Before you think about becoming a real estate investor, you should take some time to get your financial house in order, so that you are better able to proceed. If you have inadequate cash reserves, a low credit score, major debt, or intermittent income, all of these could come back to haunt you when you’re trying to secure an investment.
They will also work against you when you’re trying to obtain funding from a lender, so here are a few steps you should take to prepare yourself for becoming a real estate investor.
Optimize your credit score
When you are working with a lender to secure funding, one of the first things they will ask about is your credit score. The best way to maintain a good credit score is to pay down on any debt you might have, make sure your payments are all made promptly, and to have good available balances on your credit cards.
Establish good cash reserves
It’s essential for you to have some money in reserve so that you’re not living check to check, because that will definitely not impress a lender. Start saving money as soon as you can, and as much as you can, so that you can build up a reserve which is available when you have a business project you want to invest in. If necessary, you should consider taking on a second job to establish more income that will help you build up your savings much faster.
Minimize your debts
To really improve your financial health, it would be a good idea to pay off existing debt, and to limit any other debt that you take on. The point is for you to position yourself as a good prospect for a lender, and one of the things lenders look at closely is your debtload. Even if you can’t pay down your debts quickly, you should do your best to start whittling away at them, and reduce the total amount of indebtedness you have, so that you become more appealing to a lender.
Establish a steady income
If you can’t demonstrate to lender that you have a regular income, they will want to see a lot more cash reserve. Whatever your regular income is, you should solidify that income source and try to increase it if at all possible. If you have long-term contracts with business people, this will be a big help in establishing your income stability, and it will make you more attractive to a potential lender.
Funding for a real estate investor
If you’re thinking of becoming a real estate investor, but you need to line up at least some of the necessary funding, we may be able to help. Contact us at Business Capital Providers, so we can discuss some possibilities for providing you with funds for your next real estate project.