Is it possible to get financing if you don't have money and credit?

I want to know is it possible to get financing (private or not) for real estate acquisition without money or credit. The only ways i have heard of it is either partnerships and i can’t find anyone. Or getting the financing from a bank or lending institute using the property itself and i don’t even know if that’s possible. Please any answers will help.

Is it possible? Maybe.

The bank will count the income generated by a business towards the income requirement to qualify. So if the purchase has proof of a good enough steady income, that helps.

But I suspect that it doesn’t matter how much income you have, in this economy, banks are not going to lend large sums to people with bad credit. After all, you got that bad credit by not paying your bills, so why should they assume you will pay them back?

If you have no credit, ie: you’ve never borrowed money and don’t owe anybody anything, maybe you can find a private lender if the deal is good enough. But it would have to be a screamin’ brilliant deal before a private lender would consider doing it when you have no skin in the game.

My suggestion is that you get a second job, pay back what you owe to fix your credit, and save up some down payment money.

Put a property in trust then sell the benifical interest in the trust,
then a sale is not recorded and taxes don’t increase and stamps don’t have to be paid.
Additionally you can put many properties in the same trust and use the equity for a line
of credit to the trust.
You can do the same using a corporation instead of a trust it works the same way.

As more and more banks were burned by assignees who bought positions in their sales contracts but did not perform, they decided it was time to start to control the selling process and force the original buyer on a contract to purchase the property. Thus, they started inserting a “Non-assignability Clause” in their contracts, which goes something like this:

"This Contract may not be assigned without the written consent of Buyer and Seller. If Buyer and Seller agree in writing to an assignment of this Contract, the original parties to this Contract remain obligated hereunder until settlement.”

Buyers frequently request that sellers deed their property into an LLC (limited liability company) and then purchase the LLC.

I decided that if I purchased my properties within an LLC, I could sell my LLC to my buyer instead of assigning my contract to them. As far as the sellers were concerned, the buyer (the LLC) on their contract remained the same. For example, I would submit an offer to purchase a property at 345 Harford Rd., making my offer in the name of 345 Harford, LLC. Then I would talk to my wholesale buyers about this property, offering to sell them 345 Harford, LLC as opposed to selling them the property. Their incentive to buy the LLC was the reduced purchase price that I could offer since I would save money on closing costs by avoiding a double closing (one closing from the bank to 345 Harford, LLC and another from 345 Harford, LLC to my buyer). If my buyer agreed to purchase the LLC, which in turn owned the contract to purchase the home, they would arrive at settlement and sign as owner of 345 Harford LLC.

In terms of compensation, I sold an LLC to my buyer for whatever my assignment fee would be, which I could collect in several different ways. If my buyer were paying cash, sometimes they would just cut me a check for my assignment fee. Then I would hand them the LLC documents, sign everything over to them, and our deal was done. In the event the bank seller could not produce clear title, I would need to return the assignment fee to my buyer.

Sometimes my cash buyers would not pay me the assignment fee until settlement. In this case, I directed them to use my title company and would not produce the original LLC documents until we were at settlement and I was assured that I was going to get my check.

On other occasions, my buyer needed to borrow money for the purchase. In these instances, I always directed them to use a private lender who was familiar with my routine, which went as follows. My buyer requested a loan for his purchase price, which included my assignment fee. For example, my purchase price with the bank might have been $30,000, but my buyer requested a $33,000 loan to cover the $3,000 assignment fee he agreed to pay me. From the $33,000 loan proceeds, $3,000 would remain after settlement which the title company would give to my buyer in the form of a check to the LLC. My buyer would then endorse that check over to me at the settlement table.

To recap, here are the steps in the process:

  1. Make offer in the name of an LLC. I often include the property address in the name of the LLC.

  2. Once the offer is accepted, create the LLC. Check with an attorney and/or your Department of State regarding the procedures and costs for forming an LLC.

  3. Assign/sell your membership (ownership) in the LLC to a buyer once you receive your assignment fee. Check with an attorney regarding the documents required to assign/sell an LLC.

