![](https://biggerpockets.s3.amazonaws.com/assets/member-blog-image.jpg)
![](https://biggerpockets.s3.amazonaws.com/assets/logo@3x.png)
Investing With Less Than Perfect Credit
Is your credit perfect? Probably not, since most people don’t have that golden score of 850. But what if it’s nowhere near 850? What if your score is actually considered bad? Can you still invest in real estate? The short answer is yes, and we’re going to give you 5 different ways to do it.
But first, some real talk about whether or not it’s even a wise idea to invest in property when you have bad credit. The answer to this question is probably not, depending on why your credit score is on the lesser end of the scale. If your bad credit is a result of uncontrolled spending, this is probably due to an even larger problem within yourself, and the fact that you’ve fallen into a debt trap.
Now, we could go on forever about the debt trap and how easy it is to get stuck in that dangerous cycle of spending what you don’t actually have, but that’s a topic for another day. Suffice it to say, unless you’ve done some considerable self-reflection about your financial state and have cured yourself of negative spending habits, you probably should be focusing your financial resources on something other than investing. It pains us to say that, by the way, but it’s true. You need to fix the larger problem first, and then turn your attention to wealth building opportunities.
However, if you’ve already identified and remedied whatever it was that resulted in your poor credit score, then investment is a very realistic possibility for you. Since you probably won’t be able to secure a mortgage on your own, you’ll need to explore other avenues. Here are 3 of them:
1. Look into seller financing. This is where the seller agrees to allow you to make payments directly to him/her until the property is paid for. Seller financing works best when the seller owns the property already and isn’t making their own mortgage payment on it. In fact, that can be a dangerous situation which could result in a foreclosure, so make sure the seller owns the property free and clear before working out a deal with them.
3. Get an investment partner. Partnerships offer an excellent opportunity if everyone involved can bring something to the table. For instance, what you lack in credit, you make up for in time and skill. Your partner, on the other hand, may not have the savvy business sense you do, but their credit is great. Consider joining forces to create an investment team where you can both meet your goals.
3. Private money lending. Private lenders are just regular people who have extra cash on hand and decide to loan it out, oftentimes in order to diversify their own portfolios. If you’re interested in going this route, your best bet is considering someone you have a pre-existing relationship with, as complete strangers usually aren’t too keen on lending money to people they don’t know.
Remember, just because you can invest with bad credit, it doesn’t necessarily mean you should. Do some soul-searching to decide if real estate investment is really a smart move at this point in your life. If you believe it is, then try one of the 3 recommendations above, and you may just end up turning your whole financial situation around.
Comments