Bad Credit/No Money...How do I buy property - Posted by Jason

Posted by GinoAZ on June 14, 2001 at 24:48:47:

Great in theory. BUT people that own 400k homes also have enough inteligence to know that they could have done that by themselves very easily and bypassed you.

Also waiting around for a transaction like that to fall into your lap could take awhile. But hey, it COULD happen…

Mike Morrongiello can attest to a certain deal we have both been trying to put together that some sellers who are going into foreclosure are just stubborn and woukld rather see thier property sold at auction than sell with no profit.

people are stupid somtimes…look for the smart ones who just made a mistake and are in a bad spot.

Gino Lucadamo
Quiksell Inc/Commonwealth Financial
Phoenix, AZ

Bad Credit/No Money…How do I buy property - Posted by Jason

Posted by Jason on June 06, 2001 at 14:49:01:


I am wondering which way all of you would recommend for someone in my situation. I really want to get started in the real estate business. I have Bad Credit, and No Money. (Obviously, I want to fix this situation.) I have read many posts saying that under these circumstances I can still buy properties.

So, my main question is this: Which type of buying would you recommend. Lease/option, Deals on Wheels, …???

I am open to any suggestions.

I would also love to here from anyone who was in my situation, and is now an owner of properties.

Thanks to everyone for their replies.


Jason Straw

Re: Bad Credit/No Money…How do I buy property - Posted by Jay

Posted by Jay on June 25, 2001 at 02:22:00:

A very good resource I’ve just finished reading is “No Credit Required; How to buy a house when you don’t even qualify for a mortgage” by Ray Mungo and Robert Yamaguchi. You can find it in your local bookstore. . .

Fix Your Credit - Posted by Sean

Posted by Sean on June 07, 2001 at 20:08:33:

John Carlson has some good points in his article. It’s not necessary to have cash or good credit to make money in real estate. HOWEVER it doesn’t hurt either. Maybe you can’t turn around and have mega-cash in a year, but you can fix up your credit in that time. Plus it’ll make it easier to buy cars and all the other doodads with reasonable financing.

Re: Bad Credit/No Money…How do I buy property - Posted by G money

Posted by G money on June 07, 2001 at 09:28:54:

READ THIS:::::You Can’t Do This Where I Live!

John Carlson (AKA “JohnBoy”) has posted this incredible article several times on our News Groups:
This is for all those who live in the more expensive areas where homes are selling in the $300k+ bracket. I made this post some time ago in response to someone living in CA. She couldn’t figure out a way to buy in this price bracket, get a mortgage, and be able to rent with a positive cash flow. Maybe this post will help with getting your creative juices flowing.

Whether homes in one area are selling for $20k to $40k vs. $200k to $400k in another area is irrelevant. Granted, a $200k house in some areas may not be able to throw off a positive cashflow as a rental, but buying houses to hold as a rental is only ONE way to invest in real estate.

Quite frankly, buying to hold as a rental property isn’t the best way for a beginner to get started in this business either. If you are just starting out and have limited capital to work with, you should be focussing on building cash first before worrying about buying rental property.

If you don’t have enough capital built up, how are you going to survive the tuff times? Where would you get the capital to cover vacancies, repairs, evictions, pay the mortgage while a tenant lives in your property rent free until you can evict them and attorney fees, etc.???

If you have been focussing on looking for rentals, wondering how you will be able to borrow $200k-$400k on a home with no money and bad credit, you’re approaching this all the WRONG WAY.

It doesn’t matter where you live. No matter where you live, SOMEONE is having a problem with their property and they need help with finding a solution to solving their problem. STOP looking for properties or trying to figure out how you can make a positive cashflow and who would give you a loan to buy one of these for $200k-$400k. That’s a total WASTE OF TIME. It ain’t gonna happen that way.

You need to restructure your thinking process. You are NOT looking for properties. You are NOT looking for someone to give you a loan. You are NOT going to buy to hold as rentals. You are NOT to think in terms of you being an investor.

You DO NEED to start thinking in terms of being a PROBLEM SOLVER. You NEED to start looking for people with a PROBLEM.

Become a PROBLEM SOLVER and look for people that are having a PROBLEM. People that are having a PROBLEM, are MOTIVATED. THAT’S WHERE YOU FIND YOUR DEALS. Your job is to find the solution to solving the problem. If you find the solution to solve the problem, the deal will practically close itself.

