I’m quoting here from Trump’s, How To Get Rich:
"In [u]The Art of the Deal[/u], I had warned readers never to personally guarantee anything.Well, I hadn’t followed my own advice. Of the 9.2 billion I owed, I had personally guaranteed a billion dollars.
I was a smuck.
But I was a lucky smuck and I wound up dealing with some understanding bankers."
Was wondering what thoughts people have on Donald’s advice on not personally guaranteeing anything.
Thanks,
-Mike
personally, i think that’s what’s wrong with the world today…lack of character and lack of personal responsibility. if you (or your company) can screw someone (or some company) out of money and get away with it, go for it.
but that’s just my opinion
It’s usually necessary in the beginning of your career. Now I would never think about it. I won’t even let a lender check my credit report at this stage. It’s not screwing someone out of money lua, it’s making sure you have somewhere to live should things get bad. I’m not willing to sacrifice my personal residence to satisfy a lender. Make good deals on properties where you’d have to intentionally sabotage the success in order to lose money. If the deal doesn’t support itself you need to find another lender or find another deal. Keep your business very separate from yourself. That’s how your business creates a positive reputation.
Great advise Danny. Perhaps that’s how you got your name. How did you get into such a position? Did your company build it’s credit one deal at a time?
I am also interested in how you get to that point. It would seem that getting a lot of personal loans and the inquiries that come with them would bring down your score quite a bit. Thats what I am worried about with my HELOC strategy of buying a house with my primary residences HELOC and then getting a HELOC on the new property to pay off the original. All the opening and closing of credit lines would bring down a credit score right?
That’s exactly what I did BS. I haven’t done the second HELOC though. I was told it needs to season. Now that it has I’m sort of in a paraysis by analyis mode.
I don’t know much about your intended strategy BS but it sounds like you are going to be paying off one LOC with another. But it doesn’t matter if it brings down your credit score because you’d be trying to wean the lenders off your score.
I used nothing but hard money for my first deal. The second deal it was hard money and unsecured LOC for $20k for closing and carrying costs. My savings account at the time was such that the bank was essentially lending me my own money. After a little less than a year I went back in the bank to extend the line to 50k to cover more projects and to get the interest rate lowered by half a percent. I just kept doing this over and over and now I pay 3.75% per annum on a very large LOC. After reliable business on your end for a certain period of time, you should expect to get more from your lender than still having to jump through the same hoops and pay market interest rates.
It’s dumb to think you can walk into a bank and demand a non recourse loan for $10 million and be unwilling to prove yourself. Some people prove their credit worthiness with a credit score, I prove mine with a reputation built up over time. That’s why Donald Trump has no problem getting non-recourse loans.
okay, i kind of fell into this spot. it was not planned but it sort of was. here’s what i’ve done in this order:
start up purchases - stationary, fax, Excel, Quickbooks (waste of money - just use Excel now - anyone wanna buy quickbooks? lol)
started LLC
opened biz bank account
got a Biz CC with Wells Fargo - i had to sign a personal guarantee, but all the credit transactions go toward the IEN number of LLC, thus building it’s credit. only the original inquiry shows on my personal credit.
studied (and still studying) rei. used library, borrowed the sheets tapes from a fellow investor/friend, and also alot on forums, talking with investors etc.
use CC to buy biz items like a dig camera, paid for a trip to NC - to look at properties, bought other stationary - have spent about 700 bucks and paid about 4.50 in interest to CC - i’ve kept a little balance there <150 bucks.
purchased first real estate - made it a small low impact purchase of land in Texas - purchased wholesale and have it listed currently with realtor. have had two interested parties looking and possibly may get one offer this week from local developer, but if not, that’s fine.
okay, that brings us to this date. 8 months have gone by and i’m that much closer to having LLC with a credit history. we plan on actually doing one or two rehab deals in NC, where i will personally guarantee a loan, but the lender has told me the LLC will receive the loan.
that should probably bring us to the end of next year with two deals in the history books and about 3 to 5 months away from LLC having at least some kind of biz credit history.
also, during this time, we have a website (below) that we’re working on constantly. we have plans for the site to actually begin bringing in some kind of revenue within the next 12 months or so and from there hopefully, it will only grow from there.
point of this post - it takes time and effort to build a business. people talk about jumping right in and think they can become donald trump overnight. i thought when i started, that i would be able to talk to “bankers” and whoo them with what i learned from a book, in order to get loans and just be all that. oh my god. how naive was i.
this plan is definitely conservative, but that’s me. i’m 33 and i don’t want to retire in 2 years. i want to retire in 10 years - and be on the advisory board of the company that i and a few others build. period.
if you’re still reading, thanks for listening… lol
Danny- Was your original LOC for 20k in your name or your company‘s? From what I read you had a good amount of money in your savings account and took out a unsecured LOC, but the bank felt some assurance to give the LOC because it knew you had savings to back it up, but it was still an unsecured line. And then after you used it a bit and showed them you were a good reliable customer they increased it over time.
When you say bank do you mean that you solely do your transactions with a local branch, be it a small local branch or a large national branch like bank of america? Say you build a reputation with your local bank of america, would that reputation and LOC transfer with you to a new location, or would you be starting over from scratch with the new branch?
Im 18 and got my first card 4 months ago, any recommendations for building business credit if I dont even have much personal credit to start?
As far as my HELOC strategy goes I want to purchase a property using my primary residences HELOC, and then the next day turn around and get a no-seasoning HELOC on the property I just bought which is owned outright and doesn’t have any mortgages attached to it, and use that HELOC to pay off and free up the original I used to buy it with. So I end up with a property with a first position HELOC on it that didn’t cost anything to get. The main advantage to this strategy being the ability to pay cash for a property, and not paying closing costs because HELOC’s are generally free of costs. Input?
-Ben
Yes, the LOC is in my company’s name. It is with Bank of America so if I moved to a hideous red state, I’d still have the same accounts. To build a relationship with the new directors, LO’s, and managers I would have to get a goat and bring it in with me to make them feel comfortable. 
First step to building business credit is to start a business! Your strategy seems over-complicated and a little risky to me but what the hell do I know. Also, your interest rates will be much higher.
HELOCs aren’t free of costs, they just include the costs in the loan amount so you don’t notice.
use the funds from heloc to fund your company. have the company transact your rei business.
[b]Interesting Thread, I actually read every comment and hope to hear more feedback.
Thanks[/b]
ps. Art of the Deal is a wonderful book - I read it years ago and it did get me to think Big!