Why Bad Credit is a Good Thing

Debt PrisonI used to get houses for free.

Back when I was a real estate flipper, homeowners would deed me their homes and keep the loans in their names.  Crazy right?  I legally owned the home, and they legally were obligated to repay the mortgage.  The only thing on their minds….DEBT RELIEF!  And that’s what I gave them.

You know those “I BUY HOUSES” signs you see all over the place? One of them may have been mine.  Most of the time, the calls that I received were from distressed homeowners. Homeowners who had lost their jobs, gotten divorced, had unexpected medical expenses, signed up for mortgages they couldn’t pay, etc. They had fallen behind on their payments for one reason or another and they just wanted debt relief.

I would always have an exit strategy for each house I took on. If the property was upside down, it wasn’t a deal I would take. There was nothing I could do to help that homeowner.  I’d look for the ugly houses. The ones that needed cosmetic repairs.  The uglier the better.  I once took over a house with tadpoles swimming across the linoleum floor.  As soon as I had legal control of the property via the deed, I would come in and completely remodel the house, stage it and then sell it. The original homeowner would get instant debt relief when their mortgage was paid off. I would make enough on the sale to get back repair costs and then a tidy profit. The new homeowner would get a brand spankin’ new house and the neighbors would be rid of an eyesore.

With some of the houses I would have to make up late mortgage payments, so I would need additional funds. I also flipped a few raw land deals. For example, a partner and I once bought a lot for $50,000 and then sold it a few weeks later for $129,900.  I knew enough investors and the deals I would find were good enough that I could get private equity to fund these deals.  I didn’t have bad credit at the time but if I did, I would have been able to fund these deals privately on the sheer value of the deal itself.

See…that’s one of the advantages of having bad credit.  It forces you to get creative.  There’s an entire world out there based on creative financing. I’m not going to list all the methods here because that would be missing the point.  The point is that you can do a lot of creative things without financing.  And if you have bad credit, this can be a good thing. You can’t qualify for debt.

Debt is a crushing weight as powerful, if not more powerful than any physical weight.  Avoid it at all costs.

Car you can afford

I know someone who pays cash for everything. When it’s time for a new vehicle he goes up to the dealership and writes a check.  I used to think to myself, I could never do that. I’m barely getting by paycheck to paycheck.  I could never pay cash for a car. Until I lost it all and had to declare bankruptcy. One I got rid of crushing debt, I regained my life.  My mind was freed up. I was able to get creative and I built something (without financing) and then sold it for enough money to go pay cash for a car.

Don’t sign up for debt.  It’s a prison…and don’t become a distressed homeowner. In fact…don’t become a homeowner at all.  It’s called the American Dream because you have to be asleep to believe it.

And don’t take my advice. I’m wrong most of the time.

If you do end up taking on debt and lose it all like I did, I hope you come back to this post and I hope it gives you hope.  That’s all I want to do today. Give you hope.

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