This current market opens up the possibilities for property owners, or aspiring property owners to make it big. The market has housing prices at an all time low. In the last 2 weeks I’ve seen 3br 2ba townhouses selling for less than $95k. Additionally an eleven (yes, I said eleven) bedroom house in foreclosure listed for $159k (it sold the day after it was listed). Another example is a 5br house for $129k. These are just the ones in Southern Oregon that I found. If your not familiar with home prices in Southern Oregon, I can assure you those are all absolutely smokin deals!
What does it take to get those properties though. That’s where so many investors are running into trouble. Conventional lending is shot. Let’s face it, although every man and woman in the US just donated roughly $7.000 to finance the “mortgage bailout”, all the banks have done is buy up other banks with that money and it has not loosened up lending restrictions. Quite the contrary really. Lending restrictions are tighter now than I’ve ever seen. A+ credit is no longer 720+. You need 760+, and in some cases 780+ to get a lenders best rate. While the richest people get a little richer, the average investor’s life becomes a little harder.
Aside from the tips everyone knows about (don’t pay late, etc); here’s some tips to improve your credit, and maintain it.
- Make sure your credit cards are increased to their maximum level. Your credit line with the major banks should equal 25% – 35% of your annual gross income. If your limit is not there, call them and ask for a credit increase. The most compelling line I give is: “I’d like to see my credit line increased. Frankly, some other banks have given me larger lines and so I carry their cards in my wallet so I’m prepared for a large purchase. Your card only offers me $x and therefore it’s not as valuable to me”. I’ve yet to be turned down for a credit line increase with that reasoning. If you don’t have a credit card with a higher balance than the one your asking for an increase on, come up with another reason, don’t fib.
- Use your high limit cards, even if it’s for smaller purchases. Cycle the card in your wallet every month or find another way to cycle them. The reason for this is banks, even the larger ones, are reducing credit lines automatically. Amex has recently sent out thousands of letters to consumers stating their credit line is being reduced because they believe the consumer does not need that high of a line. If this happens to you, your credit score will take an immediate dive because your ratios of used credit to available credit will go down.
- Pay down your revolving lines. If you have any home equity or 2nds that are considered a revolving line, I suggest paying them down as quickly as you can. Get them below the 50% level so they are not negatively impacting your score. Your conventional loans don’t matter. A 30yr conventional loan, regardless the balance, will typically improve your score.
Aside from these items, keep your expenses low and income consistent. A good way to reduce your expenses immediately is to begin managing properties yourself. Also use a free property management software to manage those properties with minimal effort and time. A lot of people predict tough times ahead and it is best to prepare now. For those prepared, there will be abundant opportunities for property owners and the like to do very well.