I have bad credit and no substantial capital to invest. Taking the advice I have recieved here I am rebuilding credit, paying off creditors, and saving money. I have a plan that will by Jan. 2010 put in a position to enter the game. My credit will be over 600 and I will have approx. $25,000 to invest.
I wanted to make a splash and get rich flipping properties but have woken up to the reality and here it is. My credit is bad because I was irresponsible and did not pay on time if at all. I have no money because I lived beyond my means or right up to them. Hey lend me $50,000, I'll make you some money! Ya O.K. Anyone who would lend me money needs there head examined.
However, I can learn new behaviors that for me are the start of the REI process for me.
Pay all bills on time.
Save money consistenly and with purpose.
Learn to put off instant gratification knowing the payoff is down the road.
Get my cedit file and work on correcting mistakes and paying off bad debts.
(I am working with a civil attorney who I do work for)
As I work on these less exciting aspects of business I continue to look for deals to wholesale and building relationships with other investors. I build my knowledge of rehabs by doing them. I was frustrated for a while but realize this is the path I wish to follow and this prepartion is only the way to realize success.
This has been the toughest thing I have ever done more work than I ever imagined but know the payoff will be equally rewarding. What happened to No Money, No Credit, instant riches and no hard work? Ya OK…
What happened to No Money, No Credit, instant riches and no hard work? Ya OK....
It never existed, except on TV infomercials. However, you’re right - if you work hard; pay off your bills; build your credit; and build up some cash - the reward when you do start investing will be well worth the effort!
Congrats for being able to see where you could improve and acting on it. It really does help make things feel worthwhile when you set goals of where you want to be in a couple years. I too lived beyond my means or up to the limit for awhile. Now that my wife and I have gotten completely serious about REI, I wish I would not have spent so much money on some of the things I did.
You may just have to look for an older cheap house you can get into to get started. Are there any $20K or so fixer uppers where you are that you could get and rent out? Sounds like you can do necessary repairs yourself. If you could save up $3500 or so, you might be able to get a place like that.
You will be amazed what paying down credit card debt will do to your score. I was just 2 weeks shy of foreclosure in fall of 2005 - nasty divorce, b%^ch quit paying the mortgage that was in both our names, and I was sick of supporting her & her loser BF. My FICO score got down around 580 or so. I paid off my credit cards a few months later and my score jumped over 100 points. That put it back on track to where it used to be. Now it sits at 750.
Congratulations on getting past the first step. Now you need to apply what you have decided to do as stated above. I love the idea of working with partners. If you can learn to become an expert on your area and identify deals, people will work with you to make them happen. Education and mentoring are also key.
You can get a loan for any amount, from any lender, with any amount of down payment (even $0), with any terms available (even minimum interest rates - sometimes even deferred interest payments), as long as you present a business plan that justifies it. That’s the problem - putting together that business plan. A lot of dull, tedious, annoying hard work that the majority of real-estate investors have no interest in. Nope, its not nearly as exciting and flashy and titillating as buying real-estate, flipping it, and cashing the net proceeds from escrow. But that’s what a large portion of real real-estate investing is about: the boring hard work in between buying the real-estate and cashing the check. Typical time frames are months to years to decades. Real real-estate doesn’t get done in a 20 minute infomercials time frame nor in a 50 minute segments of Flip This House. On a personal (bragging) note, from purchase to resale, I move one property in 3 weeks. But don’t expect that to be the norm. I, myself, consider it a unique situation and don’t expect it to happen often.
Yea, definately be careful with other people’s money. You f*ck with people’s money or you’ll deserve every negative bucket load of vitriol that they’ll shovel at you for screwing up their money. However, don’t dismiss private investors. Many people use them successfully and both sides are happy.
Don’t wait till 2010 to start investing. Keep searching for a duplex that you can buy and live in one side and rent the other side out. You’ll be able to rebuild your credit along side paying off the duplex with someone else’s rent.