  4. Collect your assignment fee in the form of cash or a check made out to the LLC and endorsed over to you by your buyer (the new owner of the LLC).

“This offer is contingent upon the buyer obtaining financing from ABC Lenders. A prequalification letter from such lender is attached.”

You’ve received really good feedback here already.

If you’re not able to find the steal deals to flip, you could try the not-so-steal deals and flip those instead.

This is what I do. It’s faster and more predictable, too.

I could write about 15,000 words here, so forgive me for offering a grossly simplistic answer here…

I find sellers that have nice homes that need out of their payments. There’s no one reason I find, but they’re moving, downsizing, owe too much on consumer debt, etc. They need out. They’ve tried to sell with an agent and failed. They’ve got no option left short of foreclosure.

I offer debt relief to them. I take over their payments and they give me their deeds. I immediately resell the houses, offering “owner financing,” taking advantage of the terms I created when I bought from the original seller.

Meantime, I pocket about $15,000 per transaction up front from my buyers, and then collect another $15,000, or more when my buyer pays me off in a couple of years (or more).

What I’m doing is putting a motivated seller and a motivated buyer together on a house that EVERYONE wants with financing that nobody else can get. I’m a buyer, owner, seller, banker, and profiteer in these cases.

That all said, nobody has checked my income, asked for tax returns, requested my credit report, verified my employment, demanded a down payment from me, or forced me to take in partners. I’m usually in for about $1,500 total cash, not including notary fees.

And… I’m not having to mess with LLC’s when either buying or selling, unless I choose to; don’t have to buy title insurance, unless I want to; don’t have to qualify for a loan, talk to a bank, pull my pants down for a financial examination and/or explain anything embarrassing.

I just get in cheap and get out with cash.

Yes, it’s simple and making money isn’t brain surgery, but it does require work.

This is also the only way I know of to ACTUALLY buy and own property without a job, credit, or a down payment. Imagine what is possible, after squirreling away one or two hundred thousand dollars…

Frankly, you don’t have to sell property to make money, of course. If the deal makes sense to hold and rent, then why not?

BTW, when I already have buyers looking for what I’ve got, I get the cash from them to pay the seller if any is required, so that none of my own cash whatsoever is wrapped in the deal. That makes it genuinely a “no down,” no job, and no credit transaction.

This is a fun business.

Very interesting… I’m new to this. How does the seller transfer the deed to you if the bank has the primary lien on the property? Also, the $15k you mentioned from the buyer would be a down payment i’m assuming correct?

Hi folks.

I’ve read these posts with a great deal of interest and would love a bit more feedback if you care to educate me/us more.

I’ve been considering commercial rei for several months but have been trying to really educate myself as to the best practices. One of the things that I learned rather quickly was about purchasing as a Trust or an LLC. Johnny Q, you really provided some helpful info in that regard. Thanks.

My initial plan with rei was to get started by basically bird dogging and/or doing like javipa and putting buyers and sellers together. So I’ve been watching property in two areas that are known to be great investment locations for my region and found some that interest me personally. But I have some other questions that are both for general informational purposes and for a potential “immediate” investment scenario.

There are 3 small apartment complexes in a college town. Good location, good buildings, all the units stay rented. The property has been on the market for some time which in my mind means room for negotiation on the price. I have found a private lender so I know that the initial purchase amount can be had, but at a higher rate. Part 2 would be to refinance with a traditional lender at a better rate. The catch is credit of course. Mine isn’t great but it isn’t trashed either.

The questions that come to mind from this scenario:

  • Is that a good way to structure the purchase financing?
  • How would that change if the property was bought as an LLC (sounds like the credit issue changes a bit)?
  • What is the best way to leverage the immediate income available from the units?
  • Could that immediate income in fact be leveraged for a better rate from a traditional lender making credit less of an issue?
  • Based on this scenario, how would a seasoned investor structure this to create the “perfect” deal?

Sorry to hit you guys with so much, but you are all such a wealth of information and I am starving to death for knowledge. I would love to hear what both Johnny Q and javipa think here.