How to invest with horrible credit
Dighton, MA · Member since 2015 · 10 posts · 2 votes
hello everyone.
I could use some advise. I'm recently divorced and need to move within the next couple of months. During the divorce my credit got crushed. Had to short sale my house and my x wife got her truck repossessed which was under my name. I was going to rent for two years while I rebuilt credit. Are there any ways to control and Invest in a property I'm living in then sell for a profit in two years when I'm ready to buy a more suitable house? Or am I pretty much stuck renting until my credit goes up? I appreciate any advice. Thank you!
1. Lease Option and assign - easiest - You lease Option from Seller and assign for 3% to 5%. Be fair, charge market rent, market sales price, no rent credits.
2. Sub2 - Get the Deed - must deal with the due on sale clause - not impossible. You get the deed, seller agrees to keep the loan in their name for a short time, good for fix and flips, not long term.
3. Wrap Around Mortgage - must deal with the due on sale clause - not impossible. You wrap a new loan around the existing financing, aka "all inclusive trust deed", seller agrees to keep the loan in their name for a short time, good for fix and flips, not long term.
4. Land Contract - popular in many states. Depends on Local Customs.
5. Free and Clear Houses - Buy on Private First Mortgages - Create good private terms, like a Moratorium on payments, Subordination, and Substitution of Collateral.
6. Sandwich Lease Options - You lease options from seller, sub lease, sub option - you must pay seller even if Tenant Buyer you are sub leasing and sub optioning to.
7. Joint Venture with Seller on minor rehabs, free and clear house - You get private money for minor rehab, give note for equity, no payments to seller for 4 months, buy it, fix it, resell it, pay off private loan and seller's private note
8. Joint Venture with Doctors and Business People - many ways, I like LLC creation and JV Agreement, I find and supervise a local rehab, get funding with private individual, or hard money, buy it, own it, fix it, resell it, split net profit after all expenses, large numbers does not need 50 50% split, can be 25 75 split if deal is strong enough.
9. Wholesaling and Co-Wholesaling - You find a deal with a lot of equity and a lot of work in a reasonably good area. You can co wholesale by partnering with other wholesalers, either just find the house and seller, or just find the Cash Buyer.
This is just residential, commercial is wide open.
Dodd Frank applies to financing owner occupants. See
http://www.biggerpockets.com/blogs/3/blog_posts/39...
the CFPB has the final say on owner financing.
Creative Financing is useful for not just credit impaired investors; there are restrictions even with good credit on US Govt backed loans such as FHA 203B
http://portal.hud.gov/hudportal/HUD?src=/program_o...
Marketing for Creative Deals
Forget the MLS except for Expired Listings and Cancelled Listings. I like LONG Days On the Market (DOM) , "about to" expired listings. Knocking on doors is the fastest way to a good creative deal.
Getting Licensed or Having a Licensed Agent in your C Corp or S Corp or LLC
Having a good excuse or reason for Bad Credit might be enough of an explanation to getting approved for a Realtor's Agent Sales License.
Good luck to anyone with bad credit.
It is a temporary problem.
Start building you Good Credit NOW!
See
http://www.myfico.com/CreditEducation/ImproveYourS...
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There are posters here that are awesome in Creative Financing @Bill Gulley
@K. Marie Poe
>>No credit, more money or more knowledge or more labor
So true Bill!!
A fellow I'm reading and watching his videos, Tai Lopez, said:
- you can't do a deal type you don't know about
This comment follows this one:
- be a book reading nut, read and learn continously and fiendishly.
Knowledge can over come all short comings.
hello everyone.
I could use some advise. I'm recently divorced and need to move within the next couple of months. During the divorce my credit got crushed. Had to short sale my house and my x wife got her truck repossessed which was under my name. I was going to rent for two years while I rebuilt credit. Are there any ways to control and Invest in a property I'm living in then sell for a profit in two years when I'm ready to buy a more suitable house? Or am I pretty much stuck renting until my credit goes up? I appreciate any advice. Thank you!
Hello Thivierge,
First of all, I will to express some sympathy in regards to your current situation. You should focus on maintaining your composure psychologically before anything else take precedence. You will functioning a lot better with a clearer mind.
Usually a wholesale deal allows you to tie up the property for a very limited time period, there is no cash flow involved, and no profit at the end when the tenant/buyer exercises their option to buy.
You can get up to a three year lease/option at the investor end (in the middle), and do a series of 1 year lease/options at the back end until you sell the property. You would make one profit at the time of option execution (whichever year that happens at), but you would make cash flow and option consideration for the years previous to the sale year.
Got it, thank you!
Hi Kristy,
Learning about the exemptions to the Due on sale Clause through the Garn St Germaine Act of 1982 is important with lease options.
See
Usually a wholesale deal allows you to tie up the property for a very limited time period, there is no cash flow involved, and no profit at the end when the tenant/buyer exercises their option to buy.
