Getting financing with poor credit and no money for real estate investing…
Recently a reader sent in a question regarding the age old question that almost all new real
estate investors have:
How to get financing when you have poor credit and no money?
Really, it takes a mind-shift from one paradygm to another. Most people think from the standpoint of lack.
Successful people think from the standpoint of abundance and know that the resources they need will be available if the opportunity is truly an opportunity.
Just a little note before we jump into our reader’s question… and our response.
If you are stuck at the starting line of your real estate investing “career” because you aren’t sure if something can be done… or you think it is impossible. You need to get over it and get out there and try it.
Sure, the first 5, 10, 20 attempts may end in failure… but I can guarantee you that with each failure you are getting closer and closer to success… because when you fail that is the ultimate lesson… and you can bet that you’ll never make that mistake again.
So… without further adu…
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Question from our reader:
“Hi Trevor:
Are their ways to aquire financing when your credit is poor and you have no
money to put down? Most hard money lenders want something down.”
Our response:
“Hi,
Thanks for the email! Sorry I didn’t get back to you sooner… your email got buried in my inbox.
The answer to your question is… yes.
But, really HOW depends on what type of transaction you are doing and other variables.
One thing you should remember is that if the deal is good enough… money will never be hard to find.
Really, when you have poor credit and no money… it doesn’t mean you can’t get financing… it just means that youneed to be a bit more creative on just how you get that financing.
There are a few things you may want to do if you have bad credit and no money in order to finance your projects.
1. How I got started in REI required absolutely ZERO of my own money and no credit. The first property I bought was a 4 unit building when I was 21 and got the seller to carry 95% of the note on a fixed 30 year note at 6%. The other 5% I found another private lender who would loan me that money.
Neither person asked to see my credit or required me to pay anything upfront.
When a seller is motivated, they will work with you on terms.
So, get the seller to carry as much of the note as possible… and go out and find another investor to either loan you the remaining portion… or give them a % of ownership in the building.
2. Another way is to be the deal maker/finder… and find people who have money and credit to be the financiers.
You wouldn’t believe how many people there are out there who want to invest in real estate, but don’t want to do the work to find and manage the properties.
Some very big real estate investors have built their businesses this way.
You go out and find the deals, negotiate the deals, and put them under contract.
Find investors who have the credit/capital to purchase the property.
Most of the time, this type of relationship is set up with some type of ownership split. 50/50 many times… 25/75… etc. Whatever you and the person with the cash and credit agree to.
So, you do the work for your share… and someone else brings the money for their share.
If you don’t think this is possible… it is being done everyday.
3. Many times hard money lenders will not require for you to bring funds to the table.
This is usually when the deal is purchased at far enough below market value. If you can buy your properties at 60-70% or less below market value, most hard money lenders will not require you to bring funds.
Why? Because they know that if you default on the loan… that they will now own a property worth far more than what they lent you to buy it.
So, in summary… the money is always out there if it is truly a good deal. It is when you
start to buy at market value or just below market value that it becomes difficult to find lending w/ no credit or money.
But, like I said… if the seller is motivated enough… you can usually get pretty creative
with the financing. Just start thinking of all of the ways that you can get money for a property… and then get creative with your deals when you find a deal that is a great value.
Anyhow, I hope that helped a bit. I’m typing this fast so I may not have made sense in some parts… just let me know if I need to clear things up.
All in all… get out there and find the deals… then once you find a great deal… the money will follow.”
Cheers,
Trevor Mauch
Founder
The REI Brain
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Hey all of you lurkers… I know you have some type of question about real estate investing, building a solid real estate investing business, or setting your mindset foundation for success.
Send in your questions.
I’ll be the first one to tell you that I most definitely do not know everything (not even close), nor to I want to. But, we work with many successful real estate investors and business owners who have seen the hard times… and are now living their dream life through real estate investing.
So, send in your questions… whatever they are… and we’ll help you get the insight you need. Yes, you could send in your questions to some real estate forums… but I know from experience that many of the “experts” on there are in the same position as you and are book smart… but not experience smart. So, post your questions there… but also shoot them our way.
Hey, my name is Trevor and I'm the founder of The REI Brain and a real estate investor since the age of 21. Right now, my focus in real estate investing is multi-family income properties and I have plans on moving more into the commercial real estate investment world in 2008 and beyond. 
Great Post & Great Blog! I agree with you 100% — It’s a shame to see how many Newbie Investors waste months and months because they are fearful that they won’t be able to come up with the funds.
If the deal is good — Someone with money will fund it!! Join your local real estate investing club and network, that’s your source of funds right there. Get a hard money lender….etc….