Why Every Real Estate Investor Should Build Their Business Credit!
One thing that is an absolute fact; it takes money to get into real estate investing. The O.P.M. (Other’s People Money) rule may make it so that it is not your money that is…
One thing that is an absolute fact; it takes money to get into real estate investing. The O.P.M. (Other’s People Money) rule may make it so that it is not your money that is brought to the table, but your potential earnings on each deal are drastically cut. Building out your business credit makes it easier to bring funds to the table for completing tasks and the best part is that it is not attached to your personal credit.
Let’s first break down traditional lending tactics and what it takes to get a deal done. There are really 3 words that come to mind, CASH, CREDIT, and COLLATERAL. When working with real estate, you will need to bring all 3 to the table from traditional lending sources. You will be asked for cash upfront for closing. You will need to be above a certain credit score to obtain a loan and taking that further, rates are severely impacted by your overall personal credit score. Then guess what, the property you are purchasing is used as collateral.
In blunt terms, your ass is on the line for everything and the lender will wreck your life very easily if you default. Your home will be brought to foreclosure, your credit will be severely damaged, and the cash you put into it is just taken.
Now take that a step further and think about the real estate investing world. Generally speaking, investors are looking for properties that can be repaired or modified to increase the value of the property. The difference in the cost of acquiring, the work put in, and the actual final sales price is what creates a profit. This means that there is also additional money that is needed to make such repairs or modifications.
A traditional lender will usually setup a draw schedule where you can be reimbursed after the work has been completed. So how do you get the work done if you don’t have excess cash? This is the initial power that is created from building business credit.
THE SOLUTION
A new business is an identity. Like a person, a business has an identification number where the history and credibility is stored. It is possible to establish relationships and lines of credit through your business identity. This means that even with bad personal credit, you can obtain the excess capital required for doing a lot of repair work. The best part is that the usage is not reported to your personal credit, which in turn keeps your debt to income ratio in much better shape.
What if you had $20,000 to pay for paint and other materials? How would that change your potential in what you can do? What if you had more?
This is a reality that you can have and within short order by taking the proper steps and building out your businesses credit. We are talking 4 months. Please visit www.headstartbiz.com/building-business-credit for further details.
You will find numerous seminars for different strategies. A lot of them charge money just to teach you little tricks that we can show you for free. They all circle back to the three C’s. House Hacking as an example, is a way to reduce the required upfront deposit since you are declaring that you are living in the house. All methods discussed are ways on reducing your liability.
There is a way to acquire properties with just one C though. This is the method that we find most secure and look to help all investors achieve. Please feel free to reach out if you would like to have a further conversation about your ambitions.
Related desks: Building business credit