@Adam Bartomeo
ugh...finally, they fixed that ridiculous verified email issue.
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Your blanket statement of your credit score dropping by 10% is absolutely incorrect. A portion of your credit score is dependent upon the amount of your revolving balance. Some folks might only use $10,000 while others might use $100,000. In my world, credit means nothing as I am considered high risk, even though my credit score is considered excellent. Funding means everything.
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Actually, no adam, Im quite correct.
10% of your credit is based on the collective average age of your credit score, with anything below 4 years is considered to be very poorly performing. If you open up 10-20 new credit cards ( with the average credit card balance) to meet the 100,000 balance requirement, you reduce your score by a numerical of 0s by X, where x is the number of cards, and then take all of those 0s, add them against the total number of accounts, total number of years, and you will notice, your average will plumet.
Assuming you have a FANTASTIC amount of balances, and average 10 with 10, you have an average of 10 years average. Now add 10 years to that, you now have a 5.
Now assuming you have impecible history, you get the 35% for your payment history. Now reduce your percentage of 30% for total available credit balance, which starts to decrease at 10%, not 30%, and subtract a portion of that, usually 3-5% at 11%, and increasing in loss of points per points above 11, seeing substantial drops at anything above 30%, and additional negative impact at 50%.
Now assuming you are at a loss of 10% for the average, you drop 85 points, because lets face it, not many people have 10 accounts for 10 years on average, the average person has 3-5.
Now assuming you lose another 3-5% at the lowest, with a more realistic loss of 10% for 30% of credit max, you actually reach roughly another 25-30 points, for a grand total of over 115-125 points.
Now assuming the average americans credit score is a 720ish ball park, you just dropped from a good credit score, down to high 500s, to low 600s.
Or in other words, a score that doesnt qualify for a home loan outside of FHA, which wont be friendly towards the concept of financing a second house for you.
As I said before, its not thinking far into the future.
A business should use substantial cash for initial down payments, and pursue regular arenas for buying their first houses, going after creative financing ONLY if ABSOLUTELY NECESSARY.
Otherwise, simply wait. Anything that goes south on you, for any reason, and you are already severely extended already. Any more stress may break you financially, and ruin you for a long time.
Once you open those accounts, you will be down a substantial amount of points for at least 4 years. Add a mortgage default, and a default on 10-20 credit cards, and you are toast for at least 7-10 years.
The risk simply isnt worth it. Not for purchasing real estate. The returns arent outweighed by the risk.
@Lee Scarlett
lee the difference between your situation and purchasing real estate with this option is when you buy a business, you are purchasing an income, where as when you are buying real estate, you are purchasing income POTENTIAL, and return POTENTIAL. That is a substantial difference.
A preexisting business has a preestablished history of financial performance over a long period of time. A house, unless its a previous rental property, doesnt.
Also, I buy businesses often, and spending 50k on a business would generally assume a loan @5-10% down, 20 at the most, with a value of anywhere from 250k to 1M, which usually Net 20-50% on average, so with a net of anywhere from 50k to 500k a year. Thats a good Net Income.
@Adam Bartomeo
