There are people advertising that if you have a fico above 680, that they can use your credit to get homes at 100% financing and lease 2 owning them to someone else. Has anyone had experience with this. My partner has a 780 fico and is seriously considering this. They pay a fee of 5% for this, along with monthyly payments and a final payment after the end payoff.
Thanks
Howdy Deepvoice75:
Sounds like a great program if it works. I would want to make sure there are reserves available in case the house could not support the mortgage payment due to vacancy or non payment.
I would also want the payment coming to me so I could pay the mortgage myself.
With credit like that I would want to protect it at all costs and be double sure I was in control to a great extent.
Just my personal opinion here… but I would NEVER lend my credit out. (well my husbands LOL) He is sitting right at 800 FICO and worked very hard to get there… If they need your score, hence they have a bad score… that to me says they did not handle their own finances very well. And I would trust them to treat mine better than their own ??? Sorry something just doesn’t sit right with that.
Heather
In my experience these deals are typically scams . They take folks with good credit and have them buy houses that are over appraised to pull out any equity then promise to find lease Option buyers to make the payments. They may or may not share some of that profit with you. They may/may not escrow 4-6 months of payments but ultimalely if anything goes wrong the guy on note is stuck with a property that may be worth less than the note.
Rob
if you are thinking about getting involved in this scheme, ask yourself a question : if YOU would be a successfull REI, why in the world you would use other’s people credit instead of cleaning YOUR own and start using it when closing deals?
There are plenty of reasons to use others credit… like the bigger picture… to do more deals… access to more deals available… it’s done all the time…
Your credit will only get you so many deals… and why use it if you don’t have to…
David Alexander
I’ve looked into it because several friends have done it. The problem that I have is: 1) you pay the appraised value for the property. 2) the investor selling you the property gets their fee and they’re out. 3) when the real estate values go down you’re stuck with a property where you owe more than its worth. 4) the buyer signed at closing that there were not any oral or verbal outside agreements to the purchase contract. That’s not true, the buyer is given a rebate after closing which creates a FELONY, if caught. 5) The monthly cash flow doesn’t warrant the investment obligation.
If you have good credit, get with a good mortgae broker to provide financing, make 50 low offers and buy a home that will automatically have equity in it and give you a better cash flow.
I’ve been doing real estate since 1979 in the Dallas /Ft.Worth area and have seen a lot of scams. All of them leave the good credit investor holding the bag. Ray
WHAT BETTER INVESTMENT THAN REAL ESTATE? THERE ARE SEVERAL RISK I KNOW,BUT WHATS NOT! YOU DO NEED GOOD CREDIT TO BUY INVESTMENT PROPERTY. I HAVE A LOW RISK, HIGH PROFIT LEASE WITH OPTION TO BUY PROGRAM IN ALL STATES. I HAVE FOUND GETTING A GOOD APPRAISAL,HOME INSPECTION, AND A GOOD CLIENT TO OBTAIN A LEASE WITH OPTION IS THE KEY.
STEVE
I agree with you about the model… it works for one investor but, not so good for the other… That’s why you have different levels of investors…
I was simply commenting on using OP’s credit…
David Alexander
Deepvoice:
I would be careful as statistics show that only 40-50% of all lease options actually end up purchasing the property. What happens after a year when they decide they dont like the neighborhood and move-out and leave you with a house that needs $10k in rehab?
I would recommend findind properties that you could buy and sell. You could use your partners good credit to purchase with no money down.
Example: You purchase a house for $300k worth $400k with no money down. With his credit, he can get a 100% financed loan with a couple different programs out there. One of the programs investors are using is the 80-20 program. You guys could use this program to your advantage to get started in this business. You are on the right track, just be careful of the lease option.
Best Riches,
Jeff Adam
get at least 30-50k cash back at closing on each property to cya I have made numerous investors money using this program ask them what there motive is… My personal motive was the fact that I personaly could not buy more under my own personal credit but had the houses!!! I still made a fee off of each house!!!
As some of the others have indicated, you should be very careful about this issue. However, there is one way that I’ve found that works. Use your good credit for your own investing. I would never let anyone else use my credit. Take this scenario: YOU use your credit to purchase raw land in the right spot. With a FICA score of 600 or higher, the developer (must be a big strong company, especially financially) will let you purchase several homesite lots with only 10% down plus admin fees. Let’s say each lot costs 60,000. and let’s say the development has special circumstances, like: the number 2 public golf course in the entire state is on the development, and it’s going private in less than 6 weeks, causing a price increase of 10,000 on each lot. Let’s also say that the developer is also putting in a 30 to 40 acre lake in the development within the next 18 months. The lake will bring another price increase of 10,000. Now, you do the math. I have two lots like this.