If you had $8000, but poor credit, what's your REI strategy?

8 Replies

BP, hello family. I am a novice REI investor. 2012 was not the best year for me, and my credit score was damaged. 2013 is starting off bright, and I want to make an investment.

If you had $8000, but poor credit, what would your REI strategy be? I'm not looking for an owner occupied deal, I'm already wrapped up in a 1 year lease for a townhome.

Lease Purchase/Option on a property, then rent the place out to a qualified renter?

Purchase a Tax Lien Certificate on the steps of the courthouse?

Let me know what you would do. Thanks a lot.

I would buy fix and sell house. Dont know of a faster easier way to make a lot of money, legally.

I would borrow all the money for the projects, keep the 8,000 for emergencies, or to live on until house sale payday, unless you have a job with regular income.

Its a lot easier to borrow money and run projects when you have a bit of a cushion if/when something goes wrong.

Thats me, dont know what you skill talent or interest level is. If its handyman or project management, rehabbing may be your best bet.

Its going to be awfully tough to borrow 100% of the deal (purch plus rehab) when they have bad credit and very little reserves.

I would suggest wholesaling to build up your reserves while you work on your credit. And maybe try finding some subject to deals so you can add properties.

Subject to has always sounded like a lot of work and a very slippery slope but it would be a way for you to add properties. My only concern with subject to is that, from what I understand, you typically end up paying more money for those than a typical foreclosure so your cash flow is a lot tighther.

Given your lack of reserves and poor credit which would make it difficult to get any money, I would be a little fearful of getting into too many properties that didn't cash flow right. All it would take is one big repair (roof) and/or a vacancy (3 mos plus some damage) and you'd be sitting in an awfully big hole.

I've never believed that you needed to have 6 mos of reserves for every house you owned. To me, I just think you have to a minimum amount of access to cash/credit to get you over a reasonable hump of a raindy day.

I'd say if you owned between 1 to 5 houses = 15k
6-10 = 20k
10-15 =30k
15-20 = 40k
20+ = 50k

If you're getting decent cash flow and have over 50k in the bank, you shouldn't have any problems with reserves again. If you do, something is really wrong with your numbers.

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Brandon, I think your on the right track with investing in tax liens. A bit of advice, why buy on the courthouse steps? There are way to many OTC liens out there that you can make a killing on (I know, Im doing them myself :). Your budget is MORE then enough to start off with. Do NOT get in over your head, start small, take baby steps, learn the business before you start risking more then you have to lose.

Let me know if you need help, I dont charge haha.

I would first look to improve my credit, even if I had to use some of that 8K to do it.

Good credit is an essential part of my strategy and probably most other's, too.

I'd continue saving while working on my credit. Use the time to study REI like crazy. $8k is not going far. You'd be better served growing your capital and improving knowledge base while you wait IMHO