Frist timer need help

14 Replies

@Ebony Brown If you use Hard Money Lenders, then most will base their loans on your credit score. Many will have minimum Mid FICO credit requirements and many will be able to lend you on better terms the better your credit score.

Originally posted by @Ebony Brown :

@Benjamin Hurwitz perfect so first thing I need to do is bring my credit score up a tad and proceed from their

It's a good idea. There are of course some other things that you can do in the meanwhile, including importantly 1) Save, 2) Save and 3) Combinations of points 1&2.

Most HMLs will want you to have skin in the game. Especially if you have never rehabbed before. As an example, we might be able to give you 75% of As is value (Plus Rehab money) but if you have never rehabbed before it will likely to be a maximum of 65%. Credit score just under 600 Mid FICO? Its now 55% of As is Value. What does that mean? It means you will need money down for purchase (and closing costs) money to service the loan while you work towards your exit strategy, money to start the rehab until you at least the first draw (since our rehab is available at each milestone in arrears) and money for cost over-runs, miscalculations and when that exit strategy of yours doesn't quite pan out as optimistically as you hoped.

Another thing that might be useful to do is to network and for instance line up someone who is experienced to perhaps look over your calculations. Consider using the BiggerPocket calculators. You will also find that the nice people here on Bigger Pockets will be happy to comment if you left out something obvious.


@Benjamin Hurwitz thank u so much for your knowledge and the time u took to explain everything I’m the beginner stage something like a blank canvas so I’m going keep saving and continue to work on my credit and take a few realtor courses thank u again

As mentioned above, yes you need good credit and big money to start with zero experience. After you have experience you can get away with less money but after a few good flips you should have more money. 

Private lenders won't lend if your score is not right or as @Benjamin Hurwitz said it'll be a lower LTV. Either way you'll need to have skin in the game usually 30% but maybe more.

As for auctions... Unless your talking about those fake auctions that are really just listing sites disguised as auctions, you need to have 100% of the money, in cash, and you need to pay for the property within 24 hours of winning. No lender for auctions. Just have the full amount you are willing to bid, in cash, in your account, before you bid or you'll lose your deposit.

So save up the 50% of the money your'll need for your first flip while you get your credit score up, then get in touch with a few lenders and then start looking for deals.

@Ivan Vargas Indeed. We too cannot lend if the credit score is very low. 

I had someone approach me today wanting a mere $10M with a credit score of 510. I almost choked on my coffee even before I read further that it was 95% of LTV on a luxury beachfront home (the first property type that will likely plummet in a downturn) and he needed the money within 10 days! I needed a good chuckle.

@Ebony Brown please allow me to offer up something not mentioned:

If I understand correctly... You’re looking at not having cash, credit or experience, and want to acquire a distressed liability through debt, which you (I assume) don’t have the funds to to renovate into an asset, that you can then sell to make some money. But what you’d obviously have to have at this point is the time to do so.

I suggest you leverage your time in a way that can provide value to people who have all of those things you want. You do it at your daily job in exchange for salary. Go out and do it for a contractor, real estate agent or investment group. Whatever skill set you have, coupled with your time, may provide you not only the income to save but also an understanding of the business as well as contacts within the business.

Soon after you’ll find your personal asset pool filling up with more income, (assuming you’re fixing your credit too), experience and relationships.

At that point, find a partner in some capacity who supplies what you lack, and go start knocking down deals.