Should I use a LOC for my first few investments?

[Adam Mittermeier]

I am very new to investing so I am learning a lot. So my question I have is would it be possible for me to get a LOC (line of credit) with my local bank and then use it for down payments on my properties I want to invest in?

ex. $200,000 LOC

$20,000 down payment per property

10 doors

These would be buy and hold

[Chris Sellers]

Adam,

It's possible you could make it work if the next lender didn't inquire where you got this $200k, but most would.  They want to know if it's borrowed because they want you to have some skin in the game (10-30% usually).

If you're new, I'd focus my first deal to be a little smaller and not be so leveraged. You can get the LOC secured (but not withdraw) and be real picky about finding a property with meat on the bone. A good example might be a property with rent potential of $800 but smells like cat pee and looks horrible. You buy it for $40k, put $10k and some sweat labor into rehab, rent for $800. After a few months of seasoning, go to a lender and cash out 70% of it's value (maybe it's worth $80k). Now you pay back the higher LOC with the $56k from the secured loan and go to Disney on the remaining $6k ;-)

Then do it again, but go a little bigger.  

Good Luck!

Chris