Defend Your Credit and Credibility
By Paul Esajian on December 4, 2013
The two most important assets you have as a real estate investor are your credit and your credibility. If you are not up to date on your credit report and items appear that lower your score, it can cause you to miss out on time sensitive opportunities. The same can be said about your credibility. If you are dependent on other peoples’ money to finance your projects, how credible you are will either allow this to continue or shut this source off. Once this source is gone and your reputation is dinged, it can be very difficult to restore it again.
Any way you slice it, you need money to get deals. This can either come in the form of bank loans or private money financing. This is the starting point for making money in real estate. If you take this for granted and let these areas slip, you won’t have a business to fall back on. Whatever the cost is, you should be receiving monthly updates on your credit report. If you catch errors and items that aren’t yours quickly enough, you may have time to take them off before they do damage. If you wait too long, it can be very difficult to get these items off and your score will take months to rebound.
You can negotiate terms of any private money loan, but once you accept the terms, you need to deal with them and honor them every month. Nobody wants to deal with someone that they can’t completely trust, especially when it comes to financing. Never move forward on a deal that you aren’t fully certain, or as certain as you can be, that you can repay the loan when and how you say you will. All it takes is one late payment or one bold face lie and they will never lend to you again.
Negative word of mouth always travels fast in this business. Once you burn one bridge, you can be fairly certain people in your local network will hear about it. If you burn one private money lender and you seek out another one, they will surely ask you questions about your past and whom you previously received loans from. They can find this information out through title and town hall documents, so lying to them would be pretty useless. The best thing to do is to be straight up with anyone you work with. Anyone involved in real estate for years knows that things come up out of your control all the time. If you are honest and upfront about what is going on they may not want to work with you again, but at least you will save face and they will speak highly of you to anyone that asks. This is an important asset that will come in handy down the road.
Unless you have significant reserves, you will need credit or access to capital to purchase properties. It is critical that you stay up to date with your credit report and you keep an open line of communication with anyone you borrow money from. Without this, everything else you do for your business won’t make a difference.