I wanted to go back and say thanks Sharon for your post about being in business with a falling credit score. It really made a huge difference that day in terms of me getting a grip on the idea that my credit rating is falling like a rock.
Now I’ve got some followup questions:
First, I suspect my particular instance is due not only to closing several past debt accounts, but also that my current accounts are NOT listed. My tax payments aren’t listed, my accountant’s bill isn’t listed, and my feed bill (which had a high point of $6K and was paid off last year) is not listed. All of those, which were/are current and/or paid in full, would possibly make a nice difference. But how much of a difference? Should I petition those creditors to put that information on my credit report?
Secondly, I am most concerned about our tentative plans to buy that larger farm I mentioned earlier. The plan until Monday was to continue renting there for at least a few more years, as we pay off other bills and as we pay off this place. Say, in 2016, we’d offer to buy the larger farm. By then, we’d have zero consumer debt, we’d have our home paid off, and we’d be able to show a solid 10 year history of renting from them, on good terms and always paid on time and in full. If I used current numbers, here’s how it would add up:
Target Farm current appraised value: $1,000,000
Our farm, current appraised value: $350,000
Approximate Loan terms if we were going to finance conventionally:
25% down payment = $250,000 (funded by the sale of our current home/farm)
Monthly payments of roughly $10,000 (funded primarily by farm sales but it would also be our home payment, so some personal income in there too).
If we went Contract for Deed, here’s the approximate loan terms we’d want to propose:
35% down payment of $350,000 (funded by the sale of our current home/farm)
Monthly payments to the family of roughly $5000 for 3-5 years, funded by combo of farm sales + personal income)
Balloon payment to the family after that 3-5 year period, with the balance going onto a commercial property mortgage
Now, if my credit history is already on the way down the drain, and it’s not ever going to recover, then the above plan is NOT going to work. We can definitely start snowballing for the farm purchase after we pay off our current bills. But frankly, I don’t know of any family on the planet who would willingly go into a large real estate deal someone with a zero credit rating. Is there a DR-friendly way to keep my credit rating high enough, for the next 10 years or so, so that we can complete this long-term transaction? If not, are there other funding alternatives that folks can see which would make this transaction possible?
If push came to shove, I suppose we could give up our ideas on that particular property, and go buy something with the cash we’d have if we simply sold our place. But that would be starting over, at an age (mid-50’s by then) when we really need to be socking away income on an established property. I’m really rather nervous now about how best to proceed, given all the above. I know this is looking WAY down the road, but I’d love any insights or suggestions folks might have. Particularly those who are applying DR rules to their business lives, and have had to make large-scale purchases like this as part of their business. Thanks all.