The Pros & Cons

[Ray Agosto]

I wanna start buyin & holding properties, but of course I don't have great credit so I wanna obtain via Owner Financing or Subject 2. Now here is where i need help and advice ? What's the difference and the difference in pros & cons ?

[David Dachtera]

@Ray Agosto and @Account Closed,

Ok - you're pretty good on seller financing. The seller "carries back" a note and you secure it by giving them a mortgage or trust deed, depending on your state. 

"Subject to" means taking title to a property "subject to" the existing financing. Basically, the seller deeds the property to you, and you make the seller's payment with out getting new financing. That works so long as everyone is on board. The seller has to trust you to not ding their credit by missing payments. You're also dependent on the lender to not call the loan should they discover that the title has changed hands. Most lenders only care about whether the payments are current, but there are exceptions.

Business credit is whole topic unto itself. I don't have anything formally prepared, but look in the list of podcasts here on BP. Maybe someone has already done that presentation.

Here's the thumbnail sketch ...

Each entity needs a "DUNS" number - a Dun & Bradstreet number. It can be had for free, but their people are trained to sell stuff. Beware.

Start out getting "Net-30" credit lines with vendors like U-Line, Quill Office Supplies, Grainger industrial supplies, etc. You need five to seven such lines reporting for a minimum of three consecutive months to establish credit with D&B. D&B has a score known as "Paydex" which is a measure of your timeliness in making payments. Paydex 80 means you pay as agreed. Pay earlier, get 90 or 100. Pay late, get 70 or lower. The other two business bureaus are Experian for Business and Equifax for Business. 

After not less than six months, start shopping for business tradelines at vendors like Home Depot, Menards, local lumber yards and hardware outlets, etc.

When your entities have about a year of credit history, start looking for business credit cards if you're not already getting stuff in the snail mail about it.

Like anything else, getting started is like pushing a train. Once you have some momentum, things go a bit easier. To continue the metaphor, a train wreck, of course, stops everything and there's lots of cleanup before you can start over.

Dunno if that helps.