Low Credit Score so I'm brining in a partner

5 Replies

Hello Friends of BiggerPockets,

I have a deal that I was going to use a small community bank to fund the purchase price and rehab. I made a late payment on my student loans and it dropped my credit score below their requirement. Have anyone had experience bringing in a partner in a situation like this? I want to bring a partner in just to use their score. Would we need an LLC? Are there articles/blogs about this?

Thanks BP

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@Todd Fullerlove  Yes the partner would have the loan in their name.  I've done deals like this before (loan in my name) and the other person put in the down payment, so we both had something substantial into the deal. We split everything 50/50.  

As a side note, not sure if you missed the payment because of an oversight?  To impact your score it has to be 30 days late and I'm sure there would be notices throughout those 30 days.  

Obviously you need lot of cash reserves to do a purchase + rehab in case it goes over budget.  I've done a number of these in my days, the credit score is only one component of the loan approval.  The last thing the bank wants is to foreclose and take back an unfinished rehab.

@Tom S. thanks for reaching out Tom! I believe the loan payment was an oversight and I'm in the process of disputing it. I wasn't contacted and no payment was due. That could take some time, hopefully not.

That's awesome that you have done deals like that. Is that how you got started in real estate investing?

@Todd Fullerlove  Hi Todd - thanks for reaching out.  My first place was a standard owner occupied, 5% down loan.  Next place was what I described above, I had great credit but not 20% down for an investment, so I partnered with someone for the down, I put the loan in my name, and we split 50/50.  

We sold for a profit and I took the proceeds to buy an owner finance place for 10% down on 80K and used those profits for the rehab funds, refinanced and walked with about $50k at that point.

I need a few more owner financed deals like that next.

Eventually I started reaching out to small local banks in my area that could provide purchase + rehab financing all in one loan.  Worked out better as there was only one closing, no points , and no need to refinance like in the above scenarios. Typically terms were 5% fixed for 5 years then adjusting with prime, 20 year term.  

Hope that helps and feel free to reach out with any questions.  Good luck!

- Tom