In my experience talking to potential investors, it's easy for people to come up with excuses why they're not fit to become a real estate investor. Whether it's a personal circumstance or finances, most of these excuses tend to be limiting beliefs that aren't true. Having a bad credit score is one of them. You can invest in real estate without using credit. It might require you to be a little more creative, but where there's a will, there's a way.
Here are a few ways you can purchase your next rental property:
Private money. Private money refers to any money that you borrow from a non-bank on your own terms. This could be money you borrow from a friend, relative, or another investor. Private money is a fantastic way to get started, because typically a savvy investor will care more about the deal than your personal credit score.
Seller financing. If your credit score is holding you back from applying for a traditional mortgage, seller financing might be a great option for you. Unlike a big name bank, a seller can negotiate terms. It’s a great opportunity for the buyer to invest with no money down or a low credit score. Head over to the podcast to hear more about seller financing!
Hard money lenders. Hard money lenders are like bankers, but they set their own rules. They lend money with less strict standards than the banks because they are not regulated by the government. They don't care as much about your credit score and they don't limit you to one investment at a time. They lend on the merit of the deal and they can close funding much faster than a traditional bank. One drawback to hard money is that it typically has a higher interest rate.
401k loan. If your employer offers a 401k plan, you might be in luck! Since your 401k is your money, you can take a loan from it. There are a few limits, but your credit score isn’t one of them! This is a strategy I use yearly. It's a fantastic strategy, because you’re in essence, paying the interest back to yourself. You can learn more about this strategy here.
It’s worth mentioning that this is not an exhaustive list. I truly believe that if you want to invest in real estate, you can make it happen! If you feel like these options won’t work for your individual situation, check out our podcast episode about paying off debt, as well as this post on creatively financing your real estate deals!