How do we get the funding for real estate? We talked about 401k’s. What can you do to increase your 401k’s? First, contribute more. Second, just start borrowing money against this so you can have it readily available in your savings. It’s a very reliable way to book that up.
Now talking about savings, that doesn’t defer much either. You’re going to have to carve out additional money from your paycheck, maybe cut eating out, maybe cutting out on things that you will typically buy for pleasure, like a bottle of wine over the weekend or like eating out with your friends.
Again it’s also slow. How much can you possibly put in? Like $100, $200? Only you know your numbers. However, credit cards, this is my favorite out of all the fundings. Why, because they’re so many ways that you can utilize that in a very creative way. Again credit cards are not meant for you to buy that lovely handbag, that nice pair of designer jeans, spending $200 on dinner, eating out with friends, or drinking the night away.
No. You can do it when you have the money, but not when you’re trying to build your portfolio and increase your net worth. Credit cards, I utilize credit cards in my closing a lot, and there are so many ways you can milk it and get cash out of it.
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Credit Score
To start, you need to know where you stand with your credit. Create an account at Credit Karma. Credit Karma monitors your credit history. There are two types of credit score that the lenders use.
One is the FICO, which most of us know, and then the other one is the VantageScore. The FICO score is based on three credit bureaus. You have Experian, Transunion, and Equifax. The other one is Vantage, and it’s based on five bureaus.
What you need to know in this case is that Credit Karma leverages a lot of the VantageScore, but believe it or not, they’re not so different from FICO. Depending on the banks, some banks utilize the FICO score. Some other banks leverage the VantageScore. The most significant difference between these two is that the VantageScore will be off by somewhat between 10 to 15 points.
Let’s assume an example if you have a credit score of 620 as a VantageScore in Credit Karma and FICO, and it’s going to be somewhere along 610 or 630. It’s pretty close. It’s not going to guarantee what your score is like, but it gives you an idea of where you’re standing, and I think that’s more than enough.
Now you know what your credit score is like, and you can do it for yourself. You can teach your friends to do it or your loved ones, family. Everyone deserves to know. Everyone should know what their credit score is without having to pay one cent for the service.
Improving your Credit Score
Now, if you have credit cards, some of you are thinking, “Oh great, I can just leverage what she’s teaching us and then just continue to build credit,” or you can be in a position where you’re saying, “Oh, I don’t have any credit. How do I get started?” Don’t worry. I’m going to teach you how to do that. For now, we’re going to focus on those users that have credit.
If you have a credit score somewhere around 620 to 750 plus something like that, the good news is you can jump this up in less than two weeks. Here’s how you’re going to do it. One, you’re going to open more credit cards. Yes, I know it sounds very counterintuitive, but you’re going to open more credit cards.
The myth about credit cards is that if you inquire about a credit card application, chances are you’re going to get a hard inquiry, and your credit will go down. That’s true! It’s going to go down by one or two points. Big deal, right. One trick that most people don’t know is that if you open two to three credit cards in one day, the credit bureau will not pick up on it right away.
Your credit will go down no more than five points in one day, taking an average of two points per card. Once you open those cards initially on that same day, your credit score will go down by about five or six points. I’m sure you’ve had about the term credit utilizations. Most credit card companies want to see that you have less than 20% debt in revolving credit. By revolving credit, I mean credit cards.
It is assuming that you have a total credit line of $10,000, and you currently own $2,000 out of the entire $10,000. That means you already hit that 20%. If you go anything higher than this, your credit score will go down, but with the beauty of opening up more credit cards, let’s say you go from $10,000 to $20,000 all in one day, but you still owe $2,000. If you increase your total credit line from $20,000 to $2,000, your credit card debt will go down to 10%.
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That’s going to make you look outstanding. What do you think is going to happen to your credit score? It’s going to go all the way up. Once you open, it will go down on the same day, two to three points. Give it a week or two. Then your credit score is going to go all the way up by 10, 20 points depending on the number of credit cards you get approved on the same day.
Now, remember the trick is to open no more than three credit cards in one day. I did this by mistake, and I went on a rampage, and I opened like seven in one day, and my credit card looked like roller coasters, and a lot of the banks wound up calling me thinking I got my identity stolen. Don’t do that. You don’t want to raise any suspicions of any weird behavior.
Just do three credit cards at a time and then every four to six months, go ahead and apply for more and that’s how you’re going to increase your credit line and your credit score in a very effective way. Now the good news doesn’t end there. Now I’m going to show you how you can get money out of it.
Venmo
This hack landed by accident, not knowing what I was doing. I needed my sister to do me a favor. There’s a service called Venmo. Paypal owns it, and you can download the application. Venmo is Facebook for money. Everyone is connected depending on the bank you have, and you can send money and wire money instantly from one person to another.
I had my bank account, and I had one of my credit cards recorded as part of the payments that I could leverage whenever I needed to pay somebody. My sister asked me for $300 or something to fix something in the apartment that I was renting. I sent her a check, and I thought that wouldn’t get the money right away, so I did that through Venmo, what I did I wire her $300, using my credit card at a small fee.
