Did you know that March is National Credit Education Month? Many times people don’t pay enough attention to their credit until they want to make a big investment, such as purchasing a home or a car.
The only problem with not paying attention to your credit score regularly is that it’s not something that’s a quick fix, so if you wait until you want to make a large purchase and your credit score is lower than what it needs to be, you take the risk of delaying the process.
This is why learning about your credit score and working to raise it on a regular basis is so important, especially if you have the goal of investing in commercial real estate.
Similar to that of a regular real estate purchase, such as a single family home, your credit will help determine the loan amount that you qualify for and what kind of interest rate you receive.
To help you understand the ins and outs of your credit score, in this blog we’ll be covering what qualifies as good credit, how to repair bad credit and what role your credit plays in commercial real estate investing.
You probably already know that your credit score is made up of three little numbers that can make or break a lot of things for you in life, such as whether or not you can buy a car, a house, obtain a credit card or be approved for any type of loan.
The number ranges from 300-850 and it’s calculated by three major components, including your payment history, the amount of debt you have and the length of your credit history.
There are different scoring models that may take other information into consideration, but generally speaking, here’s the ranking:
The goal is to get your credit score as high as possible so that it falls into the “very good” or “excellent” range.
With that said, as long as your score is 670 and above, borrowers will typically qualify you as lower-risk and you can still be granted what you’re needing.
Anything below 670 usually shows a red flag for lenders and it may be harder to receive the loan that you’re seeking.
If you find that your credit score is falling below the “good” category, there are a few things you can do to repair your credit and get those numbers rising.
One of the first things you’ll want to do is run a credit report. This will show you everything that is impacting your credit and could even help you identify any errors that might be negatively affecting your score.
If there are no errors, this report will allow you to see exactly where you need to focus in order to get your score on the rise.
Once you know all of the things that are affecting your score, you want to work hard to get the amount that you owe down and usually one of the best ways to do that is to pay off your credit cards.
Credit card debt has a huge impact on your credit score, especially if you’re using a large portion of your available credit. The faster you can get your credit card debt down, the faster you’ll see your score start to rise.
In addition to paying down your credit card debt, you also want to pay your bills on time, every time! This directly impacts your credit because your payment history accounts for 35% of your score.
This is why it’s so important to set up an auto pay or create some sort of automation for yourself so that you never miss a payment and take the risk of lowering your score.
Aside from paying down your debts and paying your bills on time, you also want to consider how often you’re applying for new credit. Many people don’t realize that when you apply for a credit card, attempt to buy a car or even get pre-approved for a home purchase, these are all hard inquiries on your credit.
A hard inquiry is a necessary step from lenders to pull your credit report to evaluate your creditworthiness, but it can also drop your score 5-10 points. Not only that, but it can stay on your report for two years, which means it will have a lasting effect on your credit as a whole.
Now that you know what qualifies good credit and how to repair bad credit, let’s get into how your credit score impacts your ability to invest in commercial real estate.
You might be wondering why your personal credit matters when it comes to investing and the short answer is because your credit essentially tells somehow how creditworthy you are.
And all that means is your credit helps a lender see what kind of reputation you have when it comes to paying back loans.
You see, when you’re investing in commercial real estate, it’s rare that you’re going to have the amount you need to invest sitting in your bank account. Instead, you’re probably going to need some sort of loan so that you can invest a certain amount and eventually receive an ROI.
And while it’s true that the overall financing process is easier when it comes to commercial real estate, due to the fact that these properties are viewed as less risky by banks, you as the borrower still need to meet certain qualifications – and your credit is one of them!
If you have a score that’s on the lower end, your first step is working to raise it to at least 680 or above, so that you can easily get into the commercial real estate game without having to fight high interest rates on your loans.
Overall, your credit matters for so many things in life, including commercial real estate investing, so it’s best to keep an eye on your score on a regular basis and consistently work to keep it in the “very good” or “excellent” range!
– The XSITE Capital Team
P.S. If you have a solid credit score and are looking to get involved with commercial real estate investing, we invite you to join our XSITE Capital Investors Club!
