Starting out with $40k cash, NO CREDIT, what's the best strategy?

Question

Hi All,

Newbie finally getting ready to pull the trigger, I have 40k cash to start out with BUT NO CREDIT + no income, meaning unable to get any conventional/bank loan. Need advice on where/how to start my RE journey.

*"Where" because I am ready to move to any market in the country that could make it work for me. Where I'm at now in Las Vegas & Southern Cali, 40k seems to be hard/impossible to do any deal in RE without getting any loan - something not possible at this moment.

** Can get licensed as a RE Salesperson/Agent anytime - completed course & test, just not licensed with any brokerage yet, could easily get licensed in any state if moving out out NV or CA.

*** Handy and can DIY small flip projects, demo, flooring, kitchen/bath remodel, paint, walls, ceiling etc.

Hopefully can get some tips from all the experienced investors here. Any advice/comments welcomed :)

Rafael Norat · Answer

Hey Jonathan,

What are your overall goals? Can you outline where you would like to be in 3 to 5 years? I would say let your goals dictate your day. I started out wanting  $3000/month cash flow in 3 years. I found an area near me that could produce $150/unit within my price range. I estimated I needed about 20 doors to give myself a bit of a buffer in reaching my goals.

Try to lay out some numbers that you can shoot for. Then, look around your area and see if that's feasible. Then, address your weaknesses with others people through networking and build a solid team to reach your goal. You have some good strengths to get started with. I would say investigate your area and make a determination if you have everything there to reach your goal.

Hope that helps.

Rafael

Derek Walvoord · Answer

I like fixing up houses, but did not have enough capitol to make it a full time thing yet, so I got a job at my hard money lender!

Going through 200+ rehabs a year will certainly teach you a thing or two.

Call some, and see if they need inspectors, or draw administration help.

I am getting paid to look at a ton of rehabs in Chicago.  I really like Brandon Turner's advice about getting a job in the field you want to work in.

Curt Davis · Answer

Vincent,  what lender do you know who will let someone do 20% down when they have no credit or income?

Andrew Martel · Answer

I agree with the comments thus far. My father always said investing is great, but you need a foundation. So I would say a job is definitely a good idea.

I'm not a fan of wholesaling.  That is me personally. I just don't have the time for it, but if you work it right, I'm sure you can become quite profitable.

I love low income rentals.  A lot of investors will disagree with me, but for me, I can find fantastic cash flow, and if you're a handy dude you can get into a house pretty cheap with a decent return.  If this is something you're interested in, I recommend checking out the Section 8 Bible by Michael McLean.  It gives you the no BS low down on investing in these kinds of properties.  As always you can PM me to talk a little more.

There's also flipping.  Though with 40K you're looking at a hard money route which can be a tough angle to work... not impossible, just tough.

Good luck!

-Drew

Mark Elliott · Answer

hi jonathan. these two ideas are good on the merits, but your situation goes a little deeper than what they are recommending. sure, banks will not give you a loan without credit and a job, thats simple enough. you can just get a job, but you cannot just get good credit. i would recommend moving to another area. $40k will not get you very far in las vegas or any place west. here in buffalo, we have a good market. the prices stay pretty level for the most part. the killer is the taxes. then again, we have the winter issues too. not only does it get very cold which makes it hard to work on a place, but we have winter about 6 months out of the year.....lol. as far as your credit, pick up a part time job in a field that you have been in before. then, the job is a lateral move, not starting a new job in which you would have to wait 2 years before you could get a loan. second, take $1000 of that $40k and put it into a bank. after a month, go get a $1000 signature loan from that same bank, using the $1000 you have in the bank as collateral. state that it is a short term loan that you intend on paying back in 6 months. then, take that borrowed $1000 and go to another bank and deposit it. after a month, borrow another $1000 from the second bank, again using the deposited $1000 as collateral. continue this with as many banks as you can. when the first note comes due, use borrowed money to pay it off and continue as such with each bank. what you are doing is establishing credit with these banks and soon you will be able to go into any one of those banks and borrow money because you have good credit with them.

Colin Smith · Answer

My recommendation is get a job. I know that sounds like an awful thing when your dream is probably to become a real estate investment mogul, but you're probably going to burn through your 40k pretty quick without any income.

With that said, make it an educational job for where you want to be in life. Work for a bank to learn the lending side. Become a Real Estate Agent assistant to learn the basics. Most definitely get your license since you have already done the coursework. These jobs will not only be educational, but it will provide income to supplement your living and investments, and most importantly, make it easier to get financing.

Richard Dunlop · Answer

Relocate to Michigan Indiana or Ohio

Ayrrecia Boyd · Answer

We should partner Johnathan! I'm in the same boat..except I have established credit and it's pretty good. It's just that my income is from self employment and kinda hard to convince banks to lend me hundreds of thousands of dollars :(

Derrick H. · Answer

Awesome advice....I used this to rebuild my credit. The banks love it

Starting out with $40k cash, NO CREDIT, what's the best strategy?

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