Should I run a LOC or just do a Refinance?

[Jared McCullough]

I am currently in a situation where my last refinance put me in a position where I have $10,000 in leftover capital and was able to purchase (3) properties in cash (i.e. that I plan to borrow against for future acquisitions).

My lender seems to think it would be in my best interest to use these (3) properties as collateral to obtain a Line of Credit but to be honest I am a little confused as to why. Hoping someone on here may be able to explain a little better.

Lets assume after appraisals based on the LTV they are willing to give me $100,000 (i.e. arbitrary number to make things simple) either in a Line of Credit or as a bundled refinance.

If my intent is to use this money to purchase say another (2) houses at $50,000 OTD a piece or a grand total of the $100,000 I plan to borrow.

Using the LOC Model I know have my Line of Credit maxed out and (2) houses in the clear. This is what I get confused with and need some guidance:

1. Do I leave the line of credit open and take out an additional Line of Credit or Refinance against the (2) new properties and use that money to purchase additional properties?

2. Do I take refinances out on the new properties to payback the line of credit now leaving me with a new refinance and my existing line of credit back at $100,000 to purchase new properties?

The other option is I refinance these (3) homes for again the theoretical value of $100,000. I then take that $100,000 and buy my (2) new homes. I then take another refinance out against these (2) new homes to reestablish my funds for purchasing properties.

To be honest I am confused how one is better than the other as from the way I see it your essentially doing the same thing.

Jared