hi everyone, today I seen a fourplex for sale for 250,000 dollars. I'm wondering what is the best way to obtain financing when you have bad credit. I've heard a lot about using other peoples money but how does that work do you find the place of interest get it under contract and then take it to a hard money blender or private lender or is there another creative way of doing this, the owner said the property is currently rented so I'm thinking it will pay for it self, its just a waiting game. Any thoughts?? Or am I completely off
If you have really bad credit, your best bet is private loans or seller financing. You should not consider HML for a buy and hold - it is too expensive and most HMLs will not go beyond a year or two anyhow.
o OK thanks!! Is it possible that one would do owner financing for such a big purchase, and I have really bad credit, I'm trying to figure out how I can get into something like a fourplex or a small apartment complex, that's my big goal.
I agree with Andrew, private loans are probably the best way to go (or seller financing if they are willing). You just get a private loan and secure it against a property with a trust deed (talk to a title company or attorney if you don't know how to do this).
With really bad credit you going to be in a harder position than those with mediocre credit. The reason for it is that investors see you as high risk.
If you have cash to put down on the property and have bad credit you may be able to still secure a deal. If your looking for 100% financing on a project your going to have to show an investor (private lender) some sort of value(LTV) along with security to show a lower risk to offset your poor credit.
Your best bet may be to spend some time and repair your credit and in that mean time network and learn as much as you can.
You really don't give enough information as far as what today's value is, what the seller is asking for, as to the lowest price, what the existing financing is, what is the sellers motivation for selling, have they tried to sell before with an agent recently and what was the result, etc
When you get this information, then you can look up options as to seller financing, or JV partners. Seller financing includes sub 2, wraparound mortgages, lease options, installment sales etc
Private money should be obtainable if the deal is solid enough. If the asking price is $62,500/unit, the property better be in good condition with rents of over $700/mo per unit in my area (where w/s/g is owner-paid). Like @Brian Gibbons states, what are the numbers? What is the seller's motivation? All rented property is not in itself a good deal.
thanks guys!! For the helpful information, my credit score is around a 540 - 580 as of last year. I am a dreamer so I don't know if theses numbers are feasible but the building cost 250,000 which its a fourplex, I used an amortized calculator and the figures came out to be 1,900 monthly payment with an interest rate at 6.5 ( traditional rates around 3-4 % if I'm not mistaking) over a course of 20 years with a total of around 200,000 in interest. I added 3-4 % considering if I got a lender or if the person who owns the complex considered creative financing. Am I in left field or does this sound some what doable? Thanks again for all the input
I was also thinking if I had a lender to finance the whole deal I thought I may b able to use some of the cash flow to clean my credit up then refinance the property and pay the lender back to. and pay the lender back and have a traditional mortgage. Again I am a newbie trying to get my foot in the door, thinking of creative ways as I've read on the site how creative people have been to get their foot in the door or even how they got started my ultimate goal is to own an apartment complex of about 10 units.
I don't think you posted the unit rents but if you're estimating $1,900 a month in mortgage payments then you need about $3,800 in monthly rents to be about break even (50% rule). Anything less than that in rent and you're not cash flowing. Even if you can finance 100% of the deal (tough to do but possible), you'll need money for closing costs, appraisal and inspection.
What are the rents? That alone should tell you if it's a deal worth pursuing.
Thanks tom great info!, Im currently waiting on the agent to get back with me with that information. So the 50% rule is that the total amount of rent collected should equal double the mortgage?
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