Purchasing Real Estate with No money and Bad Credit?

Dated: 06/12/2020

Views: 301

In all the years that I have been a Real Estate Investor & Real Estate Agent, I have been asked this question way too many times. Can I invest in Real Estate with no money and bad credit? The answer is Yes!

Yes, you can. It is simple; however, it is not easy. What that means is that you need to have a know-how of the Real Estate Market (or know someone who has the know-how, someone you can trust)

Caution! 
These are not conventional ways of purchasing Real Estate, these should only be used if you know what you are doing, otherwise, you could lose more than you would gain. I often say to my clients, you don’t make money in Real Estate when you Sell, you make it when you Buy! (Especially in short term deals). So, be careful not to spend your profits upfront just trying to acquire a ‘good deal.’

Here are 5 ways that you can buy Real Estate if you are in a ‘situation’.

1.    Hard Money Loan.

Getting a loan from a hard money lender is a great option for Real Estate investors with less than stellar credit. “Hard Money” – whose name refers to the “hard” assets underlying the loan, such as Real Estate – generally refers to funding provided by non-institutional lending companies which, usually, set and define their own lending criteria. Hard money lenders are in the business of lending money and in far greater supply for the typical Real Estate borrower. You need to be careful to make sure you go over all the ‘fees’ associated with this kind of loan. If you are not sure, have your lawyer or accountant look it over for you and they will tell you if it makes sense.

2.    Private Money Lender.

Private money generally refers to funding provided by a family member, friend, business partner, or other acquaintance. In short, a private money loan comes from a source that isn’t typically in the business of providing loans. Given the relationship between the lender and the borrower, a private money loan may mean more flexible terms and a lower interest rate than an equivalent hard money loan. For the average real estate borrower, private money loans are in limited supply and may be difficult to find.

3.    Get a Partner

Your partner (investor) puts down the money required to buy the property, based on the assurance that you will take care of the property either by living in it or renting/fixing it. He or She has the money and good credit to purchase but does not have time & you have the time. Just remember a rule of thumb, a good business deal is one in which everyone makes money and walk away happy. You should be willing & eager to pull all the weight of doing all that is required to make sure that your partner will make good money from this deal. Why else would they do it?

4.    Seller Financing

Make the Seller the Bank. This is also called VTB (Vendor take Back) in Real Estate Terms. This will work if you have partial down payment & if you could find a seller who is in the market for a while but not able to sell for any reason. You can make the seller an offer to purchase based on a 10-20% down payment as VTB. This VTB will be typically for a 5-10% interest rate depending on the term of the loan. You can discuss making interest-only payments or principal & interest payments. If you take a VTB for 2-3 years, you can easily refinance the property close to the end of the term & pay off the VTB.

5.    Wholesaling

This is not for the average Joe! You really really really need to know what you are doing here. That is why I listed this in the end. In Real Estate wholesaling, a wholesaler contracts a home with a seller, then finds an interested party to buy it. The wholesaler contracts the home with a buyer at a higher price than with the seller and keeps the difference as profit. Real Estate wholesalers generally find and contract distressed properties. 

You need to speak with a lawyer & discuss this to make sure what you are doing is ‘Legal’. Wholesaling, although quite common in the USA, is not legal in Canada unless done ‘properly’. Make sure you know the legalities & do not get yourself in trouble trying to make an honest buck.

If you need any further information on any of these methods, feel free to get in touch with me or someone who has done these first hand. It is not easy, but it is simple if done right.

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