Can I Invest In Real Estate With No Money & Bad Credit?
Bad credit score? It’s just a number. It doesn’t define you. Don’t let your credit score prevent you from investing in real estate. Don’t wait until your credit score is better to start.
Too often, I hear the common objection “I would love to buy an investment property, but my credit is bad or I have no money.”
If this sounds familiar to you . . . take the first step, breathe deeply and know that you aren’t alone.
Close to 1 in 3 Americans have bad credit. So if you’re one of them, don’t worry. There are specific things you can do to improve your credit, master your personal finances, and create generational wealth through real estate investing.
If you have poor credit, you aren’t dead in your tracks when it comes to investing in real estate.
Anyone who’s ever bought a house knows the importance of credit scores. It’s almost impossible to get a traditional home loan if your credit score is bad—plain and simple.
Most lenders won’t consider an applicant with a score below 620. Depending on the lender, you may need scores above 700, 720 or even 740 to be eligible for a mortgage.
But What About Real Estate Investors?
The good news is there is much more flexibility when it comes to real estate investing. Is it easier to get a traditional loan when your credit score is off the charts? Absolutely.
But even if your score is on the low side, you still have a host of other options for investing in real estate.
If you’re serious about real estate investing, the first thing to learn is that there are an unlimited amount of ways to fund a deal.
So have no fear. To get you started, let's go through a few options below.
#1. GET A HARD MONEY LOAN
Getting a loan from a hard money lender is a great option for real estate investors with less than stellar credit. Despite its name, “hard” money isn’t hard to come by—it’s everywhere.
Hard money lenders are private individuals or groups who offer short-term loans that are backed by real estate. These lenders are only interested in investment deals—they aren’t funding someone who wants to buy a house to live in.
The best part is that hard money loans can give you funds very quickly—typically, within days.
That’s why so many real estate investors use this source. They’re quick, painless and easy to turn around.
Hard money lenders don’t consider credit scores as the be all, end all. They can determine who they lend to and what those loans look like. If your credit score is good, GREAT!
But if not, your application is still more than welcome. The majority of the time, hard money lenders only care about one thing: if the deal is a good deal. (If it makes money)
Their main concern is the value of the home. If the numbers work, they’ll more than likely fund the deal, whether you walk in with a 780 credit score or not.
A hard money lender will use the property as collateral. If you don’t pay them back, they take ownership of the property. That’s why they care about the numbers.
If you bottom out, they’ll still make money.
So, if you have a solid deal on your hands with good profit potential, a hard money lender will likely fund it—even if your credit score is horrible.
Drawbacks of Poor Credit
A poor credit score won’t keep you from loan approval, but the interest rates are higher than traditional bank loans. Most interest rates range from 10% to 15%, depending on the lender. Hard money borrowers also have to pay “points,” which are a percentage of the loan. Points can range from 2% to 4% of the total loan amount.
So, you’ll pay heftier fees in exchange for convenience, but that’s okay given the potential profit you’ll walk away with.
Another obstacle is that they may not cover the full cost of buying the property. These lenders usually lend 65%-75% of the current value of the property. Some will lend based on the value of the property after it’s been improved, also known as the "after repair value" (ARV).
That leaves you to fund the difference or find another source of funding to bridge the gap.
How To Find Hard Money Lenders
Do a quick Google search for hard money lenders in your area and see what pops up. Also, go to local Real Estate Investors Association (REIA) meetings and network. Ask for recommendations from the members there.
Once you’ve found a hard money lender, don’t forget to make sure that lender is reputable. I recommend you do this by asking the lender for references and then following up on them.
You should also see if any complaints have been filed with the Better Business Bureau against your potential lender.
At least one person associated with the hard money lender must have their Real Estate Broker license.
You should confirm that their license is valid and check to see whether or not any complaints have been filed against it.
#2. LOOK FOR PRIVATE MONEY LENDERS
Another funding source to consider is private money lenders.
This is the money we use to fund our syndications at Ferrari Capital.
Private money can come from anyone looking for a return on their investment. This can be anyone from a structured lender to a friend, relative, business partner or acquaintance.
Even if your credit score isn’t great, private money lenders can still lend to you, often with competitive terms. The quality and value of your deal are much more important to a private money lender than your credit score.
Private money lenders don’t abide by a certain set of rules. So repayment terms, interest, and everything else is up for negotiation.
And because it’s that person’s own cash, they decide whether or not they run your credit.
If you can show your deal has value and that you can close quickly—and make a profit quickly—private money lenders can overlook dings on your credit report.
