As a real estate investor, having good credit can be a huge advantage. It can help you garner one or more loans in order to purchase properties or renovate them. It can even help you prequalify for mortgages so that you can go into a deal or an auction with proof of your ability to purchase a property. In short, it’s a great thing.
However, it may surprise you to find out that good credit really is not all that crucial to your success as a real estate investor – and this is particularly true when it comes to short term real estate investing. Now, do not get me wrong. If you take out a loan, you should pay it. Period. You should never default on your word. However, it is a fact of life that even the best credit scores suffer in the real estate investing business simply because qualifying for multiple loans hurts your score – even if you pay them on time and in full. And in today’s economy, people’s credit scores are hurting for more reasons than just their loan applications.
If you have a less-than-perfect credit score, you may think that real estate investing is not an option for you. However, there have never been more opportunities for successful short-term investing than now, and in many cases, your credit will not be an issue at all. Here are a few ways to invest in real estate short-term without factoring in your credit score:
• Flip contracts rather than properties
Probably the shortest term real estate investing option is to flip contracts. Many real estate investors charge a flat or percentage-based fee for deals. They set them up using a contract that is only binding if they locate a buyer with the ability to make the purchase. Then, the initial investor sells the contract to the investor who will actually be buying the property. A real estate investor with a good list of contacts can easily make good money flipping contracts, and their credit never enters the picture because they are not making the purchase themselves.
• Look for creative financing options
Because it is so difficult to get a loan these days – and even people who can still have to come up with a 20 percent down payment – more and more sellers are offering seller-financing, subject-to deals and lease-options. In many of these transactions, your ability to pay far outweighs your official score indicating your likelihood of paying. There are a lot of sellers who still will want to see your credit, but in these cases, questionable credit does not equate to the end of the deal.
• Be a business partner
Many people who would like to invest in real estate do not because they simply do not have the time. Several of my very successful colleagues actually got started from the “dead-broke” level with terrible credit by partnering up with an investor who had the means and the inclination, but simply lacked the time to be involved in short-term real estate investing, which yields big rewards but sometimes requires periods of concentrated effort.
If you are interested in short term real estate investing, your credit score should not be a major factor in your decision to get involved. Your ability to spot good deals and turn them into profitable transactions will enable you to successfully invest short term whether your credit record is spotless or in need of a good “wax and polish.”
Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit www.CoachingByPeter.com
