Bad credit and little to no money

3 Replies

Hello everyone!  I am a new investor and very excited to get started looking for my first deal.  I' in the educational phase currently just analyzing a bunch of properties just to get good at it.  My question is this.  My credit is shot (currently working on it but it'll be a while) and have only a little over $5k.  Should I be focused on building my credit and saving money only right now or is there a way to get into my first rental property to get my investments started?  If there is a way is that even a good idea for me right now?  Thanks in advance for your advice!

Hi Efrain, Im a new investor as well and haven't started my first deal so I may not be the best person to answer this, but I wanted to give some advice from my research. Credit is important to getting loans and getting good interest rates and may even prevent you from getting a loan in the first place. I guess it would really depend on what your credit rating is, and WHY its bad but I would probably suggest working on this to begin with. You could reach out to a mortgage broker and they could let you know if you'd even qualify in the first place. As for the money, $5K might not be enough to pay for the closing costs let alone a down payment or even a security blanket if something in your personal life goes wrong. So I would also suggest working on this aspect as well before fully committing to buying your first deal. Grant Cardone suggests getting your income up to 100k first and foremost then take it from there. Although I think that is a rather high entry point. However, just because you have poor credit and not a lot of money doesn't mean a deal still can't take place. While you're working on those two important things continue to educate yourself through the podcasts/books and practicing analyzing but also keep your eye out for a great deal. Do you know anyone that does have money? Because they could be your solution to your lack of savings. If you approach them with a deal and good numbers that you've analyzed you might not even need to touch that $5K. Hope that helps and good luck.

It's all a personal preference as to when you want to get started. I hear both sides of the argument. The key takeaway for me is that bad credit and very little savings doesn't necessarily exclude you from investing. You can partner with someone if you find a good enough deal. That can give you some good experience to do it on your own once your credit and savings are more in order. You can also house hack. I would start with a 2-4 unit property either with a 203b or 203k fha loan. All you need is 3.5% down and you may be able to get the seller to chip in for closing costs. A 203b loan would be for a property that is fully fixed up, so it may be easier to run the numbers, but a 203k loan would be for a property in need of renovation. Buying a fixer upper via a 203k loan could be a good way to start off if you can handle the stress of a renovation as you can "build in" equity to the deal, live there for a couple of years while you're fixing it up and/or renting it out after which you have many options. You can sell it and take the profits so you can start doing more deals or keep it in your rental portfolio (hopefully in a couple of years you'll have more money saved so you can do more deals). The bottom line is there are definitely some options for you to get started if you feel comfortable doing so. 

@Efrain Torrez Welcome to the site! It's great to have you here. Great question, with real estate there’s many ways to be creative. Many investors have little to no money and even bad credit. But , they find a way to be creative such as wholesaling properties or finding sellers who will consider seller financing. Numerous of strategies in real estate investing not only the conventional way. Hope this will help. Good luck on your journey!

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