Blog & Advice

Strategies for Investing in Single-Family Rentals with Less-than-Great Credit

Investing in single-family rental properties has long been one of the best ways to grow long-term wealth. But if you have less-than-great credit, you may be wondering whethe investing in real estate is a realistic option. Mortgage lenders aren’t always willing to lend to people with low credit scores. But there are other ways to finance an investment property when your credit score isn’t the best. These strategies can help anyone with less-than-great credit start or expand your rental property investment portfolio. For real estate investors, your credit score can directly impact your ability to qualify for mortgage loans at lower interest rates.

Your credit score is a number based on your overall creditworthiness. From a mortgage lender’s perspective, a good credit score is a sign that someone is more likely to pay back their loan. A credit score of 700 or above is usually considered good; anything below 550 is typically considered very poor. Still, if your credit score is not quite as high as you would like, it doesn’t mean that investing is not an option. Rather, you may need to use one of these creative strategies to buy your next investment property.

Try a Fixer-Upper

If your current credit score won’t qualify you for a quality single-family rental property, you may still be able to get a loan for a fixer-upper. Distressed properties are often sold well below their market value, sometimes making it easier to qualify for a loan. For investors who have home remodeling experience, this may be one way to buy a future rental property with less-than-ideal credit.

Ask a Friend or Family Member to Co-Sign

Asking a trusted friend or family member with good credit to co-sign your mortgage loan may help you get around the problems of a low credit score. A co-signer is someone willing to act as a guarantor of your loan. Their good credit could give you the boost you need.

Invest with a Partner

Real estate investment partnerships are one way to mitigate a low credit score. By pooling your resources with someone who may have better credit than your own, you may significantly increase your chances of qualifying for favorable mortgage financing.

Hard Money Lenders

If your credit score has put conventional mortgage loans temporarily out of reach, you might consider turning to a hard money lender for your next purchase. Hard money lenders are typically businesses that make loans at high-interest rates. They also often charge high fees, making them one option to use sparingly. But getting a hard money loan with a less-than-ideal credit score may be much easier than other types of mortgage loans.

Raise Your Credit Score

Perhaps the most important thing to remember about your credit score is that there is a lot you can do to improve it. A low credit score doesn’t need to be a permanent roadblock to securing mortgage loans. As you pay your debts and consistently make on-time payments, your credit score can go up. By using one or more of these strategies, you can invest in single-family rental properties with a less-than-great credit score. In fact, doing so may give you the chance to use your creativity and business acumen along your path to success. Would you like to learn more about how Real Property Management can assist you? Please visit our Why Use Us section for more information.

*Real Property Management is not a financial advisor. Options are presented for consideration only. Please consult local counsel and advisors.