Investor · Cincinnati, OH · Member since 2016 · 208 posts · 157 votes
So I was logging onto my AMEX Account to pay my bills, and I got a pop-up saying you're pre-approved for a 25k personal loan at 8.98%. They also said this wouldn't go on my credit score. I usually spend about 3-5k with AMEX a month for flights and travel for work, so I assume this is why I was offered. They payment plans offered I can afford from my work income. I'm looking at investing in my 2nd property and have been thinking about a value add multi-family. This would seem like a very appealing tool to use either for a down payment or needed renovations. I have about 15k saved up in my bank account, my thinking is to use this in combination with the AMEX personal loan to fund DP and Renovation. Has anyone had experience in using something similar? I've been pre-approved with local credit union already, but I like the idea of the simplicity of this AMEX loan. My plan was to treat AMEX like a HM loan, and once reno is done, try to refinance into a conventional to reduce my debt. Any opinions, advice, etc is much appreciated.
@Jake Walroth I'll speak about the 1-4 unit strategy. Lots of people use these types of lines of credit to get access to money so you are in like company. The important thing to understand if you are buying and holding is the refinance rules you will face when refinancing out. When you refinance a lien on an investment property you can refinance 75% of the "After Repair Value" or the amount of the loan + closing costs...whichever is the lower amount essentially. So if a Hard Money Lender (HML) lends you 76% of the ARV, then you'll have to bring some cash to closing to get out of that loan. I hope this makes sense.
However, if you are borrowing from a HML for the purchase amount and doing the renovations on your own you won't be able to recoup that money until after 6 months. This is a conventional loan rule. There could be portfolio loans in your area that will allow a cash out loan in the first 6 months of ownership but a conventional loan would not.
What most investors use their credit lines for is for the down payment money to get started essentially. The idea with any variable interest rate is to pay it back quickly as we don't know what the rate will be 6 months from now, 2 years from now, etc. Hope this helps. Thanks!
1. It doesn't have to be used on down payment, can be used on rehab costs.
2. If a house costs 20k..... what prohibits me from using that 25k to fund the down payment?
- sure it's going to hurt my DTI.... but other than that I don't see any issue with it.... 25k at 8.98% interest is better than any hard money loan I'd get.
Jake Walroth I 100% agree with you. It makes absolute sense in my mind but the two lenders I spoke to about doing the same thing looked at me like I was insane!
I guess in the two instances I laid out, not sure what a lender's opinion would matter. I mean if you qualify for the loan, they don't really care how you'd fund your remodel.... and if a property costs less than $25k, there is no lender.