New Louisiana Investing.

[Ashley Hirtle]

Hello! 

I'm completely new to this, and just moved back to Louisiana. I am looking for an investor, but i keep getting the run around and having to go through an 'approval' i feel like it should go by the property or something not my credit score.. is this normally how it goes? Or am i just barking up the wrong tree? 

Any help would be greatly appreciated. 

Thank you! 

[Braden Smith]

For the most part all private money lenders and hard money lenders are going to want to run your credit, just like any other lending institution or loan you would apply for. The credit score is the main way they can judge someones likelihood of paying back a loan. Typically you will need a minimum 600 credit score, but the higher the better. With a higher credit score you will get better terms and rates.

However, most HMLs and PMLs will want to start you off with a lower LTV if you have no experience to show. They may only be willing to lend you 65% LTV, which means you would be looking at 35% down on the loan. A local bank would likely give you a loan for 20% down on purchase and rehab, but they will want to see some experience also. Even more experienced rehabbers who use HM and PM pay at least 10% down and then make interest only payments until the deal is done and sold. And that interest rate is usually around 10% or higher.

Here's an example for you:

Lets say you have a deal where the purchase price is $150,000 and the rehab budget is $50,000. That's $200,000 needed. 10% down on that is going to be $20,000 and you will make interest only payments monthly until the property is sold. At 10% interest those payments will be about $1500 per month. If you factor in a 6 month timeframe to rehab the property and get it sold, that is another $9000. Plus you will have holding costs and commissions to factor in. Your out of pocket expense is likely to be more than $35,000 on a deal like this. 

Regardless of what you do or how you go about it, know that all these gurus that tell people they can get started investing with no money are full of it. This business requires capital to get started, and then lots of it to keep things going. Even if you start out wholesaling you still need capital for advertising and marketing. Without it you wont be able to do much.

Your best bet for getting started, if you have little or no experience, is to offer a more experienced investor a deal where you help them out for free and you get to learn along the way. Most investors are pretty busy and may not have the time to allow some to shadow them or to mentor someone, but if you can make it worth their while they may be open to the idea.