House Rich, But Cash -and Credit- POOR! =(

9 Replies

when i recently made the big move from nyc to signal hill, ca, i could not get a mortgage cuz i write and wrote off most of my taxable income to uncovered medical costs (was blinded in both eyes couple yrs back while doing humanitarian work overseas, but can now see again after multiple surgeries), and relocation expenses for the past 2 years.

so, i purchased at around market value with half a million in cash savings. it really depleted me, and by the time i'm done with rehab, will be BROKE! all those charges at home depot quickly added up to thousands upon thousands, and the past 2 months i've been behind on payments, and i'm not even nearly done yet, heck im still doing some demo..  so i've decided to negotiate with my credit cards to close the accounts, pay off less than the full amount owned. after the settlements on the credit card, 

most other homeowners i've seen that claim being house rich but cash poor, have mortgages to pay on top of not having capital so at least i'm not in that predicament. nor have any kids (that i know of=).

 but, im still cash poor. i've calculated i will be left at some point with barely $1.00 in my last still open bank account!

so far i have never done business under business entity, but am contemplating that, if its not too late. what i dont understand is how does one build a new businesses credit, if their personal credit is a mess already?! granted, i've never filed for bankruptcy, never had an auto loan, nor had any judgments or anything and the few credit cards i maxed out, i have already settled but the damage is done because some had already reported as 60 days late and they would not remove that reporting as part of me settling because i got them to settle for half the credit balances.

it would be nice to invest in another property but at this time i'm just glad i have a roof over my head thats paid. i dont wanna sell as its the biggest lot i could find in this overpriced city (quarter acre lot!) and i'm an avid gardener and all so it fits me like a glove.

i have net income re sales/rental commissions averaging around $3,000 a month these days (which is one third of what im used to when i was a boutique realtor in nyc) but its cuz im just gettig warmed up here on the west coast.

i'm also wondering if banks/lenders do house title/deed loans anymore or if they still require 2 yrs tax return (which i dont have) and good credit (which i dont have either)?

i'm perfectly fine with saving up until i have say 100 grand to invest again cuz for me it happens in just a couple years for as i dont spend much on anything other than on home improvement, but wondering if in this day and age of underwriting if theres any other options like secured/collateral loans (not from loan sharks though!) as my home is fully paid for or is it just a useless heap of overpriced stucco & dirt?!

If your house is paid off, that is an asset that can be collateralized.  The problem is that bad credit will scare off most banks.  You are going to have to search high and low, talk to everyone, and see if you can find someone that will agree to lend on it.  You will likely end up paying a pretty high interest rate, but you have to give something to entice a lender.

thanks Neil! 

when i was negotiating settlement of my maxed out credit cards, a couple reps actually suggested that a few late payments and the accounts being settled for less than full amount would hurt my credit alot for 1-2 years BUT that after around the 2 year mark, lenders wouldn't pay much attention to them. does that sound accurate to you in your experience lending, or was that just lip service from the eager credit card settlers? =D

Originally posted by Account Closed:

does that sound accurate to you in your experience lending, or was that just lip service from the eager credit card settlers? =D

Banks make decisions for what seems like completely arbitrary rules.  One day, the like it, the next day, they don't.  I would make whatever decision is right for you at the time and let the future figure itself out. 

oh, i see. like u said, it takes alot of trying until get a bank that is 'willing' to deal with sub-prime conditions and then try hard enuf to pass underwriting. 

i'm in no rush and if its 2,3, or even 5 years till i can borrow to invest its not a biggie cuz even in 2 years i will have 100k to invest as i'm already clean slate debt free.

u mentioned entice- what in the world entices lenders nowadays? the opportunity for a desperate borrower to sign on a high interest rate? to give them my deed?? or both? or what.

luckily im in no rush as i've never took out a loan nor mortgage anyways, just credit cards.

Transferring a paid off home to a business is pretty straightforward. You may want to go ahead and do that as it will give the business some collateral to start off with. (Not legal advice or tax advice, only my opinion)

Open a pre-paid credit card in the business name and you will soon be swamped with card offers and the business will be established. (Not legal advice or tax advice, only my opinion)

^2 awesome ideas i didnt think of much at all, esp the 1st! thx Charles.

update since feb (in 2mos) i sold most everything i own aside from RE, saved up $80k, which i just pretty much blew as my offer on bankowned building for my non-profit humanitarian project was accepted earlier on today and am getting the wire into escrow started tomorrow. so now i'll be down to virtually $0 cash hopeful may 1 will bring with it the big money rent rolls until then i'll practically be starvin aside from pb & wheat bread slices & 1 heineken left in da otherwise emtpy fridge & empty house.

now i will have 2 properties that are paid off (and 2 properties i manage for a family member overseas from whom i get a generous % rent split) but no $ to invest anywhere else, and bad credit. 

is there any way to borrow against my bigger property  to buy a 3rd property or will lenders nevertheless have a problem with my bad credit (negotiated cc debt after letting em go to collections)? 

otherwise this time now that i sold everything i own aside from re i will just have to wait till i save up 100k as originally planned and that could take a coupe years at least.

If you have no income - where did the $80K you saved up come from in that short period of time?

stephen
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Originally posted by Account Closed:

update since feb (in 2mos) i sold most everything i own aside from RE, saved up $80k, which i just pretty much blew as my offer on bankowned building for my non-profit humanitarian project was accepted earlier on today and am getting the wire into escrow started tomorrow. so now i'll be down to virtually $0 cash hopeful may 1 will bring with it the big money rent rolls until then i'll practically be starvin aside from pb & wheat bread slices & 1 heineken left in da otherwise emtpy fridge & empty house.

now i will have 2 properties that are paid off (and 2 properties i manage for a family member overseas from whom i get a generous % rent split) but no $ to invest anywhere else, and bad credit. 

is there any way to borrow against my bigger property  to buy a 3rd property or will lenders nevertheless have a problem with my bad credit (negotiated cc debt after letting em go to collections)? 

otherwise this time now that i sold everything i own aside from re i will just have to wait till i save up 100k as originally planned and that could take a coupe years at least.

Originally posted by @Stephen S. :
If you have no income - where did the $80K you saved up come from in that short period of time?

stephen

 hiya Stephen just to reiterate, make $3,000 a month, plus sold well practically*everything i own - well obviously not my laptop but some top level domains and other intellectual property as well as my car, phone, and a couple caramel pink albinos.

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