Business property HELOC?

[Julian Hendrix]

I am currently buying a Personal Care Home. I have about 90% of the price we agreed upon (200k) of the land contract paid off. I am currently running the home and it is profitable. After it is paid in full, the deed will be in my name.

I am looking to use the property to fund more properties using the BRRRR method. And paying those loans down with the money from the business. My problem is this: I am unsure how to get money out of the equity/building that houses a business. Does anyone have any idea on how I can accomplish this?

[Alan Nelson]

Julian,

Congratulations on paying off your land contract! After you own the building, you should be able to negotiate a commercial line of credit with a bank by using the building as collateral. The bank will probably also be interested in the profitability of the business as well as the value of the real estate itself, so be prepared with financial statements. Caveat: in virtually all LOC arrangements, be aware that the bank will be able to "call" the line of credit at any time. So, don't over-leverage.

On a related note, you might want to consider splitting your assets (the real estate and the operating business) into 2 separate entities (i.e., one LLC own the real estate, and the operating business pays rent to the real estate LLC. Perhaps ask other people in the same industry about the pros/cons of doing that.