9 Ways to Do a Deal with Bad Credit and No Money

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There are at least nine different ways you can do a deal with poor or bad credit.

Now before I give them to you, I want you to know that I’m really supportive of learning deal structuring. The first thing you need to do is “investigate your deal” to know what I call “where the bodies lie” in other words, what is the seller’s main objectives or motivation.

That allows, you to have an idea of what approaches are going to be compatible with the sellers needs, allowing you to do the deal.

Here are the nine ways that I’ve mentioned:

1.) Partnership:

Find a 50/50 partner. It doesn’t have to be 50/50; it can be what ever you can negotiate.

2.) Flip:

The best way to flip houses is to find a potential buyer first and then find a property. You can do this by running an ad on a property to see what kind of action you get. Once you have a potential qualified buyer, you’d be surprised how easy it is to find him a house.

3.) Lease Option:

Many times you can buy and sell with a lease option. We call this a “sandwich lease option.” I’m not going to go into any great detail, you can find this information all over this site.

4.) Seller Carry back:

This is one of–if not my favorite way to buy. Now the best way to use this system is to do a second seller carry back in order to give the seller some cash from the deal. If money doesn’t exchange hands, the seller may not feel that they consummated a sale.

Example: I find a house that has a small balance on the first mortgage. Let’s say the house is worth a $100,000; the balance on the first mortgage is $30,000.

If I wanted to buy this house for . . . let’s say $80,000, I could ask the seller to carry back $15,000 and go to a hard money lender to borrow 65% of AMV (Appraised Market Value), which is $65,000, and the seller carrying $15,000 in second position, would ad up to $80,000.

It would also give your seller $35,000 new cash, and $125 income on the $15,000 loan that they carried at 10% interest only for 5 years.

5.) Hard Money:

Hard money is an equity loan made at approximately 65% LTV (Loan to Value Ratio), based on the equity of the property only. Credit is not a consideration.

6.) Hard Money/Seller Carry Back:

Again, You can have the seller carry back a second and refinance the first, giving the seller some money. You can do variations of this system.

7.) Subprime Financing:

Many national lenders will provide financing at 70% with poor credit and won’t verify money down.

8.) Subprime/Seller Carry Back:

Again, this combination can provide money to the seller, rather than ask him to carry the whole thing.

Also there are local independent portfolio lenders as well as mortgage companies that will lend, and I always recommend seeking them out. National lenders would be Associates Finance, American General, Beneficial, etc.

9.) Create Your Own Mortgage:

There is a huge market of investors who buy privately created mortgages and trust deeds (often referred to as “paper”). Many investors like to buy real estate notes because they can obtain a very good return on their investment. Since the investment is secured by real estate, it is much safer than the stock market. Look in any major newspaper under the financial section of the classified ads, and you’ll see a column titled “Mortgages” or “Trust Deeds.” Many investors place an ad there when they want to buy private mortgages. People who want to sell mortgages place ads there too.

BONUS 10) Wholesale it:

At this point, you probably know what wholesaling is, or at least have an idea of what it is. If not, it is simply tying up a deal in contract and then assigning the deal to another buyer or investor. You don’t need any money and your credit has no bearing on the transaction. Example: You know of a seller who for whatever reason wants to sell quickly. You make an offer. Seller accepts your offer. Depending on the terms of your contract, you then proceed to assign OR sell the contract to another buyer at a markup, say $5,000 or even $10,000. I’ve seen wholesale deals be assigned for double, even triple digits, if the numbers make sense to all parties involved. Crazy, but true.