Line of Credit secured to Account Receivables income

[Ari S.]

Do yyou think it's a good idea to get a credit line based on your rental income from another property? for example, if you get $10k/mo from a property in total, then you can borrow up to $120k against your account receivables and therefore don't need to go to the bank for 2nd lien or try to refi with higher leverage. I'm curious if that is even a need.


Here is the idea in a nutshell: While the current lending is usually limited to 70% LTV, sometimes owners have strong cash flow that they would like to leverage although they can't get a higher LTV or the cost of refi would be high, or they simply don't want to refi, rather just pull some working capital in a temporary way. Since in residential investments, the rental payments is relatively easy to assess (people pay rent before they pay medical bills), it's a product that would have a high collection rate and therefore the interest rate can be somewhere between hard money lending and mezz loan rates; all of this without the hassle of a lengthy process and with no resource on the property (just on the person or a direct integration with the rent collection/settings up a lockbox for collecting rents and dispersing them to the owner bank account minus the monthly interest payments). The role AR data plays in the underwriting process is quite significant.