#3. GET A PARTNER
There are many people interested in real estate investing and would happily use their credit to fund deals, provided they don’t have to tackle the other heavy lifting (your work).
So why not strike up a partnership with someone like that? Someone who has A+ credit? In exchange, you’ll be able to lock down more funding for your deals.
It’s the ultimate win/win.
Your partner could be anyone—a friend, relative, colleague, neighbor or someone you met from a local networking event or Facebook group. Just remember, you want to partner with someone who has the skills and resources you lack, and vice versa.
In this case, you lack the credit, so partner with someone who has excellent credit and can secure the funding for your deals. And maybe you have something that they don’t have.
You might consider the best way to consolidate credit card debt and start rebuilding your credit history for long-term financial success.
So what can you bring to the table? Perhaps it's your time, your deal-making skills or another resource. You can work out a 50/50 partnership so once the deal closes, you split the profits.
Should you decide to go this route, you’ll want to formalize your agreement by choosing a business structure and then registering your business.
This will protect your personal assets should your partnership run into problems down the line. Consult a business lawyer to establish your company.
#4. MAKE THE SELLER THE BANK (SELLER FINANCING)
Seller financing is a strategy best utilized for properties that are fully owned and paid off. If a seller doesn’t need “quick cash” from the sale of their home and cash flow isn’t the issue, then this strategy could be a great option.
When the seller finances a deal, they basically become the bank. In other words, you essentially have a mortgage with the seller.
With these agreements, the seller allows you to make monthly payments until you pay off the property or the term of the loan ends.
Benefits Of Seller Financing
Little or no qualifying
Credit not a factor
Flexibility to meet needs
Very low closing costs
Seller financing deals can be a win-win for everyone. The seller dictates the terms, and many won’t ask to see your credit score or dig into your finances too deeply.
Meanwhile, the seller gets a monthly income stream.
For example, a retiree may love the idea of getting a set monthly payment for their home. Likewise, a landlord may want to unload a property without getting out of the market completely.
In both cases, a seller financing agreement could satisfy all sides, helping you build capital and credit along the way.
So, how do you find a property owner willing to do this? You have a few different options:
Vacant Homes - Vacant homes present a great opportunity. Drive around your neighborhood and look for them. Then, contact the owners to see if they’d be interested in this type of arrangement.
Absentee Landlords - An absentee landlord is someone who owns an investment property but doesn’t live in it. You can locate absentee landlords by buying lists from RealQuest.com or ListSource.com. Once you’ve identified prospects, contact them to see if they’re interested in your proposition.
Real Estate Industry Gatherings - Attend real estate meetings and industry gatherings in your area. Events like these are great places to network and meet people who may be looking to get rid of an investment property.
#5. CONSIDER WHOLESALING
Wholesaling is a common first step for new real estate investors. This approach doesn’t require you to fund anything, so your credit score often makes zero difference.
How Does Real Estate Wholesaling Work?
You find a seller who wants to sell their home. You then negotiate the price and terms with the seller and put together an agreement to buy the home.
Instead of buying the home yourself, you find another buyer to take your place. This could be another investor who wants to fix up the home or a landlord who wants a rental.
That buyer will assume all the terms you’ve outlined in your purchase agreement and they’ll close the deal.
They take ownership of the home, the seller gets the amount you both agreed to, and you get an “assignment” fee for facilitating the deal.
Many real estate investors start wholesaling just to build capital. A good wholesale deal could drive $5,000, $10,000, $20,000 or even more.
A few of those deals could help you rebuild your credit and generate serious capital in the process.
You CAN Do This
One of the best things about real estate investing is that it’s open to everyone. You don’t have to have millions in the bank or a good credit score.
You need passion, perseverance, and desire. If you can package that, there’s no ceiling to your success.
Get creative, make connections, and focus on finding the funding to close deals without good credit.
Mobile Market Analysis:
Port: Last week Austal USA delivered the Expeditionary Fast Transport (EPF) ship USNS Newport (EPF 12) to the U.S. Navy at the company’s headquarters in Mobile. Newport is the 22nd surface ship Austal USA has delivered to the U.S. Navy in seven years, including three this year.
The Spearhead-class EPF, a 338-foot, high-speed catamaran, provides high-payload transport capability to U.S. combatant commanders around the world and adds versatility to the fleet. The ship’s large flight deck, open mission bay and habitability spaces provide an opportunity to conduct a wide range of missions from maritime security operations to humanitarian aid and disaster relief missions.
