Have too Much Cash Not enough Credit

10 Replies

My client wants short-term gains. Either want to fix and flip or fix rent and then flip to avoid capital gains taxes. He has a Non-Profit entity he inherited (Ido not believe this can easily be used for RE Investing idk)

His problem: New to buying properties and I am a new realtor. He has 180k$ cash but like a 600 credits score.


Is there a good way to purchase fixer-uppers and use a HELOC to finance the rehabs? This way he can have two or more properties going? Will they only loan according to the purchase amount or do they appraise the land?

The home in mind is a REO- if he buys it now he has to be an Owner Occupant for a year. If he waits until its open to investors he could flip it and run the risk of a multiple-bid escalation. Hence the question: if he buys and HELOC, is that a way to buy more properties with limited cash (180k$) or are there other ways..... In haste

I'm still a bit confused on your HELOC scenario, are you basically saying that if he ties up most or all of his $180k cash buying and/or rehabbing the first home, you'd want to get a line of credit based on the value of that first home purchased for cash, thus to use the HELOC funds to buy and/or rehab more houses?

As far as the owner-occupant only periods they'll often put REO's up for sale for at first, be very careful on that front. From what I've heard, they're pretty wise to all sorts of attempts to get around that owner-occ period by investors and will have you sign whatever iron clad docs stating that you will be actually occupying the home for whatever period of time after purchasing it and if you violate that, you can get in all sorts of trouble (financially at least)

That's right, he can't get a 203k on this REO to finance the rehab so it will eat up almost 150k. Leaving 30k for another investments.

I want to know what other creative finance strategies rehabilitators are doing. Specifically when they only have cash to fund the deal. The Owner Occupant issue forces me to only imagine a HELOC being possible. What else can be done here?

He could get Hard or Private Money if the deal is attractive. He puts in 30% of the deal in cash, Hard Money or Private Lendors cover the rest. Poor credit and a house under construction aren't really options for traditional finance.

Partnering with somebody that knows what they're doing might be a good way to invest the money and learn at the same time.

Good luck!


Thanks Rick. I have not studied how hard money and private lenders work however here in MD DC I hear of a group call The Dominion Group.

Basically they receive a promissory note from the title company regarding their share of the deal? We put

Why is his credit low?

If he has cash he should settle any outstanding debts first.

I know of lenders who will loan 65% of the purchase price on a fix and flip. These loans are expensive and should only be used for projects where there is significant upside potential. If the property is already in rentable condtion, but just needs updates, these same lenders will loan up to 75% of the purchase price. Low credit score is not a problem, if the deal makes sense. If your client is new to rehab, don't have him do 2 properties to start with. Contact me if you need more information.

@tom he has thin credit. 1st time home buyer. Probably a 640 with poor income records.


So they typically fund the purchase price and not roll the rehab in like a 203k? Yes it is his first rehab. He said something like he received 200k from inheritance.

With that much money and with credit issues your client should just seek private or hard money lenders. The rates are high but the speed and flexibility can justify the rates. Also, if your client puts up half the funds the capital costs are reduced and you'll have private lenders falling over themselves to fund.

What market are you in? There are plenty of HM and Private lender here on BP.


Lesson learned: Private money lenders here will charge 12% interest on 80% of the total loan. I would need 20% upfront. They put a lien on the property to secure their debt. They also charge 5 points and the loan usually runs for 6 months.

What is GAP Insurance in this scenario with private money and fix and flips?

Will that put a second lien on the property?

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