So, you’re interested in investing in multifamily properties to start your real estate investing career but your credit score can be classified as less than “fantastic”.
This is a position that many people find themselves in worldwide but the good news is that you don’t have to wait to get started with investing in multifamily properties until after you’ve fixed your credit score, you can get started now by following these tips.
Tip #1 – Consider Applying for An FHA Loan
Thanks to an FHA loan, you can qualify for financing with a credit score that’s as low as 580, if you plan on living in one of the units of the multifamily property.
Some investors may not want to live in one of the units of their multifamily property but this is by far one of the easiest ways to get started in real estate investing. What’s best of all is that you can also eliminate your housing expenses at the same time because the rents from the other units will pay your mortgage on a monthly basis.
Another benefit of choosing an FHA loan is that they have a low-down-payment requirement of 3.5% so depending on where the multifamily property is located you could get into a duplex, triplex or fourplex for little money down.
FHA loans can be used to acquire or refinance a multifamily property that has as many as 5 rental units so this could be a great opportunity for you to get started in real estate investing while you fix your credit score at the same time.
Tip #2 – Get A Hard Money Loan To Buy A Multifamily Property
Hard money loans are also one of the easiest ways to obtain financing for a multifamily property because these types of loans are always out there.
Before choosing this method of borrowing though, keep in mind that a hard money loan comes with a hefty price tag which can range between 10-15 percent annual interest so it’s best to fully analyze what you have to pay before choosing a hard money loan.
Hard money lenders are traditionally concerned about what they can do if you default on your loan payments. This is why they will be paying close attention to the property that you want to invest in because their #1 goal is to take the property and resell it for a profit if you default on your payments.
Thanks to the Internet, there are a wide variety of hard money lenders out there in today’s world. Just use your favorite search engine to find a hard money lender near you.
Tip #3 – Ask Your Friends, Family or Business Associates for Private Money Loans
Although some people are against getting private money loans from friends or family members, the reality is that private money can be a quick and painless way to get the money that you need for investing in a multifamily property.
Most people who become private money lenders are less concerned about credit scores than they are the actual investment itself so it’s best to write down a list of people that you can contact for a private money loan then approach them with your opportunity.
How much interest can you expect to pay on your private money loan? This can vary on the loan but the money common interest amount will be 1 percent of the total loan amount for a period of about 13 months or possibly as long as 3 years.
Tip #4 – Take on A Partner Who Has Good Credit
Not ready to try any of the tips that we’ve recommended in this article so far? If so, why not try taking on a partner?
Partnering with someone who has a good credit score is a smart strategy especially if they don’t want to necessarily have any role in managing the investment property. They will supply the credit score and the money while you provide the hustle and knowledge.
Many investors go the partner route at least once in their real estate investing careers since it’s a great way for a newbie investor to get their feet wet in real estate without having to qualify for financing.
The key to success with choosing a partner though is to choose your partner carefully because if the deal goes south it could ruin your relationship with that person so it’s best to take plenty of time before choosing a partner.
Tip #5 – Get Started in Wholesaling
Last of all, but most important is wholesaling. This is another popular option that many investors try in their careers at least once because with wholesaling, no partner or loan is needed. All you will be doing is finding a multifamily property that’s for sale, get that property under contract for a price that’s well below its value then you take that contract and resell it to another real estate investor for more money than you got it under contract for.
What’s great about wholesaling is that it’s a great way by itself alone to make money in real estate. Even if you decide to go with the hard money or other options mentioned above, you should still consider doing a handful of wholesale deals per year to help you earn some serious cash flow in real estate.
Regardless of your current financial situation, keep in mind that you always have options that you can tap into which will help you to get your start in real estate investing.
Don’t ever settle for excuses for why you can’t get started because there’s always a way for you to get your foot in the door as a real estate investor if you’re willing to try different solutions that are available to you.