The ship’s flexibility also allows it to support future missions such as special operations, command, control and primary medical operations. With its ability to access small and degraded ports with minimal external support, the EPF provides specialized options to fleet and combatant commanders.
“We’re proud to be able to provide the Navy with this highly capable ship,” Austal USA President Craig Perciavalle said in a prepared statement. “These EPFs play an important role in supporting our nation’s defense as evidenced by the multitude of significant missions EPFs have fulfilled globally since the Navy took delivery of USNS Spearhead (T-EPF 1) in 2012.”
Upon delivery of USNS Newport, two more Spearhead-class EPFs remain under contract with Austal. Modules for Apalachicola (EPF 13) are being constructed in Austal USA’s module manufacturing facility. Construction will also begin on Cody (EPF 14) before the end of the year.
In addition to the EPF program, Austal is under contract to build Independence-variant Littoral Combat Ships (LCS) for the U.S. Navy. Twelve have been delivered, while an additional five are in various stages of construction.
Medical: USA Health recently announced in a press release they received the green light from the Alabama Certificate of Need (CON) Review Board to renovate two floors of University Hospital, adding over 65 beds to the facility.
“As the region’s only Level I trauma, regional burn and comprehensive stroke center, it is important that we have the capacity to meet the growing needs of our community,” Owen Bailey, CEO of USA Health, said. “These additional beds will ensure our capacity to provide services during the COVID-19 pandemic. USA Health thanks the members of the CON Review Board, and its chair, Dr. Swaid for recognizing the need for these additional resources in the Mobile region.”
Plans call for USA Health to renovate the 10th and 11th floors of University Hospital, creating medical, surgical and critical care patient suites on each floor.
Additionally, on each floor, the bed complement will include two isolation rooms, four American with Disabilities Act (ADA)-compliant patient rooms and associated nursing stations with common areas.
The estimated cost of construction and new equipment is approximately $15.2 million.
“This will enable us to upgrade the mechanical systems including HVAC units and electrical controls throughout University Hospital,” USA Health Hospital Administrator Sam Dean said.
He went on to say the completion of this project means 111 new beds have been put into operation since October 2017.
Earlier this month, the recently expanded gastroenterology lab opened, more than doubling the capacity for local area patients needing endoscopies.
The new 8,000-square-foot lab space boasts state-of-the-art Fujifilm equipment and includes five procedure rooms.
“The division of gastroenterology has experienced huge growth over the past few years,” Dean said. “This growth has been instrumental in the success we have seen not only as a hospital, but as a health system. The original space was not adequate to meet volume. We needed to modernize the facilities so that our providers would have access to the best equipment to offer premium care for our patients.”
“When we started, we had two goals in mind,” Dr. Benjamin Niland, USA College of Medicine’s interim program director of gastroenterology, said. “First, we wanted to ensure our patients have an excellent clinical experience. We also wanted to create the best environment for our care providers to deliver the highest quality of care possible.”
With a growing USA primary care base, the clinic also instituted an open-access endoscopy clinic for patients in need of colon cancer screening.
“The new service is operated by our advanced practice providers,” Niland said. “They will perform a phone interview with the patient to determine their fitness for open-access endoscopy. In this way, the patient can be prepared and scheduled for their colonoscopy procedure with a telehealth phone visit.
“As an academic health system, we also have the added responsibility of training the next generation of physicians,” he continued. “This modern lab enables us to introduce our students and residents to the GI world of today.”
Finally, University Hospital is on track for a fall opening of the Fanny Meisler Trauma Center, which will more than double the size of USA Health’s emergency department from 11,000 to 27,000 square feet, and nearly double the current 22 private and semi-private exam rooms spaces to 41 private exam beds.
“Governor Ivey recognized the economic development importance to our region of the Level I trauma center, and we are thankful for her generous support of $4 million from the economic development bond issue,” USA CEO Owen Bailey said. “Local philanthropist Bert Meisler generously contributed $5 million for the facility to ensure the region continues to have this very important resource. We gratefully are naming the facility in honor of Bert’s late wife, Fanny.”
Construction on the new project is scheduled to start before the end of 2020 and be completed by the end of 2021.
Ascension Providence recently announced in a press release its first successful completion of a cutting-edge Transcarotid Artery Revascularization (TCAR) procedure for patients who suffer strokes due primarily to carotid artery disease.
The minimally invasive surgery uses a special device designed to reduce the risk of stroke during an operation to open blockages in the carotid arteries that occur due to a lack of blood supply to the brain.
