So you want to buy rental properties but either a have horrible credit or be you
don't want your credit being affected at all
hey what's going on guys it's Daniel one half of the Kwak Brothers and I
personally have bought single-family homes for plexes eight units and even
large apartment complexes using none of my own credit or actually even none of
my own money and in this video that's exactly what we're gonna talk about how
to buy rental properties without using your own credit or possibly not even
having your credit be involved but before we go ahead and get to that
content guys please subscribe to this YouTube channel and again share it as
much as you possibly can if you want we're actually gonna have a lot of
videos related to real estate investing in the future and also the past so if
you guys can subscribe you'll actually be getting a lot more information about
real estate investing beyond just how to buy properties using none of your own
credit or actually even none of your own money
so pretty much here's how I got involved in real estate so I'm sure you're asking
well Daniel how did you do it how did you buy rental properties without using
your own credit well truth be told I actually didn't have a choice right so
let me take you guys back about six seven years ago and I know for a lot of
you guys that may be a little bit more seasoned than life I'm not gonna use the
O word but for those you guys have even more season than life you guys were
maybe thinking oh my gosh you're so young you're a baby you're a kid I know
guys I get it all the time but let's let's go back about six or seven years I
was actually 19 years old and this is actually around the time I first got
into real estate investing at the time I had negative one hundred eighty seven
dollars and sixty-five cents in my bank account I had a maxed out credit card I
mean financially I just was not in a good place guys and maybe you're
watching this video and you're in a similar place well good news it if you
are well I have a solution for you and if you're not that's okay because well
if you can actually use the strategies that I use when I was in the situation
you can actually do it without actually being in that situation so that's where
I was I was nineteen years old I had negative one hundred eighty seven
dollars sixty-five cents in my bank account maxed out credit card one day I
heard about this real estate investing thing and well how did I hear through it
well I was actually online and for those guys that don't know I'm a huge and
diehard Chicago Bulls fan right I love the Bulls I go to a lot of different
games and I know you guys might saying the Bulls are sucking right now and yes
they are but you know what we're rebuilding that's exact
we're doing and well my dream ever since I was a little kid was to actually one
day be the owner so just like how Mark Cuban is for the Mavericks I wanted to
be that for the Chicago Bulls and I did a little research on who owns the Bulls
right now and it's this guy named Jerry Reinsdorf and I googled what did he do
you know how did he make his money and how did he make as well and I googled
that he's actually a CPA and an attorney but in his late 20s he started investing
in real estate so I was like oh man that's exactly what I got to do so at
age 19 I started looking around and my brother one night I actually dragged me
and I could you not dragged me to this seminar and I was like oh boy here we go
right and we sat down and for once in my life guys and I don't know how much you
guys know about salmon eyes background and upbringing but we weren't rich
exactly right matter of fact we were the complete opposite we grew up with a lot
of different financial hardships and difficult times you know especially for
our family and for the first time in my life as I sat there in that seminar you
know whether it was quote unquote scam or now whatever maybe you know it
doesn't matter the most important thing that night was I realized why my family was
the way we were and why other people drove around in Lamborghinis Porsches
and Ferraris and no I didn't go well it's all the system's fault if the
government could get their act together no obviously right I got to focus on the
things that I can change the posted things on the outside and the external
so I finally figured out why I started learning that you know people who make
money who invest they think differently they act differently and they put their
money and they're wiser and they're better stewards of it a lot of times so
I started learning about real estate investing I started you know studying my
butt off and I would wake up at 7 a.m. and go to sleep at midnight and the
whole time I will be focused on learning how to invest in real estate so I
studied I studied I studied and unfortunately there was one day where I
had a conversation with a commercial lender and there was a commercial lender
amongst a community of people that I saw you know once a week and I had a
conversation with them and I was so excited and by then I had learned a good
amount I watched a lot of YouTube videos I bought a lot of different courses I
read a lot of different books and I was pretty confident guy in my knowledge of
real estate investing but of course I still haven't done a single deal so I
was talking to this lender trying to pick his brain and trying to learn
more and by the time I got into the 15th minute of the conversation I think you
know I was extremely disappointed now why was I extremely disappointed
well I was disappointed because this commercial lender pretty much said
listen you're 21 22 years old what bank is gonna give you a loan it
doesn't matter how much you know about real estate investing you literally have
zero net worth you have no money and your credit is horrible I'm sorry to
tell you but you're never gonna do a deal unless you work a job you save
enough money and you get enough work experience and you build up your credit
and all these things that honestly took years and years and years for me to
accumulate for me to finally do my first deal and I'm not gonna lie guys I felt
extremely, extremely discouraged and maybe that's you too maybe you're watching
this video and you're like man I typed in the youtube search bar you know one
of the BI properties with no money no credit because I heard the same thing
right and guys again I felt discouraged and I was literally told by this guy
that I would be laughed at out of every single Bank because of who
I was and my financial assets and just my lack of overall bank ability so I was
discouraged and I like you at that point had a couple choices right like we do in
life in general my first choice number one was to take a job and do exactly
what this commercial banker said you know take a job work for a very long
time build on my credits save money enough for a down payment which the down
payment could be 30 40 $50,000 which I don't know how long that would have
taken me to save right but you know I would have to get a job saved up enough
money build up my financials and do all these things that honestly would have
taken me years before I could do my first property another one was to pretty
much use OPM which is other people's money now I'm sure that's what you're
thinking right now you're thinking well Daniel why don't we just do what you
talk about all the time which is for us to raise money and go out and do deals
well there's a problem with that I actually brought that up in the