People that are having a problem are motivated. They NEED HELP. They don’t know what else to do. That’s where you come in. YOU will know how to come up with a solution that will solve their problem.

So how can you possibly make money on a $400k house when you have NO MONEY, BAD CREDIT and NO ONE WILL GIVE YOU A LOAN? The answer is SIMPLE. You don’t NEED any of that stuff. The only thing you NEED IS KNOWLEDGE.

If you possess the KNOWLEDGE in being able to solve problems pertaining to real estate, you can make money anywhere, anystate, anytown USA.

Lets use an example:

Mr. Downandout is having a problem. He owns this nice $400k home that he lives in. Mr. Downandout had only purchased his home a year ago. He had an excellent job, excellent credit and was able to buy his home with minimal money down. He paid $410k for this with only putting $10k down. His mortgage amount is for $400k at 8% interest on a 30 year loan. His monthly payments are $2,935.06 principle & interest, plus taxes & insurance.

You know that even if Mr. Downandout just gave you his property and said here, take it. I just want this headache to go away. You know that you could never get $3k a month for rent when other homes in the area like this are renting for only $2200 a month. So what can you do to make any money off this?

No matter who came along to buy this house, how much are they going to have to pay in payments every month to own this home? We already know that even if the buyer has excellent credit his payments are going to be around $3k per month plus taxes & insurance. So no matter WHO buys a home in this price range, they will be looking at $3k + per month with excellent credit.

Now what about someone that has credit problems? Lets say they are classified as a C, B borrower. They will have to pay a much higher interest on any loan they were to get. Let’s say they found a lender that would approve them with some credit problems. They will end up paying somewhere around 10% to 12% in interest. So let’s use the middle and say they will be at 11% interest on a $400k loan. At 11% on $400k their principle and interest payment each month will be $3,809.05 for 30 years, plus taxes & insurance.

Since they were approved for the $400k at 11% we know they make enough income to qualify for the loan, otherwise the lender would not have approved them, right? So it would be safe to say that anyone that is buying homes in this price range have good incomes in order to qualify. If they didn’t, no one would be buying these homes. But a LOT of people ARE buying these homes everyday. In fact, there are so many people in your area that are buying these homes in this price range, that the market is so hot most homes sell as soon as they hit the market.

So let’s think about this for a second? Hmmmmm??? If there are so many people that are buying in this price range and getting loans to purchase them, I wonder how many people are out there that could afford these payments but they can’t qualify for a loan, or at least qualify for a loan even at 11%?

Do you think there are many people in that area that make the income to afford the payments? You think some of these people have some money in the bank they could put down a house if they found a lender to approve them for a loan? COUNT ON IT… THEY ARE OUT THERE.

Now we know Mr. Downandout is having a serious problem. He may have lost his job, he may have been transferred to another state with his job, he may have purchased another home and now he’s stuck with two mortgage payments until he gets his old home sold, facing foreclosure, getting a divorce, incurred to much personal debt, etc, etc, etc.

Whatever the reason is, HE HAS A SERIOUS PROBLEM. He NEEDS OUT.

No problem. YOU come to the rescue. YOU are just the person that can help this guy out because you are a MASTER PROBLEM SOLVER. You can come up with a solution to solve Mr. Downandout’s problem today.

Mr. Downandout just wants out. He knows he can’t even list the property with a realtor because he doesn’t have enough equity in the property to even cover the agent’s commission. By the time someone comes along and finally makes an offer, Mr. Downandout will be lucky to get what he paid for the house. Then he will have to pay some closing costs, cover the agents commission, and on top of all that, it may take 3 to 6 months before he finds a buyer.

That means for every month he is sitting on the house, he’s throwing away another $3k+ each month on a mortgage he can no longer afford.

He needs to do something quick. If he doesn’t he’s facing foreclosure or if he has money in he bank, it’s getting depleted rapidly by keeping up with the payments. Then if he finds a buyer he will have to come to the closing table with a chunk of cash just to get the thing sold.

YOU see Mr. Downandout’s problem. YOU know there is a solution to this problem and it will save Mr. Downandout THOUSANDS.

After you get face to face with Mr. Downandout and figure out the problem, you show Mr. Downandout a solution to his problem. You explain to Mr. Downandout that he can save thousands of dollars and put a stop to his bleeding cashflow problem by agreeing to let you take over his mortgage “subject to.”

