Friday, 20 December 2013

Personal Credit and Real Estate Investing Don't Mix

Are you using your personal credit to finance your real estate deals? I hope the answer is NO. This is a topic that I think everyone trying to start or has already started investing should know. Why, because I was a victim of it at the beginning of my investing career as well. Knowing what I know now could have saved me thousands of dollars.

Too often I here of investors using their personal credit to fund their real estate deals. At the beginning of my career I used my personal credit cards to pay for my business expenses, borrowed from my personal savings and checking account, and received personal loans to finance my deals.

I would be willing to bet even you have used one or more of the above financing methods for your investments. Why do we all make the same mistake in the beginning? Well because there are many experts, books and home study course that recommend people to use their personal finances to get there real estate business going.

If you use your personal credit to fund your real estate deals, you are exposed several risks. The first thing that could happen is your personal credit score can be lowered. When you personally guarantee any type of business related financing, the lender will require a personal credit check to be done. The key thing here is that every time an inquiry is made to your credit history, your personal credit score takes a plunge. Every investor knows that as your score gets lower the harder it is to go to banks to get traditional financing. Second, using your personal credit reduces the amount of credit available that you can use for your own use. As you tie up your personal credit your debt-to-income ratio will start to sky rockets. Which then will lower the amount of credit you have available for your personal expenses. The last thing that could happen is you could possibly lose everything you have. Since you have used your personal credit, if your real estate investing career fails everything else will crumble as well.

So my suggestion for investor is that receive a business line of credit. There are many companies out there that will walk you step by step to ensure that the process is done correctly. With business credit you can receive up to 1,000,000 dollars in credit!!!!!!!!!!!!!

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