Do I Need Good Credit To Buy Apartment Buildings?

I received the following question via email recently and given the current financial environment, I thought I should try to shed some light on this very important topic.

Question:

I've heard a lot of people say I can buy apartments with no money down. If I can do that, how important is my credit? I don't have great credit and I'm not sure how that affects me. Can I buy apartment property with no money if my credit is less than perfect? Thanks Steve--I'm really enjoying the book. -Tom L***, Florida


Answer:

Tom,

This is a good question because the answer has changed somewhat. A few years ago you could buy apartments all over the country with little or no money and horrible credit, but times have changed. Lenders are licking their wounds. Underwriting criteria has tightened up a lot over the past 6 months to a year. A few years ago people with credit scores under 600 were still getting conventional loans. Today it's pretty tough.

The good news is banks are more forgiving with regard to your personal credit report when purchasing commercial property than they are when you buy a single family home. Lenders start by assessing the income and expenses of the property and then look at the borrower. If the property supports the loan (meaning the Debt Service Coverage Ratio using realistic numbers is favorable) and you have great credit your chances of securing financing are better than average.

For more information on how to find quality investments using various creative strategies, check out When, Where and How to Buy.

When, Where and How to Buy


Market Analysis

* 3 Basic Questions a Market Analysis Should Answer
* How Micro and Macro Economics Impact Real Estate
* How Understanding Market Cycles Will Make You Rich
* 4 Phases of the Business Cycle
* How the Real Estate System Works

Defining the Investor

* Investor Motivation
* 2 Fundamental Reasons Investors Buy Any Type of Investment
* 5 Major Constraints to Investing in Real Estate
* How Do I Know How Much to Pay?
* 3 Major Factors to Consider When Buying Investment Property
* 5 Different Types of Real Estate Markets

Simplified Economics

* Simple Steps to Discovering Top Markets to Invest
* Top 6 Variables the Impact the Rental Demand
* Easy Ways to Understand Supply and Demand Variables
* How to Determine Where the Market is in the Apartment Building Cycle

Profit Analysis

* 4 Major Categories of Seller Motivation
* 3 Ways to Maximize Profitability When You’re Buying at the Right Time
* 5 Types of Property to Avoid
* Questions to Ask Yourself to Maximize Performance of Your Investment
* Top Money Making Indicators and Why Other Investors Avoid Them

Finding Quality Investments

* Top Resources to Finding Money Making Opportunities
* How to Find the Best Real Estate Agent

Creative Ways to Buy Apartments

* Can You Buy Large Apartments With Little or No Money Down?
* The Pros and Cons of Leverage
* Seller First or Second Mortgage
* Partnership Opportunities
* Subject To Investing
* Master Lease Option
* Other Great Ways to Minimize Out of Pocket Expense