Doesn’t it always appears as if banks would like to lend you money (or even a particular kind of money) when you don’t have the need for it. When we think back to when we in the US Army, we were having trouble building credit as well as getting a credit card, however today we’re solicited for credit cards by banks nonstop. It’s similar with lines of credit too, especially business lines of credit. So, if your access to capital is restricted and you have minimal to no credit, how do you invest? Well, there’s a few options.
3 Tips on how to Invest in Real Estate With Minimal to no Credit
1. Make use of a different type of capital.
You don’t necessarily need to use traditional financing. For example, years ago, credit cards were issued for people to buy primarily consumer goods, but we were using them to purchase and fix up properties. Then, banks would give a business line of credit far more easily when compared to a mortgage. Another example is employing OPM (Other People’s Money) to invest. By making use of private money, you’re not using your credit to accomplish deals and you’re limiting your overall risk.
2. Use someone else’s credit.
This can be done in a few ways. By this, we mean you can go into joint ventures with others on properties, where you are able to use their credit or status to acquire the real estate property. After all, it’s about seeking to build the family’s overall wealth.
A different example is the one about a friend of ours, who was buying a lot of commercial real estate. Since he previously had a failed business, he used a joint venture partner’s credit to get the loans. But he handled each of the acquisitions, fix-ups, and day-to-day management of the student housing he was buying. He still owned a nice portion of the entities, but none of the loans were in his name.
3. Invest in another way.
Sometimes, you can just invest without needing credit. This can often be done whenever we take over an investment without it being in our name. An excellent example of this is actually the “sandwich lease option,” the spot where you lease a property from an owner then turn around and sublease it to someone else. Now you’re getting a security deposit along with a monthly cash flow on a property you don’t even own.
Another way to invest without needing credit is in “subject-to” deals. This time you’re taking title on the property while using the existing loan remaining in place, and the great thing about this is that it’s not attached to your credit. What’s cooler than having ownership and control and not using your credit?
Cash Flow Investments That Don’t Require Credit
There are some other investments as well that provide off cash flow without requiring credit.
The easy one to think of here is notes. The one beautiful benefit of buying or investing in a note is that you only need the cash. So, whether you’re just starting out with a tiny amount of money (e.g. $25), using a platform like Lending Club, or you’re purchasing a secured first or second mortgage, you don’t need credit to achieve this.
Another one is tax liens. When you go to purchase a tax lien, they don’t check it either.
A third way is hard money. If you’re lending out money to fellow property investors for their rehab deals, we can’t picture the borrower asking to see your credit.
As you can see, there are many ways to invest in real estate without using one’s own individual credit. Nick & Cindy Davis work with several investors here in the Tampa Bay area who have made positive returns on their investments year over year. If you would us to assist you in making a solid return on your investment, we are always just a click here or call to 813-300-7116 away.