Don’t let bad credit or large down payments stop you from making money in real estate
by Maryann Reid
Real estate entrepreneur Lisa Phillips has built her real estate empire on homes purchased for $35k and under. She advocates using creative financing to buy houses in working class communities without a traditional mortgage, and also teaches others how to invest in lower income properties, pushing them towards earning higher income.
Here is her advice on strategies to safely invest in homes, even with less than perfect credit or no credit:
BE: What’s your real estate investment strategy?
LP: I focus on obtaining cash-flowing rental properties that cost under $50,000; this can be 20k with 15k in renovations, or 40k with 3k in renovations. However, all of them are in decent neighborhoods, with cash-flowing rents, and usually [located] within working class neighborhoods and communities. It’s affordable, bite-sized chunks of investing.
BE: How did you finance your first ever deal?
LP: My first deal, I lucked up on. I had previously purchased a very overpriced, expensive home, so I decided to purchase a lower priced, decent condo for 35k. I was surprised, but accepted that the neighborhood was really nice—up to a B class or even A class neighborhood. With rent from a roommate, it completely covered the mortgage and all utilities. This was during the 2009 to 2011 recession, so it was a scary time and jobs were scarce. But, low-priced real estate made it so I was very comfortable and self-reliant; [it was] a powerful learning lesson.
BE: Why are you interested in sub 30k market? What surprised you most, in a positive way, about this market?
LP: I was surprised (although, not really) that there were a lot of neighborhoods around the country that fit this description. The surprise came from all the “traditional” and cookie cutter advice from experienced investors, which only foretold doom, gloom, destruction, from this price range and the range of headaches from renting to “those types of people.” But, I was not so surprised, because I instinctively knew something they didn’t; I grew up in these types of neighborhoods, so sizing them up and being comfortable in them was as natural [to me] as being comfortable in a higher income neighborhood was for them. I knew they were, in large part, not knowledgeable about the culture and actual values of the people in the neighborhoods—an oversight I was going to profit from and show others that they can too.
BE: Can someone really use credit cards to buy a house? How?
LP: You can. There are a variety of loan products I’ve used to purchase and renovate homes—from personal loans, to strategic credit card use, and even equity in big ticket items like your vehicle.
Note: If you have bad credit, this is NOT for you—you’re going to dig yourself in even deeper. But, there are just as many people with great credit who know they have income coming in and the discipline to easily keep track of these business expenses.
BE: What are two to three tips you can give to a first-time investor who has little money, but is interested in sub-30K houses?
LP: You have to invest in your business. Also, you have to earn the initial capital before others will be comfortable loaning you money, although it is not as much as you think you may need—but we go over that when you book time to talk to me about your goals.
Lucky for you, that can be easily done within six to 12 months, and we’ve found some resources to do it. So, if you only have 1k to your name, shift your focus and timeline to six to 12 months out, while we focus on fundamentals. We’ll still get there; everyone can go at their own pace.
BE: What should a first-time investor consider–a single-family or multi-family home–and why?
LP: Either/or is fine. Multi-families are great, but it’s harder to find a good “deal” that does not take a large amount of cash to renovate and make it rental ready. It’s much easier to search and find a single family home of lower cost to acquire. So, whichever deal you come upon first while having the means to renovate and fix it up, go for that.
BE: Tell us how you help others get financially independent through investing in real estate.
LP: I offer a variety of ways for new investors to get their feet wet, with specific knowledge; not cookie cutter advice that says you should spend hundreds of thousands of dollars in an A class neighborhood for your first investment in places like D.C., N.Y., and C.A., where it is literally 300-400k for your first rental. That is a big step, if you’ve NEVER done this before.
I help people invest out of state, learn the fundamentals of what renovations to make versus what to pass on, dealing with contractors, analyzing homes for cash flow and investment potential, and generally avoiding 99% of the horror stories that I’ve encountered or spoken to audiences about. I find that people who utilize this go further in eight weeks than they’ve ever done in five or even eight years of researching. This is because the advice out there just doesn’t take into account personal situations or is too generic to help anyone feel comfortable going forward.
BE: What else would you like to us to know?
LP: I had a foreclosure about seven years ago. Because of that, I found that this market and price range was doable for many people, and this foreclosure did not have to own me or my results in life.
I want everyone to know that they can create their own vision of how they want their wealth goals to look, can generate a livable income within a few months that grows overtime, and profit by going into neighborhoods that have been overlooked. Embrace the fact that everyone is looking the other way (or even looking their noses down, in many instances) and learn a new skill set for real estate investing. This can help you beyond wealth creation; it can help with learning demographics, best business practices, and even understanding