19 Years Old Can’t Get A Loan

[Ryan Harner]

I have been wanting to get into rental properties for a little over a year now. I’ve picked up lots of books, listened to lots of podcasts, and am currently in the process of getting my real estate license. I’m taking a 90-hour prelicensing course and have talked to a few brokers to get info about the real estate game. There are a few properties in Lafayette that are good candidates for a rental property and I would be wanting to move into one side of the duplex to start off. On the other side of the coin, I can’t get a lender to lend to me because I haven’t built enough credit and I am young. Is there anything I can do to get ahead of my age and my credit score? I am thinking about asking an investor I personally know from Chicago to partner with me and lend to me, and I’ll pay him pretty good interest to take a high risk loan and would give him the house if by some divine odds I fell back by only $1,000 dollars in payments. How do I approach him, and what details am I missing that I should mention to him?

[Jake Denning]

Hey Ryan, glad to see you are starting out and are a hell of a lot further along than most at 19. I ran into similar issues when I was 20 but I had been building credit since I was 18 or so and was able to smoothly make my first purchase after I had turned 21 (22 now). When you are getting a traditional loan credit is a huge factor in your financial credit-worthiness. I ultimately started with a credit card which I fronted $2,500 dollars for a $2,500 dollar limit, I also added a new credit card to the mix every 6-8 months until I had 3 in total and as the others said, I cleared that balance out every month and never spent more than 15% of the overall limit, on average a good rule of thumb is not to use more than 30%, for the credit bureaus purposes but anything less is even better! After 2 and half years of doing that I was able to jack my credit score above 750 and have a total credit limit in excess of 5k. That allowed me in Texas to buy a quarter-million-dollar property granted I only had 20k in my pocket and I used the USDA no money down loan. For-sure if you are going to get traditional financing you need to build credit since they all decided that is a huge factor, but as we saw in 07-08 they threw that rule out the window and that didn't blow over so well for the US lol. Traditional financing is not the only method for financing a property like you mentioned you can get creative and go to a financial partner, and secure funding that way, that, of course, is going to be your quickest route but don't be surprised if you get turned down by quite a few people before you get a yes granted you don't have a whole lot to bring to the table other than your sweat and equity which is not to be discounted! Be sure to map the deal out from A-Z projected profits, expenses the whole 9 yards and have a full financial break down for any money partner. Since my first Traditional purchase (august 2018), I bought a property in August of this year with Hard money and just closed on another last week with Private money but I could not have secured my PML without presenting my numbers and showing that I have the witts to make the transaction move smoothly and be profitable for everyone. Make sure you know your #'s and lingo as well as understand them!!