Financing Repairs - HELOC, Business Line of Credit, Portfolio Loan

[J Newman]

I don't have alot of experience with lending. I was thrown in feet first to manage our family's rental properties. I have a few questions on options for financing repairs. Thanks in advance!

Repairs: 

Right now, I'm focused on time sensitive repairs. We need to make some repairs - probably about $10k near term for a few critical repairs and a make ready. We will also likely be needing to replace some AC units this summer - that could be a few or maybe up to 10. Some are really old. That can add up in a hurry.

We do have bigger repairs that we need to make - repaving at a multiplex, etc. but could hold off a year to start on those.

Portfolio: We have 62 units. There are two companies and split about 60/40 across them.

1) My dad has been using his HELOC but it's a bit of a mess on accounting, so I'd like to get away from that. He does have good terms on his HELOC because it's older and a better rate. Can you use a HELOC in this way? From a legal perspective, it seems to be commingling a bit, but I guess it's technically a loan to the business.

2) If that's not a viable option, then I was considering a business LOC. Our cash flow is good, so I was thinking I'd get the line of credit to use for backup on these near term repairs that are less than $10k for what I can't cash flow or cover from savings. For instance, if we had 5 AC units go out, I couldn't cover that on a dime without outstripping my capex and tax savings, but I could probably pay off in a few months. So, the overall function would likely be to buy a few months to replenish savings to pay it off.

However, I do have these longer term things out on the horizon. But in a year interest rates could be better.

The bank is asking me about how long I want the terms to go, amortization, how much, etc. I haven't used a line of credit for, so I'm not sure what I should ask for and how different variables affect the rates and terms.

3) People have mentioned a portfolio loan to me, but I'm not sure if they mean a line of credit on the portfolio for each company or some other type of loan? I wouldn't want a fixed loan for this because of interest rates.

Thanks!