Overcoming a poor credit rating

If you’re looking at property investment one of the biggest stumbling blocks that you’ll face may be your credit rating.  It doesn’t take much to get the odd smudge on your credit record – a missed payment or a lot of maxed-out credit cards.  It can even be something from your past that still shows up on the record.

This is one of the things that stops potential investors from getting off the starting blocks.  But it doesn’t have to – there are ways to circumnavigate a few blots on your record.

Before I go any further, I am not suggesting that you should take on any debt you can’t service, BUT there are ways to buy your first property and establish equity and give your credit record a positive boost.

One of my students had saved up enough to buy a small house outright and thought that would solve her problem.  But even with 100% equity in a property the buy-to-let lenders still focused on her credit record and didn’t want to play ball.

Mortgage lenders think that a poor credit history means you are unlikely to maintain their payments – and all they are interested in is getting their money back.  They don’t want the hassle of chasing bad debts, repossessing properties and all that goes with that.

Look at the problem from a different angle

If you have a nest egg to get started and can afford to purchase a property then look at the flip strategy as an option.  This means you buy a property, fix it up (sometimes not even that) and sell it at a profit.

It’s not unheard of for an investor to buy a property below market value (BMV), relist it for sale at an auction.  

If you’ve got cash you can purchase BMV as you’re in cash buyer territory and cash buyers never pay full rate.  Sellers know this and, if they need a quick sale they’ll usually drop the price.  Your job is to find motivated sellers – the ones who have a reason to get their property off their hands quickly or have a property that is unmortgageable (as long as you’re confident you can fix the problem to make it mortgageable).

Instead of letting the property, sell it for a property and move on to the next one.  Repeat the process and your nest egg will grow.  When you have enough to buy two properties, buy one and let it and continue to flip one.

The bridge to buy-to-let

There is another option.  Buy your first property using your pot of cash and let it.  Then use your equity in it to borrow up to 70% of the value from a specialist lender who will only be interested in the asset, not your credit record.

These are known as bridging lenders.  There are many different approaches, you just need to find the ones that work for your situation.  You can sell the second one for a profit and repeat as many times as it takes to build up the funds to buy another property outright.

Eventually, the blots on your credit record will expire and that means you’ll be able to get buy-to-let mortgages.  However, you may have a acquired a taste for buying and selling and the faster route to profits!

You can learn more here:

• Contact Kevin Wright over on his Facebook page.
• Browse the Recycle Your Cash online training library by clicking here.
• Attend an upcoming 1-Day Property Finance Masterclass event - Book in here.