It is one of your dreams to invest in real estate and start building a legacy for you and your future generations. But, there is one problem – you don’t have enough money or have bad credit. Can you still be a real estate investor? Yes. Let’s see how.
If you have no money and bad credit, what should you do?
Of course, having a bit of capital that you can use to invest in the real estate you desire to own is always great. Still, given the economic situation and the fast life nowadays, only a few people can afford to make the purchase.
On the other hand, having a good credit score opens more doors and opportunities while offering better control over finances. Still, some people don’t have a good credit score for various reasons, including bad payment history or high credit utilization. These two reasons, in combination, make your wish to invest in real estate seem impossible. However, that is not the case.
Here is how you can invest in real estate without your own money.
Private Money Lenders
One way to invest in real estate is through private money loans that bring great speed and efficiency to every transaction. Typically, it costs investors between 6 and 12% interest on the money borrowed, but it is one of the most popular steps when looking for financing for real estate deals with no money down. This money doesn’t come from banks but from individuals and businesses whose goal is to finance real estate investments for a return. They are also more complex as they include more fees and higher interest rates, so if you want to go with these types of lenders, a good tip is to find homes that can be bought for 50 cents on the dollar.
Hard Money Lenders
On the other hand, you have the hard money lenders who calculate fees in the form of points. From three to five points, the points represent an up-front percentage fee based on the borrowed amount. This is plus the interest rates the hard money lenders charge, which could be between 10 and 18%. They differ from one another, so the investors need to do their own research and find the most suitable conditions.
Wholesaling
Wholesaling is a strategy in real estate investment that doesn’t ask for a high credit score or large money deposits. Instead, you should be good with the numbers and have them well calculated. This means that the process consists of finding these distressed properties and assigning the contract to your potential buyer while getting paid. Utilizing the Best CRM for Real Estate Investors allows you to manage contracts, buyers, and properties effortlessly, helping you close deals faster.
Equity Partnerships
Partnerships are another way to invest in real estate without money or a good credit score. What you lack as an investor, another person can make up for. This way, your partnership will be formed. One partner can find a distressed property at a discount price, while the other will use their credit score and capital to finance it. However, the goals, risks, roles, and returns must be discussed before creating any partnership type between the two parties.
Option to Buy
Known as the “lease-option”, this method enables investors to buy properties without initially taking legal ownership. So, the investor will sign a legal option to buy from the homeowner for a specific price in the future, and in return, the investor will rent the property for a long-term lease agreement. When the lease agreement is nearing its end, they will prepare to buy the property for a previously set amount of money.
House Hacking
It is an excellent real estate investment strategy that especially savvy investors love because it allows them to take advantage of a unique situation. Namely, this strategy allows investors to earn rental income by renting out their primary residence. This way, they will use the rent to pay the mortgage. Those in single-family homes may choose to rent bedrooms when they can. Regardless, it is a great strategy that allows investors to decrease the risk of vacancies while they are building their cash flow.
Government Loans
Last but not least, government loans are a great source of funding. However, you must be eligible and qualify for this loan. For the pending type of loan, you need to make sure that you have all the proper documentation. Plus, you must take into consideration that sometimes government loans can take months to receive approval, which makes them less attractive. Here is a list of some of the possible options:
- HA Loan
- USDA Loan
- VA Loan
- Good Neighbor Next Door Program
- Fannie Mae Or Freddie Mac
- Energy-Efficient Mortgage (EEM)
- FHA Section 203(k)
- Native American Direct Loan
- Local Grants & Programs
Conclusion
You can be a real estate investor even if you have no money or good credit. All of the options in this text can help you turn your financial situation around and help you start a career as a real estate investor.
