Newbie Needs Advice!

Hello All,

I’m ready to take the plunge into investing, but have a couple of challenges and am wondering what others in my position would do. Here is my situation:

  • Credit Scores: 640, 627, 594 (just had error corrected, should go up soon)
  • Own primary residence, but only on deed, not on mortgage (not on CRs)
  • $10K in self-directed IRA to use for purchase, as well as $10K cash
  • $80K in student loans, in-school deferment until Dec. 2009
  • Currently unemployed due to layoff, but hoping to be working by Jan. 2008 (when working, salary averages between $85K-$100K)
  • Looking to flip in NJ, purchase in Easton/Allentown, PA

I would like to buy a rental property for between $60K-$70K and a rehab to flip at the same time. This week, I am planning to visit local banks to see if any of them will work with me in spite of my being unemployed. I have some properties picked out for purchase as well as rehab.

Do I wait until I find employment or try to do a quick flip and then another to build my reserves? If I do this, there is a chance I can parlay my real estate endeavors into a full time job, however, I need to act soon.

Any and advice is greatly appreciated.


With your unemployed/lack of income status and inexperience, it is going to be near impossible to get bank financing. That said, there are other options.

  1. Look for owner financing. One great way to do this is look for existing rentals that need rehab. Often the owners of properties like these have owned them for many years, and can afford to sell to you on seller financing. You take it over, use your cash to fix it up, then sell, or, when you get established, with a renter on a 12-month lease you have a better chance of refi-out.

  2. Check out HML and private lenders (relatives, etc). If you come up with a good deal many will loan based solely on the property value.

  3. Consider wholesaling your first few deals so you can build up a bigger war chest and learn your local market,

Learn to buy without using your credit or your cash… Subject to Investing is the only way to go… And I have to disagree with wholesaling your first deals… It is the most expensive form of money… If its a deal worth wholesaling then its worth doing yourself… There are tons of folks on this and other boards who can help you…

Congrats on the new career

Michael Quarles

Learn to buy without using your credit or your cash... Subject to Investing is the only way to go

I totally disagree with this statement. If you limit your investing to subject to deals, you will lose the vast majority of deals out there. Learn to tak advantage of all different types of deals, including deals that involve bank financing. All this guru nonsense about not using your own credit or your own cash is just plain silly. Bank financing is part of almost every successful business, including almost every successful real estate business. Can you do a DEAL without your own money and your own credit? YES! Can you run a successful business without your own money or credit? NO!


Well I have to disagree with you disagreeing with me :beer… Sure learn to do all types of deals but the BEST model is by far Subject to the existing liens…And you can run a business successfully without putting your credit at risk…

PM… Did you just call me a Guru… I am so not, just someone who likes to set the record straight for new investors…
After doing as many deals as I have done, I have a clear picture of what is and isn’t required. And the simple fact is in today’s market you do not need to use a ton of money or your credit…

Sure if a good deal comes along then make the decision but most new investors don’t have the understanding they need so they hire a real estate agent who sells them an overpriced property with the idea that it will appreciate…

I bet all of the investors who jumped into Vegas or Florida wished they had learned how to invest without credit or cash…

PM... Did you just call me a Guru...

No, I am not calling you a guru. I think that you’ve heard the gurus spout this nonsense and you’re repeating it. If you are a serious investor, then you should certainly know that only a small minority of the available good deals can be bought subject to the existing financing. Most sellers want cash and want to be free from their existing loans. In addition, they’ve seen so much about scams, that most people simply won’t sell subject to (and neither would I).

You certainly also should know that buying subject to the existing financing does not spare your personal credit or personal assets. If you do a deal subject to the existing financing that goes bad (you don’t pay the seller’s mortgage), you WILL be sued and your personall credit and assets will be at risk.

Sure if a good deal comes along then make the decision but most new investors don’t have the understanding they need so they hire a real estate agent who sells them an overpriced property with the idea that it will appreciate...

Buying a property subject to the existing financing certainly does nothing to improve the new investor’s understanding. They can pay too much for a property with subject to financing just as easily as they can with bank financing. In fact, at least the bank will do some due diligence to see if the property is worth the amount borrowed.

I bet all of the investors who jumped into Vegas or Florida wished they had learned how to invest without credit or cash..

Again, this statement doesn’t make sense. Investors are still liable for their contracts, whether the buy with traditional financing or subject to the existing financing. If you don’t honor your contracts, you WILL BE SUED! You don’t seem to understand this basic fact.


If someone has no income, no money, poor credit, and lots of debt, they certainly aren’t going to get into real estate investing any other way than doing bird dogging, lease options, or subject to (and how are you going to make that motgage payment with no money and no credit?)

I suspect that people with no money and no credit need to learn how to manage money before they learn how to invest in real estate. They’ve run their own finances into the ground and think they can get more money to spend by getting into real estate with no money and no budget.

It doesn’t make me optimistic for their chances.

However, there is always the exception who will prove me wrong, and they need to do something to build up a cash supply and to improcve their credit so that they are in a position to do better deals.

Thank you all for the great advice! I love the debate on this thread - that’s what makes this business so great…There are so many different ways to make money!


VERY, VERY, VERY, VERY WELL SAID!!!..Some investor wannabe’s may have valid reasons for destroyed credit (divorce, unexpected medical bills, etc.) but the others who have bad credit due to having bigger eyes than wallets really need to read Tater’s sentence above and think about it…

Very good, Tater…


If you are ready to take the plunge, here are the first three things you need to do

  • Develop long term goals, and short term goals. Make a personal commitment to becoming a real estate investor. Set aside some time each week to learn your market, your market values. Commit time to educate yourself. Figure out which niche of real estate investing most appeals to you and learn as much about it as you can.
  • Determine the origins of the wealth you will be creating for yourself. Figure out how many purchases you will have to make each year to meet the financial goals you set for yourself in the first step.
  • Learn what you need to do to establish credit. Learn what you need to do to improve your existing credit history, then do it.

As you work on step 3, you will quickly realize that to get good credit you will need income to pay off your debts. The quickest way to do that is to get a job. You don’t say whether you have any credit card debt, so I assume you don’t. If your student loans are private loans, work on paying those off as quickly as possible. The high (adjustable) interest rate on your student loans and the debt service will negatively impact your credit score for awhile until you start showing a payment history and reduce your loan balance. Additionally, if you want another reason to get rid of your student loan debt as quickly as possible, student loans can not be discharged through bankruptcy.

Your goal should be to get your credit scores above 720, 750 would be better, but only marginally. After you complete these three steps, you are ready to begin establishing yourself as an investor.