By Mr. Downandout agreeing to this, it will save him from losing additional money each month waiting for a buyer to come along, it will save him from having to go to the closing with thousands of dollars in closing costs and enough to cover the agent’s commission, because he won’t need an agent and won’t have any closing costs and won’t have to take a discounted price to sell his property because YOU will just take over his problem and end his nightmare right now.

Mr. Downandout is happy to get rid of his problem. He doesn’t even care about whether you have good credit or not. He assumes you must be responsible after listening to the way you were able to put together a solution that solves his problem so easily. Heck, Mr. Downandout is so happy he’s hugging and thanking you for coming along and saving his behind.

Next, you run an ad in the Major Newspapers:

NICE 4bd/2.5ba Home
Call xxx-xxxx

You find a buyer that has been dreaming of owning their own home for years. The Buyer says they have $15k they can put down. You say, “Well, I was really looking for $25k down, but I might be willing to work with that.” You tell the Buyer that house is $435k. The terms are contract amortized over 30 years with a the balance due in two years. So with $15k down the amount you would be financing is $420k at 11% interest plus taxes & insurance. So the payment amount from your buyer will be $3,999.76 per month plus taxes & insurance.

Your payments that were taken over “subject to” are $2,935.06 plus taxes & insurance.

$3,999.76 - $2,935.06 = $1,064.70 per month in positive cashflow.

The home was only a year old when you picked it up. So at the end of 2 years your loan balance will be around $389,120.55.

Your buyer will owe around $416,000.13 at the end of two years when the contract comes due.

$416,000.13 - $389,120.55 = $26,879.58 additional profit to you at closing.

So you will have made:

$15k up front from the buyer’s down payment
$1,064.74 x 24 months = $25,553.76 in positive cashflow
$26,879.58 at closing when your buyer refinances to pay off the contract

That’s $67,433.34 total profit over two years from buying a house with no equity, no money, no credit and reselling it on contract.

That’s an average monthly profit of $2,809.73 over two years.

So you see, you don’t have to just look for properties to hold as a rental. If you read this site everyday, the “how to articles,” “money making ideas,” “success stories” and the news groups, you will discover many other ways to buy property no matter where you live and no matter what price range the homes are in.

The price range only reflects a number. Those numbers are the affordable prices that property is selling for in that area. It doesn’t matter how many zeros you add to the numbers if those numbers reflect what that market is getting.

Forget about the numbers and focus on people that have a problem. Forget about thinking in terms of becoming an investor, think in terms of being a problem solver. Search for the problems, figure out a solution to solve the problem and the deal with practically fall in your lap and close itself, as long as YOU know what you’re doing and have the knowledge to get it done.

Now get busy and EDUCATE YOURSELF. Then take ACTION and GO GET A DEAL.

John Carlson (AKA JohnBoy)

AMEN! - Posted by David Butler

Posted by David Butler on June 10, 2001 at 15:32:44:

Hello Jason,

Sean hit that one right between the eyes! JohnBoy’s post is one of the best things I’ve seen about the whole topic of what CREI is really all about, and how to get from Here to There.

But, it is absolutely foolhardy to consider one’s self to be serious about real estate or note investing, if the fellow is not on track to repair his own credit situation. There is so much FREE (and darn near FREE) information available about the Care & Feeding of Your Credit Report, that to have lingering credit problems is unjustifiable, AND self-defeating… once you begin the road to financial independence.

Credit reports and credit ratings are a critical component of obtaining money. It’s like sports… victory goes to the biggest, fastest, and smartest, more often than not. And not only is it critical for your own credit status, but for knowing how to evaluate and improve when necessary, those whom you deal with who will have an effect on your financial future (Payors, buyers, renters, etc).

Learning all you can about legitimate, do-it-yourself credit repair, and actually going through the process of righting your own boat… should go hand-in-hand with everything else you undertake here at the beginning of your journey.

Diplomacy, Discourse, Determination, Diligence, Detailed Documentation, Discovery, and Dauntlessness are all skills and benefits accruing to one who undertakes to learn the credit system. The overwhelming advantages gained far outweighs any possible excuse for not making it a priority in your investment educational process.

Whatever else you do at this point, make it your number one goal to dedicate as much time learning about repairing and maintaining your credit… as you do to any other undertaking related to your investment activities. The rewards will be breathtaking, the neglect will be devastating.

Hope this helps, and see you in the 700 Club :wink:

David P. Butler