Commercial Equity Line of Credit

[Kristen Daniel]

Does anyone know what the requirements are for a 40%-50% LTV commercial line of credit? Do banks even give lines of credit that big? The property would be free and clear and my credit is very weak. Going to work on that. :) Anyone know where I can find a calculator on this? I'm trying to make my investment plan and decide how much I will spend on a building when I do my 1031 exchange.

[Albert Bui]

Originally posted by @Kristen Daniel:

Okay thank you, I'll keep that in mind. I just want to clarify my post. Essentially I would be looking for a commercial line of credit at 40-50% LTV so I could then fund 100% of a flip deal.

 HI Kristen,

I've used a lot of commercial LOC's to fund deals similar to what you're doing.

Typically a commercial or local portfolio lender will be looking for:

- 1.25% DCR or debt coverage ratio or DSCR - debt service coverage ratio

- up to 70-80% LTV max depending on local credit union or small lender (usually 1-10 branches or less is the type of profile of lender who will do this)

- rates around 4.75 - 5.75% varies from lender to lender

- usually charges 1 pt for origination + standard closing/title/recording/etc (for commercial / portfolio note)

The distinction is probably going to be whether you want a residential type product on your property to obtain a LOC on or whether you'll want to use the above commercial/portfolio LOC.

The benefits of a residential LOC is that it can often times be obtained with the best rates (mid 4's to low 5's) on non owner occupied/investment properties and does not have to meet DCR requirements like a commercial loan has to (above). The residential products only looks at you from a residential mortgage point of view and uses debt to income (DTI). This approach has advantages because you're not going to be limited from the properties rental income point of view.

Hope that helps, let me know if you have any additional questions.