You can get up to a three year lease/option at the investor end (in the middle), and do a series of 1 year lease/options at the back end until you sell the property. You would make one profit at the time of option execution (whichever year that happens at), but you would make cash flow and option consideration for the years previous to the sale year.
Got it, thank you!
Hi Kristy,
Learning about the exemptions to the Due on sale Clause through the Garn St Germaine Act of 1982 is important with lease options.
See
Doesn't apply. There is no sale until the option takes place....and when it does, any current loans in place are paid off.
Sandwich Lease Options. No credit needed.
I was going to suggest lease options, as I'm in the same boat (rebuilding credit in hopes of purchasing one day for myself, and investing later), but I've come across lease option opportunities. Anyhow, Mr. Villeneuve, could you please expound on Sandwich lease options? I've never heard of that phrase and am curious as to how it works, so please explain (and also is having a down payment or security deposit necessary)?
Thanks in advance,
Stephanie Dobbs
@Ernie Thivierge If you are trying to get a house for you go with an owner finance or lear option.
As a buyer, I'd prefer an OF as you'll get title, but close at a title company and get clear title.
as far as making money in RE, the power is in the paper. I like LO's, wholesale and sub-2.
For you. I recommend LO's and wholesale.
@kristy
@Account Closedundefined often tell people not to do a SLO or sub-2 unless you have reserves.
I did an SLO many many moons ago and it was the worse situation ever. Even the almighty God didn't know there were that many cockroaches alive......YIKES!
Do a couple years of deals then do SLO's.
A lot of good answers here.
Personally, I would focus on a MOTIVATED SELLER and work with the following:
1. Seller financing
2. Lease purchasing (lease a property and sublease it to students/tenant)
3. If you need a loan -- Don't go conventional loan, go to a local credit union.
Find a credit partner, structure LLC with 19% ownership, credit partner 81%, the bank won't look at your credit because it's below 20% ownership, then get the seller to carry a note for 10%. Then use a private lender for the remainder 10% or a business credit line.
4. Buy with a land contract (deed doesn't transfer at closing, deed transfers at payoff)
5. Buy with a land trust. (if this is your first deal, eventually you want to use this more often for asset protection).
6. If you want to get creative, trade a personal asset (car, boat, etc) for another property.
7. Subject-to.
this community is awesome, so helpful. I think I'll try and find a credit partner. Property has motivated seller. Asking below market price. While I live there I can update some simple things and turn it over for a profit for me and partner. Thank you so much everyone!
Sandwich Lease Options. No credit needed.
I was going to suggest lease options, as I'm in the same boat (rebuilding credit in hopes of purchasing one day for myself, and investing later), but I've come across lease option opportunities. Anyhow, Mr. Villeneuve, could you please expound on Sandwich lease options? I've never heard of that phrase and am curious as to how it works, so please explain (and also is having a down payment or security deposit necessary)?
Thanks in advance,
Stephanie Dobbs
There are three parts to a Lease/option. Lease payment, Purchase price (option) and option consideration (this is what you pay to buy the option to buy the house down the road).
A Sandwich L/O is where you Lease/Option from the owner of the property (control it now), and Lease option it to someone else that actually lives in it and intends to buy it down the road. You make your money in the spreads of Rents, Purchase Prices and Option Considerations...you make your money being the "meat" in the bun and make it on the "spread". Hence the term "Ssandwich Lease/Option".
hello everyone.
I could use some advise. I'm recently divorced and need to move within the next couple of months. During the divorce my credit got crushed. Had to short sale my house and my x wife got her truck repossessed which was under my name. I was going to rent for two years while I rebuilt credit. Are there any ways to control and Invest in a property I'm living in then sell for a profit in two years when I'm ready to buy a more suitable house? Or am I pretty much stuck renting until my credit goes up? I appreciate any advice. Thank you!
Been there and done that about ten years ago, got the post card and everything. You are in the right place. The foundation of all of of real estate is networking. You need to be networking all the time, none of these things will work IMO without connections. Always be networking and always be closing.
There are three parts to a Lease/option. Lease payment, Purchase price (option) and option consideration (this is what you pay to buy the option to buy the house down the road).
A Sandwich L/O is where you Lease/Option from the owner of the property (control it now), and Lease option it to someone else that actually lives in it and intends to buy it down the road. You make your money in the spreads of Rents, Purchase Prices and Option Considerations...you make your money being the "meat" in the bun and make it on the "spread". Hence the term "Ssandwich Lease/Option".
Thanks for the explanation! I will be sure to try this, as I have two potential lease options in the works.
Regards,
Stephanie Dobbs
you do not have to BUY real estate to make money in RE, You CONTROL real estate! you don't need credit or a good score. You need brains and someone to teach you the ropes.