Using a personal Line of Credit to purchase then refi out (BRRRR)

[Miles Stanley]

I have a long standing relationship with my credit union.  I'm in the process of trying to set up multiple avenues of financing in the event i find a deal i can move on it.  I do not want to depend on a single source of financing.  I think this could be a problem if that single source doesn't pan out.

i had a thought of opening a line of credit (not a HELOC) with my credit union so i have it ready to go. I want to do a BRRRR-style deal so i wonder if i could get a big enough LOC to purchase and fix up the refi out to pay it off. The APY rate they charge is about 8.9% (which i understand is similar to private money rates ±). I know the rate is higher than conventional, but it would be short term. And i doubt conventional loans would help here (especially if the house needs work).

Has anyone purchased property with a LOC and then rented and refinanced the property to pay it off and leave a mortgage on the property (paid by the tenant)?

Is this possible?

Thanks,

[Jackie Lin]

That’s the strategy I have been using for a few years now. I use the LOC to make the offer, which makes it stronger than a offer with a contingent on loan qualification, and just buy it with the LOC. This process makes the buying house experience so much easier. No more needed the houses to be appraised at a certain value to qualify for the loan and no appraisal needed, which could cost few hundred to a thousand dollars.

The thing is that I don’t get why your rate is so high, my rate is at 4.28% now. I use the money to buy the house and do whatever renovations needed to be done making it rent ready. Once I have the residents in there, that’s when I try to refinance that house to pay off the LOC. This way my LOC is always ready when the next deal comes to up and the residents is paying off the loan on the rental.

Hope this helps.
IHSV