Apartment Investing with Bad Credit?

In response to one of our emails we set out promoting an Apartment Investing product one of our readers asked a very important question.

As a previous owner of multi-family houses he stated that, “I absolutely agree with with your assumption.”  The assumption he was talking about was the subject of the email, “The shortcut to REAL wealth in real estate is ….”  And of course that email went on to talk about Apartment investing.

Our reader indicated he and his wife had been through some hard times and had bad credit.  He asked, “My question that I really need an honest answer too is do we have a chance with bad credit?”

That, of course, is a very important question because so many people have experienced tough times.  Are they no longer able to invest in Apartments?   The good news I was able to give our reader was he indeed had a real chance to continue to invest in real estate.

What my wife Mary Jane and I have found is that real estate investing, especially multi-family investing, is better as a team sport.  Sure you can do it all on your own but with the right partners you increase you chance for success.

The other thing we have learned is there is a lot of money on the sidelines waiting for the right deal to come along.

So you have bad, poor, or even no credit how do you purchase an Apartment building/complex?

You need to understand that for commercial property, in this case, houses with more than 4 units or apartment complexes, the bank may not look at your personal finances.  They look at the financials of the property and does the person managing the project have the right experience to successfully manage the property and the finances of the property.

So if you don’t have good credit or experience managing what do you do?  You get a sponsor.  A sponsor is someone with either great credit or experience or preferably both.  The downside of working with the sponsor is you are going to need to give them a piece of the action, perhaps a big piece.  Just remember a little bit of something is always better than a lot of nothing.

The benefits of working with a sponsor are many:

  • You get the deal done
  • That puts you on the playing field, you can now state you have ownership of a multi-family property which will give you more credibility for future deals
  • The sponsor’s experience can be invaluable to you as a mentor
  • You will receive cash flow you wouldn’t otherwise have

There is another way, perhaps a better way.  Find someone who you trust, with experience and credibility and develop a partnership with them.  We have a friend who did this.  She and her partner work very well together.  In about 5 years they acquired a portfolio of several thousand units (think individual apartments).  By following proven systems  they developed significant cash flow for themselves and the investors who put their faith in them.  They also created tens of millions in net worth.  Owning Apartments can make you rich!

If you can’t find a sponsor or a partner you can still make money with Apartments.  You see, evaluating a property is a matter of knowing the numbers and following a straightforward process however you may have to look at a lot of properties before you find a winner.  It was the same with the Princess and the Frogs, she had to kiss a lot of frogs before she found her prince and when she did, it was a happy day!   When you find a good deal you will be able to wholesale the deal to Apartment Investors.

The wholesale payment can be significant depending on the value of the underlying property.  I recommend taking a little less up front and trying to get a small piece of the deal to help build your credibility and portfolio.

So yes, you can make money with Apartment Investing even with bad credit.

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