New To REI

General Real Estate Investing
1

Hello Everybody,

I am interested in starting a REI buisness of my own but as you read from the subject, I am at the bottom of the totum poll.

I have been wondering if sombody could offer me some advice on my situation.

I’m 27, and I am currently a stay at home “Mr. Mom” I am fortunate enough to be able to suppport our family with my wifes income and my savings, FOR NOW! But things have to change with another baby on the way, and our monthly bills dipping into my savings is proving to be too much. Let me just go ahead and say it, my credit is bad, 523 bad. Yeah I know. So, I still have about 20k outstanding debt, credit cards, student loan, and a repo. Geez this is hard.
So on with the good, at least i hope…
About a year ago my brother and I sold some land that was givin to us from our parents.
With the profits I bought a bigger home and payed for it in full with cash.
Our original house is in the process of closing and I am expecting roughly 20k profit from that sale.
I also still have some savings left as mentioned above.

So my main questions are this…

Have I dug my own grave?
Is my bad credit and outstanding debt going to stop me from getting started?
Will I be able to obtain any form of a loan for capital?
Would I have to borrow while putting up the deed for my house?
Would I be forced to borrow against my savings?
Would a hard money lender even touch me for a rehab?

Thanks for reading!
-Scott Murphy

2

You can certainly obtain financing from a good HML for a rehab. I say good HML because there are plenty of lenders who claim to be hard money just so they can charge insane rates but then want all of the conventional documentation and security.

Find a good agent, find a good HML, find a great deal, find a good general contractor, and stop using your damn credit card.

3

You put yourself down too much. You have a great advantage that most of us don’t have…time. You can spend the time to look for and doing deals because you are not shackled to your desk or in my case the airline travel schedule. Bad credit today is a function of people not using technology. I say this because what I would do is buy a lot of cheap food and visit the websites of every company that I owe. This is every body from the mortgage company, GMAC auto loan, to each Visa card. Put them all on automatic minimum payments. That will automatically pay all your bills every month on time and prevents you from overlooking them. Your credit will be good in a very few months. Oh and that cheap food is so that when you automatically pay that last bill and you don’t have money to eat, you can still make hamburger helper. All jokes aside that does really work to get the score up.

4

Thanks for the replies!
And as far the credit cards go, I don’t use nor have a single one. (just still owe them)

Danny what criteria or things do I need to look for to pinpoint a good HML?
And for a loan you are suggesting i would be able to get a conventional HM Loan?
What other “Power Team” member will I need?

Thanks again,

-Scott

5

Skeeter-

Lenders are easier to find than the properties they will fund with no money from you, so let’s talk about what kind of property you need to find first;

  • The property is going to most likely be unlivable. Usually a house that has been vacant for a while and probably wont be listed with a realtor. Use your realtor for helping with the transaction, not finding the property. The best way to find these properties on a shoestring budget is to hit the pavement yourself. Don’t go to a place where all the houses on the block are run-down but also don’t go to Beverly Hills. Once you find a house that’s not at the bulldozer stage and has potential, find the owner. To do this you can research the tax records ( online or the courthouse). Then you can approach the owner and offer to buy the house. Most of them will say “not interested” some will cuss you out but just keep doing it until one says “yes”.

You will have to buy and renovate this property for 60% of the after repaired value (ARV). In my experience the best HML’s will lend 65% of the ARV. This gives you an extra 5% to pay for closing costs and holding costs.

  • Your lender will have to be flexible enough to allow the upfront points and fees to be financed along with the monthly payments (usually interest only) which will be paid when you sell the property.

As long as every single cost you incur with this property added up, remain under your lender’s ARV percentage, you can do this without money. These properties are not easy to find but are certainly available if you look hard enough.

My definition of a “Good” HML:
-No Doc, NIV especially
-Able to finance everything, provided it remain under their LTV guideline
-Uses only the subject property for collateral

You’ll figure out your own “Power Team” as you need them.