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Newbie needing guidance and advice


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Hello Hubbers,

 

I'm an excited, cautious, optimistic, newbie here, and loving what I'm seeing so far.

 

I'm already working my way through the many ace podcasts, blogs, tutorials, vids, plus anything else I can get hold of to learn more about property investment.

I've read/listened to many audio books on the subject up to now, and plan to keep the learning going before hopefully making the jump next year. I've gone from books that are essentially just an up sell to property investment courses promising you the world, and of course Rob D's excellent (and more realistic) investment books too.

 

To my main point, and questions - I was wondering before I do get my hopes up for a future in property. I am basically a lender's worst nightmare - A bottom feeder when it comes to borrowing. A very low credit score, thanks to a few hiccups in life, as we all have now and again. I'm also currently a self-employed (but contracted) freelancer (again, banks hate that). It's great when you have an accountant that manages to squeeze your books to your advantage, but the flip side of that is lenders think you're on the bread line.

In my favour though I'm currently trying various things to re-build my credit: cards, phone, etc. No Bankruptcies or CCJs and everything paid on time, plus I have about 85k equity in my house that I'm looking to unlock (once I have the bottle!) to invest to get things going. At this early stage and referencing the Rob's advice so far a flip may be a good place to start and build up from there.

 

Has anyone here managed to get things going from literally a bottom level start? Is it do-able? I know with hard work anything is possible and I'm under no illusions that it will be easy. Blimey, it was tough enough back in the early 00s getting a mortgage and that was when the banks were throwing money at people! Perhaps a better plan would be to set up a LTD company instead and start from there? Any advice would be welcomed, and I'm looking forward to learning more, and hopefully earning more by getting things going.

 

All the best and thanks in advance!

 

PAUL

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Afternoon Paul, 

 

Great to have you on the forum and glad you're enjoying and making your way through the podcasts, they have been and still are an invaluable source of information for me! You can stay up to date on the market and changes in the law by just listening to their podcast. They manage to cover all the info you need... Trust me I've been on some expensive courses run by some rather dodgy companies that basically tell you the same information as what they tell you on the property podcast. 

 

I'm not a mortgage broker, so I don't want to give any specific advice on what you can and can't do, but from my point of view and knowledge base there are lenders out there for everyone and I suspect your circumstances aren't that unusual. 

 

I think @bridging expert or @richard brown would be good people to ask. They give great advice on mortgages etc and will have a better understanding of what criteria you would need to comply with. 

 

Looking forward to seeing what they recommend. 

 

Cheers

 

Phil

 

 

 

 

 

 

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Hi Paul 

 

The 'bottom-feeder'; surely you are being humorous or at least self-effacing...but if not DO NOT PANIC!

 

Thanks to Phil for tagging me in. However, to clarify, I am not a mortgage broker either, so all I can share with you is some hints and tips based on general experience, some personal through a career in financial services, property investing and in the past, some financial challenges too, along with from other people I work with or alongside.

 

So, one of the first steps is to understand your current position, which it sounds like you are doing. Get hold of your credit reports, from each of the main credit reference agencies, of which there at least 3 (Experian, Equifax & Call Credit plus a free one called Noddle). Make sure you do apply for each of them as some record different things from different institutions; you are entitled to get a 'statutory copy' for £2 the last time I checked (I have a subscription now). Also, search for and apply for your National Hunter profile (c£10 from memory), which most people have never heard of them and so is the lending market's biggest secret, more on this from an old blog post here: http://www.thepropertyvoice.net/the-secret-credit-reference-agency-big-brother-is-watching-you/

 

Next is to repair or correct any mistakes or errors that exist. For example, I had a false address connection that I needed to remove from my report, which could have potentially and wrongly linked me to some dodgy drug dealer or something! If you have any outstanding defaults or judgments, then make a plan to clear them. If you did have any and they have now been cleared (or will do) then get a 'satisfaction certificate' and make sure it is correctly recorded against your credit report too. If you have large debts, an IVA or that sort of thing, then the 'snowball method' can help to sort them out. This is where you throw extra money at one debt in particular, usually the one with the highest interest rate, the largest monthly repayment, or even that you can pay-off the quickest. With a little effort, you will be able to take a bite out of this and then move on to the next one, which creates the snowball effect, accelerating as you go.

 

You make a good point about some so-called credit repair tactics, such as having smaller credit / payments that will help you to show a better payment record and money management skill. Also, keep in mind, that bad credit has a 6-year shelf-life (10 years for bankruptcy), so it should fall off your report after this time PROVIDED the account has been settled or brought back up to date. Time is a great healer with credit histories, so if you struggled back in the early noughties, perhaps things look better today...

 

If once you have started all this and you feel as though things are stabilising, start to have some savings, no matter how small as lenders also like to see some savings discipline too, but debt pay-down is the main priority I accept. Avoid using all your credit limits and where possible keep their unsecured debt balances to 50% or less of the available credit limit. A useful technique here sounds counter-intuitive and also requires great self-control, so tread carefully! But, if say you have credit cards with balances of £6k and a total limit of say £8k, clearly this suggest that you are using 75% of your available credit limit. However, if you get another credit card with a balance of say £4k and DO NOT USE IT (or switch some of the existing balances across before cutting the card up!), then you will be using 50% of your available limit with the same debt, which improves your score usually.

 

So far we are only talking about credit repair and consolidation. But if you speak to a decent mortgage broker, especially after you have got this far and everything is more under control, they should be able to tell you if you qualify for lending with certain lenders. Just like in love, there is 'usually somebody for everybody' out there ;) Some lenders specialise in 'adverse credit' or 'sub-prime' lending and believe it or not, some short-term lenders do not take up a credit reference either! I am not saying you will get the best rates, but you still get lending is all.

 

Then, there are some alternatives to mainstream High-Street Bank lending too...options, installment contracts, non-status lending / bridging, developer & vendor finance, JVs, private lenders and so on are all out there if you look deeply enough. In fact, check out series 3 of The Property Voice Podcast for all you can eat financing options from here onward: http://www.thepropertyvoice.net/property-financing-introduction-s3e01/

 

In summary then...understand and control your credit position, understand what lending options exist based on your credit rating and also explore alternatives to the obvious and mainstream. Finally, please note: I am not providing any financial advice here, just in case that was not clear. So, do not get another 6 credit cards and take out a pay day loan from a loan shark to go and buy a property, as it probably won't end too well!

 

Hope that helps!

 

Best

Richard 

Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

10%+ ROI property deals every week: check out PROPERTY DEAL TIPS
Amazon best-selling author Property Investor Toolkit & #PropTech, YPN Magazine columnist & PODCAST host

Web & Blog: The Property Voice | Curated property news & insights feed

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Let's connect...mention The Property Hub :)

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Ace, thank you for the advice chaps, seems like all is not lost and there will definitely be some options out there for sure.

Certainly seems a lot more choice compared to when I first mortgaged nearly 17 years ago, and like you say it's a case of digging for the alternatives.

Good call about the repair ideas too: spreading the credit card balances, squirrelling savings away and generally showing some money sense to potential lenders. 

Great stuff, thanks again!

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