Monday, June 18, 2012

Bad Credit Isn't A Death Sentence

Bad Credit Isn't A Death Sentence

Many potential new home buyers have been discouraged from purchasing real estate by the perception that those with bad credit have no ability to do so. While it can be difficult to purchase a home with a bad credit rating, it is certainly not impossible. What is true is that it higher fees and interest rates are the price potential home buyers pay for a less-than-stellar credit rating.

That is, that is true unless you are willing to be somewhat creative about how you go about a potential home purchase. The following are some tips designed to help even those with less-than-optimal credit own real estate while remaining flexible to creative situations that can sometimes circumvent the bulk of the negative aspects of bad credit.

One of the potential methods available to potential home buyers with bad credit is engaging in a rent-to-own or lease-to-own arrangement where a portion of the rent payment each month is applied towards a possible eventual purchase of the property. While this does not build up equity as fast as say a mortgage does, it does get around the problem of financing a home purchase with bad credit while still making headway on purchasing the home.

The down side of this type of arrangement is that those with bad credit may be better off working to raise their credit score instead of going through the process of hunting down a rent-to-own situation. Rent-to-own and lease-to-own properties are not nearly as common as conventionally financed properties, giving you a smaller group of homes to choose from for potential purchase.

As an alternative, some sellers offer their own financing options on properties for sale, circumventing the problem of banks and credit scores all together. This kind of activity is also less common than conventionally-financed real estate, but the arrangement as the potential to be beneficial for both parties, especially in a down real estate market if it exists in your area.

Generally speaking, your realtor will work with you in looking for a way to get you financed for a home that you are interested in. Of course, there are limitations and that million dollar home may not be a realistic proposition, but there are certainly instances when your credit rating will net you a home that you can love. If that process requires hunting down a seller willing to do their own financing or a rent-to-own situation, your real estate agent would be more than happy to go through that process with you.

If all else fails, work on small piece of your credit score to improve them and perhaps get financed for a loan and interest rate more accommodating to your needs. That could mean paying off debt on your credit cards or letting some credit inquiries on your record clear a bit before getting pulled again. Even if you do manage to find a home you can finance in the midst of bad credit, these are good steps to take regardless.

Many times, your concept of bad credit may not indeed be as bad as you think. Your realtor will also be able to tell you what kind of threshold is necessary to get proper financing for a property and just what steps you can take to reach that threshold. The dream of owning your own home is a common one and one that should be experienced by as many people as possible.

With that in mind, realtors and other real estate professionals would like nothing more than for everyone to have that thrill, so letting them work for you is a great way to get started on the road to home ownership.

This is another original article by Joe Lane, co-owner of The Lane Real Estate Team at Are you looking for an experienced Tri City WA Real Estate agency? With 20 years of service based, business experience, Joe and Colleen Lane work hard to serve home buyers and sellers for the Tri Cities of Washington's Kennewick, Richland, Pasco, and surrounding areas.

Are you a short term Investor?

Are You A Short Term Investor?

The world of real estate investing can certainly seem like a vast one full of many different types of projects and opportunities. That can certainly be true, but by asking yourself the key question of what kind of investor you want to be, you can cut through a lot of that material and focus on the activity that you will not only benefit most from, but will enjoy the most as well.

Asking yourself whether you are a short or long term real estate investor will go a long way towards determining the types of project you should spend your time pursuing and the kind of information you should be soaking up from as many sources as possible. For those that answer the question as short term, your primary purpose is to buy low and sell high, no matter how you get there. There are two main ways.

Put A Home Through Rehab
Perhaps the most common way to take a low-sale price home and convert it into a higher sale price home is through renovations on the property that add real value to the piece of real estate. You've no doubt heard of flipping homes or renovating homes and this is where those types of investors put their resources.

The draw for this type of investment just like any short-term investment is the prospect for a quick payoff. Indeed that can be the case but those pondering a pursuit of fixer-upper properties should keep in mind that it takes time and experience to get through a real estate transaction efficiently and first time real estate investors can be overwhelmed by the renovation experience.

