Building a business line of credit for BRRRR

[Samuel Bavido]

I recently listened to one of the BP Podcasts in which the guest talked about using a business line of credit to BRRRR properties. I'm really interested in doing this. I'd like to hear your thoughts on how to go about putting myself in position to do this. I don't have to do it tomorrow; if it takes me a couple years to build up to that point, it's ok; I'm not in a huge rush. Below is my financial situation. What steps should I take put myself in a position the banks would like?

I have a SFR that is cashflowing about $200/month. It's worth roughly 95k, and I have 35k of equity in it. For the past two years (since I bought it) I have been putting any cashflow into the mortgage, hoping to get it paid off within the next couple years. I do not have this property in an LLC; it's currently the only thing of value my wife and I own, so it didn't seem worthwhile. My wife and I both have excellent credit (730+). We currently rent, but will be purchasing a home later this year for 100k with 10k down. That property will eventually be a rental as well. Moving to that new house will also mean leaving my wife's job and my job. I have a solid set of marketable skills, and feel confident I can bring in 40k/annually; I might be able to bring in as much as 60k. 50k seems a reasonable expectation for me. I hope to be in a permanent job by August or September. 

What would you do if you were me? 

[Bob Okenwa]

@Samuel Bavido

Most lenders want to see that the business has been operating for a certain amount of time (6 months, 1 year, 2 years) and will may require a personal guarantee from you on the BLOC. They will also check your credit and financial standing and having a job is pretty important for repayment so make sure that you can show proof of income and a good overall financial situation. Focus on getting gainfully employed 1st, call a few banks and credit unions or search online and get info about their BLOCS and if everything sounds good, then open an LLC (speak with a lawyer and CPA before doing so) and apply for your BLOC when ready. Can't emphasize calling and speaking to bankers, lawyers, and CPA's before doing all of this as I am none of the above. Don't want you to get your hopes up and open and LLC for no reason if there is no credit to be loaned to it. As always, due diligence goes a long way.