One common statistic widely cited for the 15 million-plus people who are the victims of strokes annually, indicates carotid artery disease was found to be the source of the attack for over one-third of all cases nationwide.
In essence, the TCAR medical device allows the surgeon to directly access the common carotid artery in the neck and initiate a temporary reversal of blood flow.
The device works to filter and capture any loose fragments of plaque to protect the brain while surgeons are implanting a stent. After the stent is successfully placed, blood flow reversal is mitigated and circulation resumes its normal direction.
“Offering this new, minimally invasive treatment option for our patients with carotid artery blockage is advancing patient care by significantly reducing the risk of stroke and heart attack during and after carotid interventions,” Rick Metzer, vice president of operations and surgical services at Providence, said.
The local medical team that successfully implemented the high-level procedure was led by local vascular surgeon Dr. Melanie Rose.
Real Estate: The historic, two-story, 5,000-square-foot mixed-use Fry Property building, sitting on a 3,527-square-foot wedge of land located downtown at 362 Dauphin Street in a designated Opportunity Zone, sold last Friday for $380,000.
The site is located on the corner of Dauphin and North Franklin streets, directly across from the Cathedral Basilica and next door to the toney local restaurant Southern National.
The first floor is anticipated for use as either retail, restaurant or office space while the second level will house up to three residential units after buildout is completed.
A local speculator purchased 610 Saint Michael Street in downtown Mobile for $149,000.00. The 8,800-square-foot parcel of undeveloped property is located within the northeast quadrant of Saint Michael and Dearborn streets. The buyer intends to develop the site around residential use.
The Mobile-based firm of Hargrove Engineers + Constructors has announced the relocation of its Savannah, Georgia, satellite office to 17 Park of Commerce Boulevard. The move came about because they needed to expand since originally establishing roots in the Peach State around 2005. The new footprint will reportedly provide additional workspaces as well as room for future growth.
The announced expansion is one of two Hargrove offices in Georgia, part of 14 full-service sites nationwide.
“It is exciting to see our growth in Savannah,” Donald Brown, operations leader for Hargrove’s Savannah office, said. “We’re honored to continue to provide our local and national clients with quality service.”
Hargrove has earned several top 10 rankings over the years in Engineering News-Record’s national sourcebook, including No. 1 in chemicals, No. 3 in industrial process, No. 4 in pulp and paper, No. 8 in refining and No. 9 in aerospace.
A local investment group called The Calirojae Inc. has picked up property located at 1004 and 1006 Dauphin Island Parkway, across the street from Bishop State, for $217,500. The plot includes three existing buildings that will be completely renovated and repurposed into an event venue.
The name of the new business will also be called The Calirojae and the buildout completion timeline is set for some time in the fall of 2021. The new venue’s footprint will cover 20,000 square feet and will cater to weddings and special events.
Locally owned Lavish Salon has leased 1,000 square feet at 6347 Airport Blvd. in West Mobile inside the Piccadilly Square shopping center. Additionally, Bay Life Nutrition has leased some 1,200 square feet at 1956 S. University Blvd. in the University Oaks shopping center. The new Mobile-based business will be selling nutritional drinks and shakes.
Marl M. Cummings with Cummings & Associates Inc. reported Auburn University’s Marine Extension and Research Center, an aquatic testing and oyster study facility, has signed a lease to occupy some 3,170 square feet of office space at 50 Midtown Park in Mobile.
Some 12,700 square feet of space has been leased by The PACT Theatre Company located inside the Cottage Village Shopping Center at 5025 Cottage Hill Road in West Mobile, next door to B&B Pet Stop. The space is anticipated to be converted into a new performing arts center that will reportedly hold around 200 seats for patrons upon opening. Buildout and opening timelines were unknown as of press time.
Local business owners recently picked up a building located at 2312 Halls Mill Road in West Mobile with expectations to use of the site as warehouse space. The 9,100-square-foot building was purchased for $139,000.
An out-of-town investor has purchased a convenience store located at 116 Dunlap Circle in Prichard for $40,000. The buyer intends to continue operating at the retail space with no interruptions.
A local investment group has acquired a property at 1509 Navco Road in Mobile for $75,000. The 2,800-square-foot site will be used as a warehouse by the new business owners.
This completes this months newsletter! We are currently in the process of rolling out a great deal for you guys to be apart of, so stay tuned for more information, and don’t forget to subscribe to all our different resources to stay up to date with the local market, the economy, and our latest investments, so that you can get involved. Go over to our partnership tab to find out more on how you can get involved with us, and what that means for the future of your finances.