With credit problems, another idea is a lease option. Present the idea to a home seller and have the option come due in 2010 - 2 years is rather typical for a lease option. Once again, though, don’t screw with other people’s money. With a lease option, that would be the monthly rent you pay for the lease. That rent is effectively the other person’s money. Don’t screw with it and make sure you pay it. By 2010, you should be moving along well enough to expand out into other real-estate investing venues.
Keep reading on this board, and you’ll be sure to find other ways to invest while taking care of credit - two birds with one stone.
Thanx for the responses.
I am currently in a lease option and will buy the house this time next year. Got it for a smoking good deal and end up paying about .50 onn the dollar. It is where I want to live in a great school district and secluded yet close to major highways.
As far as working with a partner I am currently exploring options and looking for someone to fund a turn key deal that I will be the contractor / project manager / birddog for whatever split we come up with. Like anything else it just takes alot of action and waiting for results.
I have wrote several business plans for my contracting business and will explore options on how to write a good one for RE. This may be a good way to interest a partner in funding a deal. Does anyone have advice on where to find resources for this, I will be Googling as soon as this posts. At the very least writing it will be an exercise in learning and will pay off when I really need the skill.
By the way I really do not want to be a landlord I just do not want to deal with it. At least not in the short term. I read a book called the "the Weekend Millionaire" that suggests turning them over to a Mngt. Co. I like it but think the proceeds of flipping would be better invested in commercial property. I like the idea of doing several flips and investing in a car wash, mini storage or something else better. Input is greatly appreciated. My reason is the low income neighborhoods I grew up in are the area I can afford to buy and hold in and if I do buy and hold I would rather be in a better neighborhood.
GRIDcorp. Congrats on making the change. It sounds like you’re on the right financial track regardless of what you choose. While you’re working on you finances, you can absorb everything you can via books, networking, etc… I’m not sure how much rehab work you’re able to do, but the more the better. In regards to flipping, you may find yourself having to rent the house until it sells or do some creative financing for a potential buyer. I think it’s a good idea to identify what investments type work in your area. Some areas are better for rentals than flipping. It won’t hurt to look into all areas and see if they really are as good or bad as you think they are. You never know, you may be surprised. Personally I like the area of rentals. But I like the idea of flipping also. What I like mst about rentals is the continued cashflow over time. Especially when you’ve paid them off! :cool Low maintenance things like carwash & storage is a great idea too. Give 'em all try and see which one you like. Good Luck. :beer
I am learning the areas around Pittsburgh better and better and from what I see here are the scenarios I visualize.
Buy and flip in more desirable areas with good a school district ensuring profit. The properties require larger investment but the ruturn is better and if I have to rent them I get a better choice of tenants. This is the route I plan to go.
Buy the properties that are cheap, cheap, cheap. Usaully in less desirable neighborhoods and of course drawing a different kind of tenant. If I buy this property in order to flip out of it and continue building my capital I need to really get in low and keep the rehab short and cheap. By doing so I can then sell to a buy and hold investor leaving enough to make the deal attractive. Or sell to owner occupant using the same strategy.
From what I have seen the guys making money stay out of the marginal neighborhoods unless they get a great deal and get units with a high positive cash flow.
STEELER COUNTRY!! I go there once a year to catch a steeler game. I’ve driven around some of the areas around Pittsburgh due to getting lost :biggrin. I think that if you flip in low income areas, you may have a hard time selling the house due to the area. But if you were to buy rentals in these areas (providing you can manage/ have them managed in that area), that stand on their own financially and have plenty of equity, you could leverage those properties to initially get you started flipping in the better areas. I’m finding in my area that there aren’t many good flipping properties. But there are some decent rentals. In order to get the best price, I’ll have to find some that need a lot of work that I can flip,hold & rent. What I like about that is the fact that you don’t have to put a lot of money in rentals. It’s a lot cheaper to rehab a duplex than a SFR. You save a lot when you can just put tile floors, laminate countertops, etc…, as oppsed to the high end stuff you’ll need to get a decent profit on a nicer SFR.