New Real Estate investor w. terrible credit...where to starts??

[Don Draper]

I am in the Tampa bay, FL area. I am looking to invest with the BRRRR method. My goal is to create affordable housing for the elderly. I am looking to use an LLC. and I understand that it will take some time to build a strong business credit score, however, my personal credit score is somewhere near 550. How can I get into the game in less than 6 months with a low credit score? Where do I start, what is my real time line? How difficult is it to find a quad or triplex in Tampa that can be house hacked? What areas of Tampa bay are good for purchasing quad or triplexes?

[Erik W.]

@Don Draper, hi and welcome.

Okay, let's start out by clearing up a few things about "business debt".  First, you are not going to be getting "business credit" any time soon, and maybe never.  In almost every case involving real estate purchases, you will be required to sign a personal guarantee for any debt, so if the business goes broke you still have to pay with your personal assets and any deficiency will wind up on your credit report.  This is standard practice for most small businesses.

"Business credit" where individuals are not liable if the business goes bankrupt is for multi-million $$$ companies that have been around for decades and own vast amounts of real estate and inventory that can be used to secure the loan. It is not for Ma and Pa real estate investors who have no credit, no assets, and no track record in business. So don't worry about getting an LLC just for getting loans. No banker with an ounce of sanity will loan $ to an LLC without demanding that you sign a personal guarantee. Sorry to burst your bubble, but better to know ahead of time how this works.

Now that we've got that all straight, here are some options.

1) Don't use banks.  Look for private money partners who will fund acquisitions based on the DEAL, not your credit score.  Think doctors, lawyers, successful small business owners...people with lots of cash sitting around but they don't trust the stock market.  You will have to ask a lot of them to find the one who are open to this.

2) Use a lease option to gain control of a property and sub-lease to a tenant.  Then if the owner wants to sell to you, they might carry the note.  Again, credit score is mostly irrelevant here: how much trust you build with the Seller will be important.

3) Find a group of investors and bird-dog (hunt for deals) for them for awhile.  If you can find out what they're looking for you can bring the deal to them.  The best bet here is to talk with older land lords who are wanting to cash out their holdings and will sell bulk packages of homes for a discount.  You bring the discounted deal to the investor group and negotiate to where you get either a nice finder's fee or maybe even get to keep one of the houses for yourself free and clear.

Good luck!