The key goal here is to find properties that have the potential to sell for far more than their renovations might cost. That search is being done right now by hundreds of real estate investors in your area, so pinpointing the best opportunities can often be a difficult, competitive pursuit. It may be a good idea to partner up with a seasoned investor on a few transactions before setting out on your own to get the hang of renovations and the homes that are best suited for that kind of investment.

Find A Gem
Many real estate investors skip the renovation portion of the process all together and focus on properties that are undervalued on the market and could be resold almost immediately at a higher price. Obviously, these properties can be more difficult to find and the risk involved is usually higher because undervalued homes are usually undervalued for a reason.

One demographic that finds this type of investment particularly attractive is made up of committed real estate investors that also have a license to buy and sell real estate. One of the key barriers to reselling a home is the expense entailed in real estate commissions on both the purchase and sale of the property. For those that act as their own realtor, that cost goes away and the prospect of a profit increases greatly.

Short-term investments can certainly provide many benefits such as quick profits and the flexibility to quickly pursue other opportunities, but there will always be risks involved as well. If you want to get involved in renovating homes, make sure you do your homework and learn what to look for in a real estate candidate.

If hunting down undervalued homes is what you plan to do, think about pursuing a real estate license as well to cut down on the cost involved in the process. No matter what course you ultimately take, the key piece of advice is to become knowledgeable in the field before ever taking your first step. Real estate investors with the best foundation of understanding are more likely to build upon that and forge successful real estate investing careers.

This is another original article by Joe Lane, co-owner of The Lane Real Estate Team at Are you looking for an experienced Tri City WA Real Estate agency? With 20 years of service based, business experience, Joe and Colleen Lane work hard to serve home buyers and sellers for the Tri Cities of Washington's Kennewick, Richland, Pasco, and surrounding areas.

Lease Option Options

The Lease Option Option

The world of real estate investing is filled with mechanisms investors use to get into properties and turn a profit. As a new real estate investor, that avalanche of information can often seem insurmountable. Financing options alone on a real estate investment could take days to fully understand.

Nestled somewhere in that great array of information is the lease option, a mechanism used by some investors to get into a property quickly and with no down payment to speak of. It is a flexible solution to some investing issues and can provide a win-win situation for buyer and seller.

The basic form of a lease option dictates that a buyer and seller agree on a payment plan for a particular piece of real estate that includes the option to buy the property at some point in the future with a particular selling point. Should the buyer ultimately decide against purchasing the property, no harm is done and the agreement is simply terminated. However, if the buyer does decide to purchase the real estate, the seller is obligated to sell for the price and terms agreed to at the onset of the contract.

While this type of deal is not for every investor or every property, there are certainly some benefits. These agreements are often rapidly worked out, giving the buyer control of the investment property and the seller a monthly payment in short order. The buyer remains flexible in the investment, having the ability to decide later not to purchase the property and the seller benefits from that flexibility by keeping the monthly payments and perhaps keeping the whole property in the end.

The buyer benefits by escaping any sort of down payment to get into an investment property, only having to come up with the monthly payment. If the property is managed correctly, that monthly payment will come directly from the revenue seen by the property.

One of the most common ways this method is used is for investment properties that could use some renovation to ultimately command a better sale price. A buyer will enter into a lease option agreement, work on the home to improve its value and then pursue a separate buyer that will pay more than the cost of the lease option. With such an arrangement, an investor can turn a profit on a home he or she was never even the legal owner of.

Of course, there are some pieces of information to consider when deciding whether a lease option is right for your investing needs. The most important piece of advice when dealing with a lease option is to take special care when drafting the contract as it will largely determine whether your investment succeeds or fails.

Every lease option agreement will include a monthly payment amount, an option fee (a low amount paid to the seller to enter into the agreement much smaller than any kind of down payment), the option sale price and an expiration date for the agreement. You must decide whether you want to purchase the property or not before the expiration date or else the seller is freed from the obligation to sell. You can still make payments and enter into another agreement if the seller deems it worthy, but that obligation expires.

This is another original article by Joe Lane, co-owner of The Lane Real Estate Team at Are you looking for an experienced Tri City WA Real Estate agency? With 20 years of service based, business experience, Joe and Colleen Lane work hard to serve home buyers and sellers for the Tri Cities of Washington's Kennewick, Richland, Pasco, and surrounding areas.