Exceptional Credit Score

[Sam Ghi]

Hi, I have exceptional FICO score (above 850 out of 900) and am looking to earn passive income on it, with low risk, for example in real estate, low tenant risk, and I am willing to pay monthly fees to managing agents, but not too much sunk fees at start. If every month I give a percentage to a managing agent, I am fine, as long as I see long term growth, even pair gains for the first 6 months and then start growing. Can you please point me in the right direction? An overarching passive income managing agent, with tax and LLC/trust expertise would be the perfect fit. I am owner of my primary house, have excellent credentials, but I am unsatisfied with my passive income and potential to become owner in 20 years of a self financing house elsewhere. Any suggestion or advertising is welcome. Thank you

[Randall Alan]

@Sam Ghi

Welcome Sam!

To my knowledge most FICO scores only go up to 850... but congrats on your score.  It won't really do TOO much for you in real estate other than make sure you get the best financing rate available and qualify you to buy financed properties in the near term. As soon as you buy a property it will begin to drop due to credit usage, but that's ok... that's what it supposed to do.

Unfortunately in today's rate environment it is difficult at best to find good deals in about 95% of the country.  Ohio seems to be the best state I see that is delivering better results.  

Regardless of your FICO, you will need cash money to be able to invest in holdable real estate.  Typically about 20% down on each purchase you make.  So you can use that figure to determine an objective (ie. I'm looking to be 4 investment properties a year, etc).  Once you know your objective, I would research potential areas you want to invest (ie. Ohio, etc) and then engage an agent in that area to help you find suitable properties. 

There are many investment vehicles in real estate.  Long term rentals, short term rentals, flips, etc.  Flips definitely aren't passive... Long term rentals have the least amount of interaction required, but short term rentals (AirBnB, etc) have higher profit margins - but require a lot more attention (some companies charge 30% for management and the daily turnover service, for instance).

I would suggest you compare your potential rates of return from real estate with other investment vehicles.  In my opinion real estate isn't that attractive compared to the stock market (currently) - or even your money sitting in a high yield savings account earning 5%.  Most quote the long term stock market gain at 7% a year.  2 years ago real estate had the POTENTIAL to deliver 30%+ per year returns.  It's just not the case right now.  Prices have doubled in the past 2 years, along with interest rates.  Whether you are a cash buyer or financing your purchases those two factors have really squashed returns for NEW real estate investors right now. 

Beyond that, if you plan on your properties to be property managed, you will be paying 10% of your gross income to the property manager.  This could easily be ALL your profit in the current environment... or if not all, a significant chunk if you are financing your purchases - which begs the conversation above about other investment routes.  Most real estate investors are sitting idle right now because of the Fed rate hikes and high property prices unless a deal makes sense to do.

I wish you all the best in your endeavors.  Just wanted to throw out a few thoughts for you to ponder.

Randy