CAN, and often DOES. Everything that goes on around you is a direct result of YOU, no one else. I only say these things because I'm a high school drop out who was told I would fail in life. Now, I'm an honorably discharged veteran (Army).  I make close to six figures a year at my current job. I have a two unit property in a prominent area and I refuse to stop there. You can always "out work" your circumstance(s). I would be glad to discuss how we can brainstorm taking your business to the next level and improve your current situation if you want to send me a pm. There is honestly nothing that makes me more happy than seeing people succeed outside of the way society dictates.

Best of luck,

Eric

@Aaron Phillips , I wish I had the interest in RE when I was 21. I'm 33 now and it took me 3 years to really get the ball rolling. Between, fixing my credit, saving money, getting my RE license and investing on my own literally took until this year. I partnered with people with money and experience for me finding the deals and buying/selling them for free. That was my value add. DO NOT GET DISCOURAGED! Watch motivational videos, read books, go to REIA meetings, set attainable goals and stretch goals. Year 1 and 2 I did 1 deal each year while selling the rest of the time, year 3 which just finished had me buying and selling 6 properties, by no means am I crushing it, however everything grows at the rate that you do. You got it man, just keep banging on the door, eventually it will open.

@Aaron Phillips ,

I agree with a good bit of what's being said.

Starting on your credit should be 1st and even if it takes time to fix it won't necessarily stop you from getting started. Hopefully, people will work with you to get it fixed since it's an identity theft situation. Good mortgage people will help you with ways to get the number moving up.

As far as keeping the company or getting another job I would say that it depends on what you want, running a company isn't easy and if you don't enjoy what you do then it must be nearly impossible. I definitely think that there are a lot of ways you could turn it to your advantage. I think some already mentioned were using it to meet owners and develop a relationship and if they seem to be getting tired of it they may strike a deal with you like owner financing or something, going to the local REI meetings to find those people and put your services out there, etc.

I can tell you from my perspective in PM a big issue I ran into is the maid/cleaning services that have a set price based on size. The problem is they are used to the amount of time it takes to dust around things on shelves and all that, when I need a house cleaned it is emptied out of all that kind of stuff and it changes the dynamics of the situation and should impact the pricing accordingly but many don't see it that way. Basically what I am getting at is cleaning a house with someones valuables and a rental that was just vacated are two completely different things and your pricing strategy along with the method the job is approached should reflect that. Deep cleaning carpets and wiping down walls VS dusting around picture frames and changing sheets, less time per sq ft, these kinds of things. 

Maybe some out of the box stuff would be good too: If you can't buy due to credit I assume you are renting somewhere. If you're staying in an apartment or some MFH could you use your company to your benefit there? Hey, I'll clean units going through turn over for you at the rate of X off my rent per unit and anything after that caps out I'll clean at this rate per unit... Maybe something like that could allow you to drum up some more business, maybe it will reduce your monthly living expenses and allow you to grow that 3000 faster?

I am vary wary of the little to no cash investing methods. Especially so when your new to REI. I think it makes sense in certain situations, like those where there's an exit strategy that justifies it and you have capital to back it up if things change. My personal opinion is to be a little conservative on the money side of it and creative in other ways where the risk are nominal (like what was discussed above by me and others). It would be horrible and devastating to get into a deal while you are making progress on fixing your credit and then have the deal go sideways because you didn't have enough of a reserve to handle a serious repair.

Hustle, hustle, hustle; apply that to your consumption of knowledge here and elsewhere, to fixing your credit, to your business, to the creative methods you come up with to get your foot in the door and saving up. You'll be well on your way to starting off on the right foot and it can snowball from there.

Best,

@Aaron Phillips the big problem here is your salary. Based on a 40 hour work week, $2000 a month works out to $11.49 per hour. Walmart just changed their minimum to $11 per hour. I think Costco and Target hire at $13 per hour. You need to look at your business and understand what the income growth potential is. If you are looking 1-2 years down the road and still see $2000 per month, then you really need to reconsider your chosen field.

One of my tenants has a weekend side job delivering pizza and makes $200-300 in tips on a Saturday. That is all cash tips, so in a month he is making $800-1200 on those four days out of the month. He also has a day job, so the point is you can add a side hustle to make extra money. 

You have to be realistic about your best income options and you need to hustle to make it happen. There are countless job professions that pay well with very little schooling. Without knowing your skills or interests, I can't recommend anything, but I know for a fact you can do better.

Everyone has a story. Do not feel sorry for yourself about your situation.

My father was killed in a car accident when I was 16 years old. My mom and I were left with a house that was falling apart. I woke up one night to a storm and sound of water. The roof to our kitchen had caved in and water was coming in by the buckets. I was on a ladder in my boxers at 2 a.m. in the morning trying to take an actual bucket and each time it filled up would dump it in the sink. I did that for about an hour before the rain let up. Kitchen was old solid wood cabinets and laminate wood counters do damage was not as bad as it could have been. We also had a leaky basement foundation. My dad worked as a supervisor at the Atlanta post office working overnight when he was alive.

The point to all of this is I have been through this and many other challenges in life and have come out on top. It's a mindset that no matter what life throws at you it won't matter because you will not feel sorry for yourself or believe because of a current situation you cannot do anything.

It all starts with small steps and is not easy. Accept right away that everything you work for will not be easy. This is counter to what guru's say to sell books and systems. You might want to go work for an investment firm where you can increase your income. Then if you show big initiative and want to learn maybe the owner of the company might co-invest as an example with you or allow you to invest money or give you a small slice of equity on a deal for your time and labor.

You have to crawl before you walk, walk before you run,etc.

Good Luck     

First off, I'd like to personally thank everyone for their responses. My biggest problem is getting discouraged when it feels as if hope is lost. I try my best not to by continuously coming to BP, and reading others stories who come from similar situations and some from even worse situations. I don't seek pity, I come to BP for Advice & Guidance and so far you all have given that to me. So once again, Thank you! 

I would also like to mention I am actively looking for ways to cut my current spending habits down to where maybe I can put more money back into savings each month towards my RE goal, and I'm also going to start looking into Credit Counselling or something of the sort. I have already filed a police report, and put a fraud alert on all 3 bureaus, all I need to do now is figure out ways to increase my score and show good payment history. 

I did a little digging here on the BP forums, and found something from I think 9 years ago. Someone had suggested;
1. Opening up a savings account, and put $1,000 in it. 
2. Pull a loan out for $1,000 and use the $1,000 in the savings as collateral. 
3. Taking the $1,000 from the loan and repeating the process at a couple other banks. 
 - Then just repaying them loans back on time to show a good payment history. 

Is this something any one of you has done before? Is there a catch to this that I'm not understanding? 

I've also considered getting a Secured Credit Card ($200) and spending minimal each month to keep Credit Utilization down, and making a bit higher than the monthly payment each month to keep my Payment History up. 

I currently have a Credit Card with a limit of $600.00 on it. I spend around $50 on it each month, I pay a month before bill is due, and I pay $10 more than what my minimum payment is. 

I know this is going a bit off the rails, but if there is any sort of Credit Building technique you guys used to help boost your credit to get you home buyer ready I'd appreciate the advice. 

Thanks in advance! 

You need to fix your credit. Right now you have limited income with very little left to start investing. Additionally with marginal credit scores the interest rates charged if you could get a loan are likely very,very high.

If there is fraudulent charges on your credit reports and you dispute them the reporting party has to prove that the accounts belong to you and show supporting evidence to the credit agencies or the mark should be removed.

Credit does not get fixed overnight. Sometimes it can take years to totally clean it all up.

No legal advice given.   

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