It’s amazing how easy flipping houses can appear in a 30 minute television show. What isn’t shown on the popular home improvement shows are the weeks of work – sometimes months – that construction crews put into the property or how the “flipper” came about the cash needed to purchase and repair the home.
Investing in real estate can lead to major dividends, but the inability to get funded to start your project can leave you at square one. If you’re just beginning your real estate investment venture and your credit score is hindering the process, here are some tips to keep moving forward.
Real Estate Investing Facts
Real estate investors can plan to pay higher interest rates than buyers who want a property as their primary residence. Investors will also face more stringent lending criteria before getting the cash, like a larger down payment and higher credit score.
Lenders will also want to ensure the investor is financially able to cover the mortgage of the property for an extended period of time – whether for the rehab process or in case the home doesn’t immediately sell.
Can You Invest In Real Estate With Bad Credit?
Because of the tougher regulations, a low credit score can make getting a loan from a traditional lender for an investment property mortgage difficult. Without a large amount of cash on hand or an investment partner who can finance your venture, your likelihood of a loan is grim.
While a low credit score may create immediate challenges, there are ways to prevent those issues in the future:
- Improve your credit score. Get a detailed copy of your credit report and resolve any collection-related issues. After outstanding balances are addressed, start to pay current debt. Lowering the percentage of used available credit is one of the most effective ways to better your score. Avoid any new financed purchases.
- Find a private lender. Hard money lenders aren’t the guys bellied up to poker tables. They’re private groups or individuals who will negotiate real estate investment deals despite a less than stellar credit report. With this type of financial backer, you’ll likely have to put 40 to 60 percent down to close the deal.
- Go for no cash down. Have you ever noticed those side-of-the-road sale signs that stipulate “cash only?” Those signs are typically the product of an investor who has received permission from a homeowner to try to sell the home. The investor profits from payment directly from the buyer or from back-to-back closings.
- Explore wholesaling. It’s a tough job, but wholesaling can be very profitable when done well. This process calls for you to find a good buying opportunity, put the home under contract, and quickly flip the home to sell to a cash buyer at a higher price. Experienced wholesalers can run through the entire process without spending any of their own cash or having their credit checked.
Poor credit history may create hurdles to financing your real estate investment goals, but it doesn’t make it impossible. Being creative with how you find financial backing could mean you continue with your ventures while bettering your score behind the scenes.
Real estate investors can plan to pay higher interest rates than buyers who want a property as their primary residence. Investors will also face more stringent lending criteria before getting the cash, like a larger down payment and higher credit score.
Lenders will also want to ensure the investor is financially able to cover the mortgage of the property for an extended period of time – whether for the rehab process or in case the home doesn’t immediately sell.Because of the tougher regulations, a low credit score can make getting a loan from a traditional lender for an investment property mortgage difficult. Without a large amount of cash on hand or an investment partner who can finance your venture, your likelihood of a loan is grim.
While a low credit score may create immediate challenges, there are ways to prevent those issues in the future:
- Improve your credit score. Get a detailed copy of your credit report and resolve any collection-related issues. After outstanding balances are addressed, start to pay current debt. Lowering the percentage of used available credit is one of the most effective ways to better your score. Avoid any new financed purchases.
- Find a private lender. Hard money lenders aren’t the guys bellied up to poker tables. They’re private groups or individuals who will negotiate real estate investment deals despite a less than stellar credit report. With this type of financial backer, you’ll likely have to put 40 to 60 percent down to close the deal.
- Go for no cash down. Have you ever noticed those side-of-the-road sale signs that stipulate “cash only?” Those signs are typically the product of an investor who has received permission from a homeowner to try to sell the home. The investor profits from payment directly from the buyer or from back-to-back closings.
- Explore wholesaling. It’s a tough job, but wholesaling can be very profitable when done well. This process calls for you to find a good buying opportunity, put the home under contract, and quickly flip the home to sell to a cash buyer at a higher price. Experienced wholesalers can run through the entire process without spending any of their own cash or having their credit checked.
Poor credit history may create hurdles to financing your real estate investment goals, but it doesn’t make it impossible. Being creative with how you find financial backing could mean you continue with your ventures while bettering your score behind the scenes.