conversation with the commercial banker and he says yeah that's great but we
would actually put you in a situation where the people who bring the money
would actually have to sign on the loan and not only that you being the managing
partner and then being the passive investor we would still ask for your
personal financial statement we would still ask for your DTI which is your
debt to income ratio we would still pull up your credit report and based on that
that may or may not change the terms of the deal to have it be more
disadvantaged for us or we might not even give you the loan at all so no
matter how I looked at it I was pretty much in hopeless situation and of course
the third option was to quit which I'm not gonna lie guys having traveled
around the country and met hundreds and thousands of aspiring real estate
investors I've met my fair share of people who are well liked I think I'm
just gonna quit I think I'm gonna continue to work I think that I just
this isn't for me I'm gonna go to day training or I'm gonna go to stocks
commodities whatever and guys I've seen a lot of that well fortunately there is
an answer and it's an answer that we talked about we've made tons of videos
on so fortunately for you you can actually check out all those other
resources by liking and subscribing to this video see what I did there now guys
the answer is pretty simple it's in the title its owner financing so obviously
we've talked a lot about owner financing in this channel before but for those of
you guys who don't know what owner financing is and maybe this is the first
time watching myself or Sam or any of our many other guests that we've had on
this channel but owner financing is a very very simple concept now if you were
to buy total property you would actually have to go to a bank and get a loan
right well in owner financing instead of you going to a bank you actually have
the owner almost be your banks they're actually going to finance you just like
a bank would and you're actually completely taking the bank out of the
picture now guys that is very very relevant
why does owner financing not involve credit well it's simple number one as we
mentioned already it does not involve a bank now let's break down what is credit
now when you think of credit you might think of the word credibility right and
it's exactly how credit works it's pretty much a score or a report for that
matter that pretty much tells you how reliable are you in terms of being able
to pay back loans that's exactly what it is right we have a credit card we used a
credit card alright and we swipe it and with the promise that we eventually will
pay that money back same thing was car loans with student loans and mortgages
all these things that affect our credit report or credit score so at the end of
the day banks use credit they pull your credit because they do one thing and one
thing only and as I mentioned in many other videos and even in our real estate
programs with our students the banks care about one thing and one thing only
and that's mitigating risk that's it at the end of the day if you
are risky they do not do business with you and let's think about how they give
out loans if you're a doctor making five hundred thousand dollars a year and you
have a high net worth you are seen as less of a risk as compared to somebody
like me six or seven years ago when I was talking to that lender at the time I
had no experience in real estate I haven't done a deal I had no money right
I had very horrible credit and I had no bank ability I had no financial so
therefore if things were to go south I was not able to come up with the payment
for the bank as opposed to the doctor who may make half a million dollars a
year I was a very high risk individual therefore the bank did not want to do
business with me so what does this mean right what does this mean in terms of
owner financing well in traditional ways of doing real estate right we go to a
bank we get a loan we pay for the property and the risk is mitigated by
the bank's underwriting process well in owner financing it doesn't exactly work
that way and in creative and owner financing instead of the risk being
mitigated by the underwriting process the risk is actually mitigated by
collateral now what do I mean by that well what I mean by that is in owner
financing one of the biggest benefits is that there's flexibility the business is
done between you and the seller and there's nobody else involved meaning
that if the seller wanted to mitigate that risk they can do it in many
different ways besides looking at your credit report or asking even what your
credit score even is they can actually do stuff like adding collateral which is
well if you default on the loan or if you aren't able to pay the mortgage that
month the seller in that case has the right to take the property back well you
might be saying well Daniel in that case you know what if the seller gets the
property back in really horrible condition I've heard nightmare stories
about owner financing where a seller sold the building and they get it back
five years later and you know the property isn't just in complete shambles
the carpets ripped off and you know the cabinets are all torn apart and there's
a pack of hyenas living in every single unit right I don't know guys I've heard
story after story and what I hear just doesn't fail to surprise me right well
that's actually when we move on from collateral to what is known as a
contract addendum the beautiful thing again about owner financing is the
flexibility so if I were to sell my property on owner financing and
you know the person was a little bit of a high-risk not only would I add in
collateral in terms of me getting the property back but I would actually add
addendum to the contract saying not only do I get the property back I get all the
payments that you know he or she has made to me so far and I also get to keep
the down payment but what I can also do is add an addendum saying that there is
an inspection that happens every single year to make sure the property is in
good terms that it's in good graces and that's what again the beautiful thing
about owner financing and that's how we can mitigate risk in an owner financing
situation as compared to getting your credit pulled at the bank for the sake
of instead of then you know mitigating the risk through their underwriting
process so again guys that's why owner financing as you've heard in many
different other videos in regards to real estate is one of my favorite ways
to acquire properties because not only is it great for many other different
reasons like such as recession proofing and ability to scale your business it
actually does not require for you to actually get your credit pulled or for
you to even say what your credit score even is you know it protects you in that
manner because well if a situation happens where you default on a bank loan
well that actually gets put on your credit report and it damages you for the
rest of your career that does not happen necessarily in an owner financing
scenario so again guys I hope you enjoyed the content in this video if you
have any questions comments or have any insight that you want to add on top of
what I already said I encourage you to comment down below that way we can all
learn from one another so again guys thank you so much for watching don't
forget to subscribe like and share and I'll see you guys in the next one