Financing Your Real Estate Business with Establish Business Credit
I never watch 60 Minutes but I was trying to get my TV antenna to work (free over-the-air TV) and found the episode on Artificial Intelligence.
Kai-Fu Lee, author of AI Super Powers and who was an Executive at Google, Apple, Microsoft, etc. says that 40% of all jobs lost to AI in 15 years.
Your goal should be to never be an employee again. The way to do that is to own your own business. One better is to own your own passive income business. One that makes you money if you work or not.
That is why we invest in real estate rental properties.
Rental properties makes you money in 6 different ways.
Monthly Passive Income
Passive income from the monthly rents. I teach all my students how to make a minimum of $250 a month in passive income from each and every property they buy. That is $3,000 a year in passive income. If you had 10 properties making you $250 a month, that is $2,500 a month and $30,000 a year in passive income!
Equity Capture when we buy the property. Because we are investors, we never pay full price. If a house is worth $150,000, we buy it for $120,000 and make $30,000 in equity because we buy the property right.
Forced Appreciation when we take ownership of the property. This is where we would spend money to fix up the property to make it worth more money. $5,000 put into a rental property to fix it up could increase the value by $15,000. That is another $15,000 you made in equity.
Market Appreciation over time. Just like every property, you property is worth more every year as the market goes up over time.
Tax Deductions and Benefits
Tax Benefits every year. There are MANY tax benefits and it is as if the tax code was written just for us investors. Everything from 1031 Exchange to defer your taxes, depreciation where you right off the purchase from your taxes over 27.5 years, to flying to Hawaii to look at properties and have the trip as a business expense.
Mortgage Paydown over time. Your tenant pays you money in passive income of $250 a month PLUS, pays your mortgage for you. The principle, interest, taxes, expenses, property manager, etc. are all paid for by your tenant!
Each one of these ways has the ability to make you loads of money. Check out this post to see how you can make 780% return on your money with buying one rental property.
When you invest in rental properties, you are building and automatic business that will run itself.
Not only that, but it will allow you to get access to amazing benefits that only businesses can get.
Listen to the Business Credit Podcast Episode
Also, when you have just one rental property, you now have a business.
When you create a business, you can establish business credit which will give you loads of great benefits that you would never get if you didn't have a business.
Benefits of Business Credit
- Value of Business Goes Up with Better Credit
- Flexibility to Use Cash or Credit for Your Business
- Personal Control Over Your Cash
- Provides Cash Flow to Keep the Business Moving
- Lower Interest Rate than Credit Cards
- Higher Credit Limits
- Better Terms for Repayment
- Lenders Offer Lower Rates to Businesses with Good Credit
- No Personal Guarantee
- Business Perks
- High Bonuses for Signing Up
- Separate Credit Histories from Your Personal
Get Business Loans with 0% Interest from Fund and Grow:
Instantly Pre-Qualify To Discover How Much Business Funding You Can Get
Use the capital to launch or grow you business without putting up any collateral or paying little to no interest.
Business Credit Card Perks
With your business credit, you can get even better credit card rewards than you would if it was in your personal name.
- More airline miles…
- More cash back…
- More start-up rewards…
- More perks…
Credit Card Perks
By using my business credit, I made:
- $600 from one credit card
- 80,000 miles from American Airlines
- 70,000 miles from American Airlines
- 60,000 miles from Alaska Airlines
With my American Airlines miles, we flew from Phoenix AZ to Washington DC for Free. The normal fare for myself, my wife, and my 4 kids was going to be $2,500. We flew for free with using my business credit card and business accounts.
Businesses Give You More Incentive To Use Them If You Are A Business
Using my business account, I was able to have Verizon give me an amazing deal on my plan and phones.
- $45 per line, minimum of 2 lines
- $200 credit to buy Galaxy 9
- $200 credit turning in my old broken phones
Commercial and business loans are only given to companies, not persons.
Commercial loans like “Bundle” loans are only given to companies. This is where an investor bundles 2 or more properties together to form one loan, with one payment, and one rate.
The benefit is the process is simpler and some banks even allow you to break apart the bundle and sell each property individually if you desire to do so.
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How to Establish Business Credit
- Incorporate Your Business
- Obtain a Federal Tax Identification Number (EIN)
- Open a Business Bank Account
- Have a Business Phone Number
- Establish Business Credit
- Pay Bills On Time
How to Build Business Credit
When you first start your business, you need to establish trade credit. It is like building your own personal credit with getting a Chevron Gas card. These are fairly easy to get and they will help you build your business credit.
First: Establish Trade Credit.
In this step you'll open Vendor and/or business credit accounts.
The vendor accounts will provide you with products and services you can use to build your business. These vendors will give you credit right now with no personal credit check. You basically have a running tab with the company which you will pay at the end of the month.
Accounts with public utilities, local construction supply companies, and others.
- Quill Office Supplies
- Grainger Industrial Supply
- Wells Fargo Business Secured Credit Card (Secured by your personal cash)
Next: Establish Fleet Credit (if so desired)
Fleet Credit. With fleet credit you can finance one or more vehicles in your business name with no personal credit reporting.
You can purchase or lease your primary vehicle or a fleet of commercial vehicles.
You’ll also get fleet credit cards for maintenance, fuel, tires, even major repairs for your primary vehicle, or a fleet of commercial vehicles.
With limits of $5,000 to $40,000 each.
Next: Establish Retail Credit.
At this stage you can also get up to $150,000 in business credit cards with rates starting at zero percent – if you or a co-signer has a 680 credit score.
Retail Credit. In this step you'll get retail credit cards from retailers like: Home Depot, Lowes, Walmart, Amazon, Best Buy, Staples, Office Depot, Dell, Apple, Sprint, AT&T, Costco, Sam’s Club, Sears, Ikea, and most other major retailers
With credit limits of $10,000 to $50,000 each.
Last: Cash Credit.
Because you have built up your credit, you will have a credit record with the big name credit reporting agencies and have established scores with Dun & Bradstreet, Experian, and Equifax.
Now, you can get high-limit revolving lines of credit.
These accounts allow you to take out cash to use however you like. Use this money to finance a purchase and/or cover rehab costs.
These are lines of credit so there are no restrictions on the use of funds. There are terms that you must abide by when holding and paying back the funds.
Let me know your thoughts about business credit and how you use it to build your business.
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