Business Line of Credit

[Nathan Frost]

Hi all, how can one use a line of credit to add rental properties to their portfolio?  Can someone give me an example?  Bank said I could use it as the down payment and then get another bank to fund the loan.  I am trying to add more rental properties and wanted to see how to use this.  A lot of banks here are not doing HELOCs.  So I am looking at line of credit or possible cash out refinance but really don't want to cash out refinance on my primary.

[Jay Hinrichs]

Quote from @Nathan Frost:

Quote from @Jay Hinrichs:

Quote from @Nathan Frost:

Quote from @Jay Hinrichs:

keep in mind most business lines of credit from a bank TRUE unsecured LOC's are on one year revolvers and they can and are frequently called.. another tid bit is many times they have a 30 day resting period per year.. meaning you have to pay it off and rest it for 30 consecutive days.

these are true unsecured LOC's from Banks..

also careful with the fake business loan lenders that say your all approved just send me a little money up front.. in almost all instances they are simply scammers crooks and thieves. 

So what do you recommend? Refinance it or pay it off in a year. One year could be tough to pay off a $10k LOC. What is an example of how to effectively use the LOC? Wish I could use a HELOC but a lot of banks around here are not offering them.

for me I use the funds for rehab and quick turns never to buy long term assets as 100% financing can put you underwater quickly .. those lines of credits are not intended for downpayment and long term holds.. they are to help you with cash flow in your transactional business thats what they are designed for. And frankly very tough to get U need to have a lot of liquidity have a lot of money in their bank good track record etc etc.. again I am talking about a true bank unsecured LOC.

I agree on being underwater quickly. I have made my fair share of mistakes. Mainly buying on the MLS and at 20% down. So I am trying to find ways to use equity and other avenues without using my own money for the 20% down and rehab work. So basically flips is that what you are saying? What if you use the line of credit to buy an investment property as cash to get a deal? What do you mean help with cash flow in your transactional business?

 OK here is how I have used mine over the years.

I had a 7 figure unsecured LOC that I would buy courthouse steps with.. boom cash buyer go to the bank pull the cashiers checks from my unsurecred line. Then once i get the trustees deed or the Sherrifs deed and its now vested in my name and I can get title insurance.. about 30 to 90 days depending I take that free and clear asset to my same bank and secure it up with my other credit facility that was 8 figures.. they advance normally enough to get all my cash back and then that cash pays off my unsecured LOC.. I use the Unsecured LOC also for rehab funds.. we stabilize then flip them make our profit and pay back the bank.. and depending on rates at the time I was borrowing on these lines at 4 to 7% with one point annually so I could flip say 3 times a year for the same one point.

thats how I use the lines and how most RE business's use them they do NOT use them for down payment on buy and hold as its not prudent to have 100% debt banks dont like that and we dont like it either far to risky when markets change on you like they are now.