Forums: Discussions for entrepreneurs and small business.

I recently ordered a kit by Ray Reynolds teaching you how to build business credit.  It says that I should do this using credit that I build by forming a corporation.  I understand the steps that I need to take as far as building the credit. I do not understand how shares work.  I want to start buying and selling real estate but my credit is  not strong enough to do this.  Is there anyone that has just incorporated and understands how shares work?  I feel so silly for not understanding this by doing my own research, although, I would be very open to hearing any ideas or information that anyone would be willing to share with me.  I can also give any information about what I have learned also.

 

Natasha F.

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N.Fuller
nrealestate@gmail.com
1-888-864-8097 Ext. 3

When a business is incorporated, the new corporation issues shares to its shareholders. Now shares are divided based on the paid-in capital by each individual, who buys shares or funds a new startup
(the funds that each investor like you and your partners  provide towards the funds of the business). In return you as the shareholder own shares (or parts of the corporation). Let`s say you and  and few others invest $100,000 in total. You alone invest 60% of the $100,000 at $1 par value ( an accounting term) common stock. Thus, you own 60% of the total shares and have more than half. So, you have more than other shareholders. However, you might only have common stock, which is a stock with less privileges ( like voting rights and dividend distributions) as opposed to prefered stock , which has more privileges than common stock.
Hope this helps. If you have more questions, please ask.


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Natasha,

I think the question here is how you can establish some basis to leverage to start buying and selling real estate.  There are two ways to do that, your credit, the credit rating of a business you are running, or borrowing against assets.  I am not sure how forming a corporation is going to solve that problem.  Even if you start up a corporation today and issue all the shares (which are explained in the answer above) you still have not created a credit worthy entity.  That is that would be a new business (no payment track record, so no credit rating - typically followed as the D&B rating) and no real assets.  So those shares have no value and no basis to leverage for credit.

There are no easy answers or short cuts to getting the credit you need to leverage to acquire real estate (or anything else you may want to grow your wealth through your business).  Banks lend on credit ratings, which can only be established over time paying off obligations according to terms (on time), whether it`s an incorporated business credit rating or your personal credit rating.  Bottom line is that it may take a couple of years to build a strong credit rating.

For real estate speculators there is another formula.  You borrow against the value of the first property (banks lend against assets, even if credit rating is weak), then leverage the equity in that property (the spread between the loan and its appraised value) to help leverage the purchase for a second property.  This approach requires that you are covering the mortgage payments, but if you can rent the property or flip it quick enough for a profit that strategy may work.  Servicing the loan payments builds up a credit rating while at the same time building your real estate portfolio.

Good luck!

Chris

Thank you very much for answering my question.  That is exactly what I needed. I have read so much on shares but I just needed to hear what you said from a person just like you.

 

Thanks Again,

Natasha F

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N.Fuller
nrealestate@gmail.com
1-888-864-8097 Ext. 3

Chris,

Thank you for taking the time to answer my question and giving me an insight showing me how to go about doing what it is that I am getting ready to do. That is the idea that I had, I just wanted to know if I should do it using my credit or by building corporate credit to do it. I was aware of the fact that I could use the first home as collateral to purchase the 2nd home. 

Thanks Again

Natasha F

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N.Fuller
nrealestate@gmail.com
1-888-864-8097 Ext. 3

I went to a RR seminar too.
I think the only thing that I wasn`t convinced by was the Incorporating in Nevada while my business is being ran and established in CA.
The reason why he is making you incorporate is because he doesn`t want you to use your personal information to establish your business credit. Remember in the seminar when he said it takes 5 years to get your life together and establish good credit, but it only takes six months to mess it all up? Now if you are under a corporation, you would use your federal tax id to establish your credit. In other words you would be protecting your own.
If this is an on going business that you currently have, you should already have vendors that trust you and give you credit. What you need to do is establish a  Business Credit file for $269.00 with D&B Dunns & Bradstreet and have them report it there are other other businesses like staples and office depot that can help you establish good Business Credit. Just remember on the part where it says "now tell us about yourself" dont use your Social Security leave it empty.
And they should set your account as a business account..
SO how is the RR Kit helping you out?

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Edgar Monroy
Web Developer / Owner / Consultant
When starting your own business the need to "know-how" is greater than money!
http://www.nuevolution.net

I like the kit. It is very informative. I called in to the Mark Levin show in Los Angeles, CA the other night and I asked him about it.  Just like you thought, Mike was leery about having a business incorporated in another state and doing business in another. He told me that I should not do that because when the IRS gets wind of it, they will stick me and RR will not be there to help me.  I do like the other information that he gives and I love the inspiration that comes with it.

Thanks for the reply!

 

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N.Fuller
nrealestate@gmail.com
1-888-864-8097 Ext. 3

Great post.

Now this is very good information that gets to the point! Thank you so much.  I appreciate the responses from everyone, if there is anything that you need help with, please feel free to send me a message. :)

N. Fuller

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N.Fuller
nrealestate@gmail.com
1-888-864-8097 Ext. 3

In another thread I posted about the "evils" of credit/debt. I also provided a link to Dave Ramsey`s web site. I`ll do it again.

http://daveramsey.com

I`ll also provide a link that tells Dave Ramsey`s story ..

http://www.daveramsey.com/elphub/index.cfm?event=displayCont ent&intContentId=2709&

[quote]

Dave Ramsey is a personal money management expert, an extremely popular national radio personality and best-selling author of The Total Money Makeover. In his latest book, a follow-up of his enormously successful New York Times best-sellers Financial Peace and More Than Enough, Ramsey exemplifies his life’s work of teaching others how to be financially responsible, so they can acquire enough wealth to take care of loved ones, live prosperously into old age, and give generously to others.

Ramsey knows first-hand what financial peace means in his own life - living a true rags to riches to rags to riches story. By age 26 he had established a $4 million real estate portfolio, only to lose it by age 30. He has since rebuilt his financial life and now devotes himself full-time to helping ordinary people understand the forces behind their financial distress and how to set things right - financially, emotionally and spiritually.[/quote]

Visit his web site, read the articles and testimonials regarding the use and mis-use of credit. And the total NEED to be DEBT FREE !

Credit is of no use. Do like rich folks do ... PAY CASH !

Because in reality

DEBT is DUMB!!