I think that Venmo charges 3% if I’m not mistaken. Automatically gave her $300 from a credit card, which is way better than taking a check for those cash advances for over 20%. I’d rather pay 3% versus 20 something percent in a credit card. Then once I learned that trick, I started taking large sums of money so that I could start getting more cash into my bank accounts and have it readily available for my next property to buy.
With Venmo, when you set up your initial account, you have to start slow. $300 for a week or two, maybe, and then you do multiple transactions. You can send the money to your spouse, a good friend who will give you the money back in cash. Once you’ve set that account and you’ve managed to use it quite often, but then I’ll say within three weeks or so, you can bump up the money transfer to $3,000.
You can do $3,000 a week, and if you multiply that by four weeks in one month, you can get $12,000 out of your credit card in one month. That’s enough money for a down payment. That’s enough money for a closing cost, whatever services that you will need assistance. Let’s say if you’re flipping a house, buying construction materials and stuff like that, if you need to buy it cash. It is excellent money that you can get ahead of time. Now, you’re probably thinking, how does it going to impact my credit?
Yes, your credit is going to go down. Still, I thought that the whole point was to help you get enough cash in advance and buy more real estate. Hopefully, as soon as you close, you started getting rent, and with that rent or with the flipping money, you can repay down that credit card or just simply pay down your mortgage.
Plastiq
Now, my next favorite site is a place that’s called Plastiq. You’re going into plastiq.com, and Plastiq works like some kind of a bank for you. They pay checks on your behalf. What you can do, you can open an account, and you’re going to register your credit card, whatever number of credit cards you can have. You’re going to start scheduling or naming what they call payee, I think, and you can actually add your landlord as a payee and upload a copy of your lease, and then you can have this service pay your rent on your behalf by your credit card.
The beauty of this trick is that let’s say: Your rent is $1,300 a month. Instead of using the cash that you will typically use to pay for your rent, you can put that cash away into your savings account and then have your credit card payment that $1,300 on your rent while you stash that money at the site, waiting for the next few to come. They’re going to charge, I believe 3 to 5% depending on the amount, but hey, again, don’t get greedy. Don’t get too focused on this 3% or the 5% that you’re paying. Your ultimate goal is to save enough cash on the side so you can buy your next property.
Lenders
Last but not least, another quick way to make money or to raise more funds: Lenders. Now, I know dealing with lenders is not necessarily fun all the time. It requires many social skills, a lot of public speaking, and for most of us, we’re not very savvy at it. Most of us prefer to stay in our comfort zone and talk to our friends, but whether you like it or not, real estate is a relationship-based business that you’re going to have to learn how to socialize with people.
Ways for you to approach lenders are to go to a local realtor. Believe it or not, local realtors not just for real estate investors to exchange ideas and stuff. Many hard money lenders attend these events, and a lot of lenders show up to these events. I met roughly about four lenders, which I still keep in touch with via email, after that first interaction. If you don’t know or are terrified to speak in public, you need to work on that.
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There’s no easy way to go about it, but I can share some tools and programs you can leverage. One, use your cell phone, whether you like it or not. Many of us love to take selfies, so instead of using your phone as a way to take selfies, use it to help you grow. Put it on top of a table, closet, whatever high scene you have, and start filming yourself so that you talk. The more you do it, the better it is.
It’s going to get uncomfortable initially, but believe me, you’re going to thank me for it. Then if cell phones are simply not enough, if you want more human interaction, you can go to a program that’s called Toastmasters. I was a timid person, and I have no problem being alone, just locking myself in my circle, but I realized that that wouldn’t help me go anywhere. Toastmasters changed my life.
They have chapters in all 50 states. All you’re going to do is just to go online and type in the word Toastmasters. I think the website is toastmaster.com, but don’t quote me in that, but if you do a Google search using this term, you will find that. They have local chapters everywhere, have it in local schools, have it at your job. Believe it or not, I had it at my job, and basically, the way Toastmasters work is that they have a series of modules that will help you build up your public speaking skills.
It’s not like you’re standing in front of a bunch of strangers. You’re presenting your speech in front of other people in the same situation, in your same shoes, learning, petrified, tried to speak in public, and to evaluate one another. You do have people at different levels. Some people are more advanced than others, but that’s the whole beauty of it, right?
Like you socialize and network with people that have the same pain points that you have, and at the same time, you’re not only building relationships, but you’re also building upon your skill. Once you develop that, you can smoothly go to those local realtors, interact with people, talk to them, walk them through what you’re trying to do, don’t lie, just be honest, “Hey, I’m a real estate investor. I’m new in the area, but I’m working in this…, and this is how I do research.”
When I first approached those lenders, all I had to do was just walk him through how I got my first property and what were some of the things that I considered while I was doing my search, like location, the average return on my rent, cash flow and how I plan to manage that. The best place to sell to people is by explaining to them how you will do things without sounding salesly. That’s how I do it.
Once people can visualize, or at least imagine what you’re trying to explain to them in their head, you got that deal locked. You have that lender who’s willing to give you the money. All you have to do is just do your homework and find the next available property for you.
RESOURCES & LINKS MENTIONED IN THIS ARTICLE:
– Credit Karma: https://www.creditkarma.com/
– Venmo: https://venmo.com/
– Plastiq: http://bit.ly/plastiq-re
– Toastmaster: https://www.toastmasters.org/
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