Residential Real Estate Agent · Ann Arbor, MI · Member since 2010 · 18 posts · 0 votes
Hello BP!
Wanted to throw together a quick conversation on how to borrow $ to invest in Multi-Family properties when you have a decent amount of capital but your credit is on the other side of the ship (under 640)?
I'm a Realtor and I find myself coming across several deals that fit my own personal criteria for investing as well as our BP "rules of thumb". I've been looking at a lot of 4+ units and a few duplex and triplex.
So in my situation I'm trying to find out what the best way to borrow is when you have good capital (around $100k in reserves) but a low credit score (630)? I'd prefer to leverage myself instead of sinking all my reserves into one or two properties and I would especially like to get more doors in my portfolio and get into a complex of 4+
My fiance has a 740+ but no documented income since she is a nanny (bless her heart)...
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
In the lending environment, it's going to be tough to borrow money without at least decent credit.
With credit below 640, your options essentially boil down to private lenders, hard money lenders, and perhaps some portfolio lenders if you have a proven track record of investing success.
All that said, start working on your credit now, and in a year or so, hopefully you'll be positioned to borrow!
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
In the lending environment, it's going to be tough to borrow money without at least decent credit.
With credit below 640, your options essentially boil down to private lenders, hard money lenders, and perhaps some portfolio lenders if you have a proven track record of investing success.
All that said, start working on your credit now, and in a year or so, hopefully you'll be positioned to borrow!
Residential Real Estate Agent · Ann Arbor, MI · Member since 2010 · 18 posts · 0 votes
15y
Indeed. Debt is gone and just need to work on the new accounts now and have some patience. I suppose I should look for some low capital investments in the meantime that make sense still... No sense in sitting around.
Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
15y
You are "subprime" and that lending market with banks and typical mortgage brokers is defunct. You may want to consult with a credit expert who can lay out steps to optimize your credit score over the shortest time frame, to get you in the game ASAP.
In the meantime, you can potentially utilize your capital to buy, rehab, and sell properties (i.e. flipping), particularly those beaten up houses where only cash buyers compete.
Of course, if you have friends/family that would lend you funds for a year or two at 8% until you can establish your credit and refinance, that would be your best option.
Hard money lenders are typically 6 mth deals (maybe 1 year), so I'm told, so you really don't want to use them for a project you want to buy-and-hold, not knowing when your credit would eventually be good enough to refinance them out. A flip on an apartment project, where you have 40-50% of your money in the project, is something they may consider.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
15y
To add to what J Scott said, portfolio lenders (local banks that will hold your loan in-house) are a source to try. Typically they will look at other factors such as your income, cash reserves, and track record, beyond just your credit score.
Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
15y
Josh -- check with some small banks in your area and post back on what you find out, if you don't mind. If you have success, I think many would be interested.
Private Money Lender · Fontana, CA · Member since 2011 · 4 posts · 0 votes
15y
Josh,
I have client just like you all the time, and to be blunt with you; your not going to get a conventional loan. The best way for you is to get a private money loan and work on your credit during the term of the of the private loan.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
15y
Look at the difference between the cost of private money and a decent bank loan. Look long term on the overall costs. Then offer that tosomeone to partner with and have them as a co-/primary borrower. Some will rent their credit. Otherwise, as stated above, go for private funds. Good luck