Work on credit before getting started in real estate?

Question

Hi, everyone. My name is Gabriela and I'm from Houston, TX. My questions are, do you need credit to start wholesaling? Do you need credit to acquire a hard money loan?

I have money saved up, but I am having a difficult time deciding what to do with it. I would like to spend it wisely on something that will be beneficial for my future. Should I start wholesaling to jumpstart my career in real estate or establish credit by buying a computer (I'm a student)?

Shipping container homes intrigue me and my goal is to take on that kind of a project some day. I have enough to purchase a shipping container and I could establish credit that way as well. However, I understand that is a whole different ball game that I should probably hold off on.

Any tips/advice? I would really appreciate some help. I'm trying to figure out how to make things happen instead of believing I can't right now.

Tom Mole · Answer

Hi @Gabriela Martinez, I applaud your ambition. You're starting to think like an investor. However you appear to still be influenced by the "employee think" mindset that you were raised with ("get good grades so you get into a great college which will allow you to get a good job...."). Let me recommend that you keep your mind open.

You won't need credit to start wholesaling, but if you have good credit, use it. Hard money lenders won't care very much about your credit. They will be more interested in your business model and your experience. They'll be more comfortable with a proven business model and a solid track record of success. Good thing you won't need hard money to wholesale.

You may find it quite difficult to get a HML (hard money lender) interested in shipping container homes. They're kinda weird! You'll likely find more success in mainstream homes. You're gonna wanna invest your time, money and effort into something you can duplicate over and over.

I would recommend that you keep your priorities on finding great deals and good partners, not on building your personal credit. Buying things that you can payoff over time may build your credit and credit can be useful, but you'll be wasting time. Instead, find someone you might partner with who already has the credit you need, then go do some deals.

Have you looked for REIA's (Real Estate Investor Association) in your area? They can be a fantastic way of meeting people who have the resources you lack when you're getting started. I'd look on Meetup.com for a Cashflow 101 or Millionaire Maker club near you.

You're fortunate to be starting with a little nest egg. Don't be in any particular hurry to spend it. Certainly do NOT spend it to build your credit. If you need a computer for your real estate business, then by all means buy a computer, but don't buy it just to play Candy Crush and hope that building your credit will be enough to succeed.

I would put a pin in the idea to invest in storage container housing for the time being. Once you have developed enough success you could play with the new concepts when you have enough resources to weather the risks. So, what else are you interested in?

You said that you live in Houston, TX. What great fortune. There should be a pretty good stock of distressed properties in your area. Do you know how to find a great deal? If you find a deal, do you know how to find a buyer? Do you have enough money to fund your own deals? If not, do you know how to find the money?

I'm not trying to discourage you, rather I encourage you to step out there, but with a bit of caution. Each of us starting out knows less than we need to. Many of us has paid for our education with our investment nest egg. I'd rather not see that happen you. If you'd like, feel free to contact me directly. I'd be happy to help you develop a plan and mindset that works for you. Send me a Colleague Request and we'll chat.

Cheers!!

Gabriela Martinez · Answer

Thank you so much. I will definitely contact you. I am completely new to bigger pockets, but I am not new to the idea of investing in real estate. I have always wanted to be my own boss, but I never knew exactly how I could do that until a cousin of mine told me about Bigger Pockets.

I am currently finding houses online and watching Brandon's youtube video on how to analyze houses using the calculator.

Thanks for the tips! I will look into REIAs in my area. There are plenty of opportunities for me here and that just gets me determined to start as soon as I'm ready.