How to Invest in Real Estate with Bad Credit & No Money
A real estate investor is required to have perfect credit and a wealth of money to get started, right? Wrong. The truth is that while poor credit and a lack of liquid assets can be challenges on the road to real estate investment, they are certainly not roadblocks that can’t be overcome.
As a matter of fact, you could be the world’s next successful real estate investor – even if you don’t have a money tree growing in your backyard. Use the tips tbelow to get started.
Bad Credit? Be Creative & Take Risks
If you want to invest but have bad credit, you’ll need to be creative and comfortable with risk. Furthermore, if you do it successfully, you’ll not only break through the roadblocks of real estate investing, but you’ll also likely raise your credit score at the same time. Five options to consider when investing with bad credit are to:
- Work with hard lenders. This does involve a higher cost of capital, but if you’re looking to flip a home and sell it within eight months, it may be a good option.
- Consider Real Estate Investment Trusts. Also known as REITS, you can invest in these trusts through major brokerages such as Fidelity, Schwab or E*Trade.
- Find a co-signer. Is there someone in your life with good credit who believes in your ability to succeed? They may be able to co-sign for you.
- Get a partner. If you know someone who is also interested in investing in real estate and who has a skillset complementary to yours, it could be mutually beneficial to work together.
- Repair your credit. While this won’t instantly enable you to invest in real estate, it will work to your advantage in the long term. In particular, if you pay down your debt when you can and don’t miss any payments, you may be surprised by how quickly your score increases.
No Money? Think Outside the Box
Yes, money is required to invest in real estate. But, even if you don’t have a cool 10 grand sitting around, you still have options. Admittedly, these options are riskier than traditional methods, but if you have bad credit and no money, they may be your only way in. Specifically, consider:
- Hard lenders. As you can see, this is a solution for both bad credit and no money. Once again, this is only a good choice if you are confident in your ability to flip real estate quickly.
- Seller carry-back. If the seller is interested, you may be able to borrow the money from them. Similar to a traditional mortgage, you would make monthly payments to them with interest until the principal was paid off.
- Home equity loans. Do you own a home? If you do and you have equity in it, you may be eligible to take out a loan to purchase a property.
- Partnership. Once again, working with someone else may be the best way to combine skills – and money – to get the investment moving.
- Saving. Like raising your credit, this won’t happen quickly, but it is the safest option.
Investing in real estate is not a simple, quick option; it can be time-consuming. That said, REITS are a passive way to invest and require just a few hours of work each year. Moreover, you can also work a full-time job and invest in real estate. In fact, that full-time job could be what moves you from bad credit and no money to good credit and savings. However, remember that although there are many advantages to investing in real estate, it’s not likely to make you rich overnight.
Keep Your Dreams in Sight
It may seem as though bad credit and no money are enormous roadblocks that you cannot overcome. But, remember that for almost anyone investing in anything, there is usually at least one roadblock. The good news is that there are also solutions. If you begin today and pound away, you may find that you’re investing in your dream real estate transactions sooner than you expect.
We hope you enjoyed this promoted piece as much as we did!