Did you know that 66% of Americans set new years goals that are directly related to their finances?
Whether it’s paying off debt, generating more savings, implementing a budget or investing, more than half of the U.S. population have made plans to adjust their finances in the new year.
A recent study has shown that even though these financial goals are still being set in 2023, 81% of people believe that inflation and the overall state of the economy will make it much harder to meet these goals.
As you set your own goals for the new year, maybe you can relate.
You might wonder how you’re going to generate extra money to pay off debt. You may worry that you won’t be able to stay within your budget due to the high costs of everyday living.
You might think that investing isn’t an option because you need every extra dollar after expenses to go towards your savings. Or you might just be overwhelmed with finances in general and aren’t sure which actions to even take.
If this is you, you’re in the right place! At XSITE Capital, our mission is to educate and encourage people to make decisions that are best for them, specifically when it comes to multifamily real estate investing.
We believe that everyone deserves the opportunity to learn and take action on the things that will better their present life and future dreams.
Last month on the blog, we addressed how interest rates, inflation and a possible recession can impact your commercial real estate investments so you can know what to expect with the ongoing economic changes.
With that, we also want to share three main reasons why commercial real estate IS still a good investment in 2023 so that you can take confident action as you work toward your financial goals this year!
The talk of a recession has been going on for a few months now and with a recession people tend to become very cautious about where they put their money.
This is totally understandable because you want to make sure you’re putting your money somewhere that is safe and will produce a quality return for you in the future.
While it’s true that a recession can negatively affect your investments, the good news is that when you invest in multifamily properties, you can rest easy knowing that your investment is protected.
Historically, multifamily assets have shown to be recession resistant because, at the end of the day, people always need a place to stay.
When a recession hits, there’s typically an influx of people selling their homes that they can no longer afford, which means that the demand for apartment rentals or other multifamily properties will see a significant increase.
This is good news for you as an investor in multifamily properties as this can boost the cash flow that you receive thanks to more tenants occupying the property.
Whether or not a recession will actually hit in 2023, we aren’t sure, but what we do know is that people are already taking precautions which means that the demand for rentals is already happening and now is a great time to get involved with investments of this type.
Many times when people think about investing, they jump straight to the stock market because they haven’t been properly educated on how real estate can be a quality investment as well.
The only real problem with solely investing in the stock market is that it can be very unpredictable and can take a massive hit at any given time, especially during economic downturns or world events.
Commercial real estate on the other hand has proven to be trustworthy decades after decades and remains fairly stable regardless of the economic state.
The main reason for this is because housing is and always will be a basic necessity that all people need. Because of this, you can trust that multifamily properties will continue to appreciate in value which ultimately means that you will receive more return on your investment.
This isn’t to say that investing in the stock market is bad. We encourage that too, but more than anything you want to make sure that your investments are diversified – meaning you have money in multiple places – so that if one takes a negative hit, you have the other to fall back on.
One of the biggest challenges that people often face in real estate in general is the ability to receive the funds they need to purchase or invest in a property.
This can become even more difficult when the economy is in a downturn because banks become more strict with their loan process and have more requirements than you might typically see.
While this can cause difficulty for you if you were to purchase a single-family home, there is a much easier financing process when it comes to commercial real estate.
Banks can confidently predict that the cash flow of a multifamily property with multiple tenants will be consistent and steady versus a property that only houses an individual or one family.
What this means for you as an investor is that the bank doesn’t look at solely your income to grant you the loan. Instead, they will look at the details, history and projections for the property so they can accurately gauge the return.
This is why getting involved in deals that have been thoroughly researched and scouted for you is so important and is the very reason that we take our property selection process so seriously at XSITE Capital.
Linking arms with an investment group that takes the time to ensure a property will be lucrative is your best bet to receive a healthy ROI and that’s exactly what we do through our Investor’s Club!
So, if you have big financial goals in 2023 and are looking for ways to make them come to life with ease, we invite you to join us.
When you join the XSITE Investor’s Club, you will receive:
Overall, we’re here to empower and support you in your personal journey!
Here’s to 2023. 🎉
– The XSITE Capital Team