Why Savvy Investors Don’t Use Their Own Money or Credit

Not having lots of money or perfect credit are two of the most common excuses individual’s use to self-sabotage and justify their lack of in action towards becoming real estate investors. This is incredibly ironic when many savvy and incredibly successful investors simply choose not to use the large amounts of cash or the great credit they have built.

Some say “it takes money to make money” or you have to leverage in order to get ahead. This may be true to a certain extent but it certainly doesn’t have to be you money on the line nor your personal credit.

There are four major reasons why successful real estate investing pros don’t use their own credit or capital…

1. They Don’t Have to

With the right strategy and tactics investors don’t have to use their own money or personal credit to buy and sell investment properties. There are even some with several million in the bank who have gotten so good at leveraging other people’s money they never have to put a dollar of their own into a deal. This also means never having to apply for a bank loan or deal with the often ridiculous hoops underwriters want to put borrowers through.

2. They’d Rather Save it for Emergencies

Isn’t it better to have $1 million in liquid cash than $1 million in equity, providing you also have money out there working hard and earning a return for you? Having access to substantial amounts of liquid capital and credit which can be used on demand means a nice fat safety cushion no matter what life throws at you.

3. Borrowing is so Cheap Today

Mortgage interest rates both conventional and private are so inexpensive today it only makes sense to use leverage. Even when borrowing isn’t so cheap the risk buffer and advantage leverage offers to control more real estate and benefit from more equity appreciation is often worth the extra cost. Private lending also offering the advantage of fewer closing costs and points or loan origination fees, less time and hassle associated with applying for conventional loans and of course the expense and aggravation of fixing credit when mistakes are made.

4. Its Wiser Not to Mix Personal & Business

Savvy real estate investors recognize the importance and wisdom of not mixing personal assets and credit with business. First off it certainly provides more peace of mind and a nice safety cushion. It also often enables more credit and better terms to be had by building and using business credit and perhaps most importantly provides essential insulation against malicious and frivolous lawsuits. Mixing credit, assets and income means little room for mistakes and allows attorneys to ‘pierce the corporate veil’ when lawsuits loom whether related to misconduct, genuine mistakes, the market changes, accidents happens or your partner decides to divorce you, enabling them to come after everything you have.

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