how to properly use a line of credit.

[Tyrel Holman]

So my line of credit of 140k just closed. What are some ideas on how to use this in terms of scaling my rentals properly

[Andrew Postell]

@Tyrel Holman I love lines of credit. That have great purposes in investing but a Line of Credit is NOT designed to be a permanent financing solution. Two of the common areas of concern for LOCs I see out there is the 10 year maturity date and the adjustable rate. Since LOCs have adjustable rates they will often catch people off guard when they adjust. Rates have been increasing lately...it is likely that your rate will increase in the future. The 10 year maturity date is where the LOC will modify into a different product all together. Meaning after opening the Line of Credit for 10 years it will cease to be a LOC. It will "mature" into a 20 year fixed rate mortgage that you can no longer draw on. And when is matures the rate will increase. I've seen typical numbers of 1%-2% higher than your current rate.

However, if you use it to say....buy another property. Then flip that property...thus paying back your Line of Credit. Then that's perfect! Because you will never get surprised by an adjusting rate or keeping a balance on it. Lines of Credit are PERFECT for people who have a plan to pay it back.